Indian Interim Budget 2024
On February 1, 2024, India has only presented an interim budget. This serves as a temporary financial plan until the new government formed after the upcoming Lok Sabha elections presents the full-fledged budget. Therefore, significant policy announcements are typically deferred until the regular budget. This article will summarize the key features of the interim budget and discuss its implications within the current economic and political landscape.
Fiscal Consolidation Takes Priority
The interim budget presented by Finance Minister Nirmala Sitharaman prioritizes fiscal consolidation, aiming to maintain a downward trajectory for the fiscal deficit. The revised estimate for the fiscal deficit in 2023-24 is 5.8% of GDP, which is an improvement from the budgeted estimate of 6.4%. For 2024-25, the government projects a further reduction to 5.1% of GDP. This commitment to fiscal prudence assures markets and rating agencies of India’s responsible fiscal management.
No Change in Tax Slabs
In a pre-election year, the government refrained from making any major changes to the income tax slabs in either the old or new tax regimes. This move avoids upsetting voters but might disappoint those hoping for further tax breaks to boost consumption. Instead, the focus remains on improving tax compliance and revenue collection through digitization and administrative reforms.
Infrastructure Push Continues
Recognizing the importance of infrastructure development for economic growth, the budget allocates ₹1.3 lakh crore to continue the scheme of providing interest-free loans to states for capital expenditure. This will support investments in roads, bridges, and other critical infrastructure projects across the country.
Focus on Agriculture and Social Welfare
The budget allocates ₹1.2 lakh crore for the PM Garib Kalyan Anna Yojana (PMGKAY), a food security scheme providing free food grains to millions of vulnerable families. Continued support for agriculture includes increased allocation for the Pradhan Mantri Fasal Bima Yojana (PMFBY), a crop insurance scheme, and initiatives to promote natural farming and digitalization in the agricultural sector.
Uncertainty Hangs Over Key Issues
With the general elections looming, the interim budget lacks major policy pronouncements on crucial issues like job creation, healthcare reforms, and education reforms. These will likely be addressed in the full-fledged budget presented by the new government based on its specific mandate and priorities.
Impact on Different Stakeholders:
Businesses:
The focus on infrastructure development and continued fiscal consolidation is positive for businesses seeking long-term growth opportunities. However, the lack of tax breaks might dampen immediate investment enthusiasm.
Farmers
The increased allocation for PMGKAY and PMFBY provides relief, while initiatives like natural farming and digitalization hold long-term benefits. However, concrete measures to address issues like market access and minimum support prices might be missing.
Consumers
No change in tax slabs provides stability but might not stimulate consumption significantly. Continued focus on food security through PMGKAY offers some relief.
Investors
The commitment to fiscal consolidation reinforces confidence in India’s financial stability. However, clarity on key reforms and policy directions might be delayed until the full-fledged budget.
Looking Ahead
The interim budget serves as a bridge to the upcoming elections. With no major policy changes, it primarily focuses on maintaining economic stability and avoiding any pre-election disruptions. The real policy direction and its impact on various stakeholders will be clearer when the new government unveils the full-fledged budget after the elections.
While the 2024 Indian budget serves as an interim placeholder before the elections, it still offers valuable insights into the government’s current priorities and spending patterns across various sectors. This analysis will delve into the significant sectoral allocations and compare them with the previous year’s budget (2023-24) to understand the evolving trends and potential implications.
Comparing with Previous Years:
A broader comparison with the previous year’s budget reveals some interesting trends. The interim budget in 2023-24 had witnessed a significant 9% increase in capital expenditure compared to the revised estimates of 2022-23. This year, the focus seems to be on maintaining that momentum with continued emphasis on infrastructure development. However, some sectors like defense and railways saw their allocations decline compared to the previous year’s budget, potentially reflecting the pre-election cautiousness and the need to balance fiscal consolidation with sectoral requirements.