In a historic moment, Finance Minister Nirmala Sitharaman presented the Union Budget 2024 in Parliament today, marking her sixth budget and etching her name alongside former Prime Minister Morarji Desai as the only Finance Ministers to achieve this feat. Following tradition, Sitharaman visited President Droupadi Murmu before revealing the pre-election budget for 2024-25, meeting with the President at Rashtrapati Bhawan before heading to Parliament. However, this budget carries a unique distinction – it’s an interim budget, a temporary financial plan bridging the gap until the new government takes charge after the upcoming Lok Sabha elections. – Finance Minister Nirmala Sitharaman announced no tax rate changes, including import duties.
The estimated fiscal deficit for 2024-25 is 5.1% of GDP, down from 5.8% this financial year. With elections approaching, Sitharaman emphasised the economic successes of the Modi government in her Budget speech. The interim Budget extends social welfare schemes to benefit the poor, women, youth, and farmers, identified as the government’s top priorities.
Key Highlights about Budget 2024
- Interim Budget: Focuses on essential spending from April to July 2024, serving as a placeholder until the full budget post-elections.
- Policy Continuation: Avoids major policy changes, emphasising stability by continuing existing programs.
- Key Sectors: Prioritizes infrastructure, agriculture, healthcare, and social welfare for growth.
- Fiscal Discipline: Aims to control fiscal deficit, ensure macroeconomic stability and attract investments.
- Populist Measures: Includes targeted tax breaks or subsidies for farmers, low-income earners, and rural communities to gain public support before elections.
Distinguishing Characteristics of Annual and Interim Budgets
When it comes to budgetary planning, the crucial divergence lies in the timing. The annual budget, unveiled on February 1st annually, delineates the government’s financial trajectory for the entire fiscal year spanning from April 1 to March 31. Conversely, the interim budget, also recognized as a ‘Vote on Account,’ emerges in an election year, usually around February, ensuring essential government operations remain funded until the incoming government presents its comprehensive budget. While the annual budget stands as a meticulous and expansive plan, the interim budget functions as a temporary measure, concentrating on sustaining vital spending for ongoing initiatives and critical public services until the reins are handed over to the new government.
Positive Economic Transformation and Future Goals Emphasised in Budget 2024
Finance Minister Nirmala Sitharaman claims that the economy has seen a significant improvement in the past 10 years under Prime Minister Narendra Modi. She highlights initiatives like “Sabka Saath, Sabka Vikas” (Collective effort, inclusive development) and “Atmnirbhar Bharat” (Self-reliant India) as key drivers. The past decade has witnessed a positive transformation in the Indian economy, instilling hope for the future. Despite significant challenges in 2014, the Narendra Modi-led government, through Sabka Saath, Sabka Vikaas, successfully navigated these obstacles,” stated Finance Minister Sitharaman during her budget speech.
The fiscal plan for 2024 sets a fiscal deficit target of 5.1% of GDP for FY25, with Sitharaman emphasising the next five years as a period of unprecedented development. Aimed at realising the vision of becoming a developed nation by 2047, she highlighted the trinity of democracy, demography, and diversity as instrumental in fulfilling the aspirations of every Indian. Experts echo positive sentiments, emphasising the budget’s focus on domestic macro factors, infrastructure, tourism, logistics, and research innovation for sustained growth.
Budget 2024 Highlights: Economic Vision and Fiscal Responsibility
Finance Minister Sitharaman emphasised the government’s unwavering commitment to continuous sustainable growth, showcasing key measures in infrastructure, tourism, logistics, and research innovation. This reflects the administration’s dedication to achieving a targeted fiscal deficit of 4.5% of GDP by FY26. In her budget speech, Sitharaman announced the stability of income tax rates, both in direct and indirect taxes, including import duties. While no changes were proposed, she highlighted the remarkable doubling of tax collections over the past decade, emphasising efficiency with a reduced average processing time of tax returns to 10 days.
A significant boost to infrastructure development was revealed, with an 11.1% increase in the outlay for the next year, totaling 11.11 lakh crore. This substantial allocation, amounting to 3.4% of the GDP, builds on the past four years’ tripling of capital expenditure outlay, contributing to economic growth and employment creation. Pradeep Gupta, Co-founder & Vice-chairman of Anand Rathi Group, welcomed the budget’s focus on domestic macro factors, sustained investments, and fiscal responsibility. He highlighted the positive impact on foreign investor sentiment and potential credit rating upgrades, particularly with the targeted fiscal deficit and lower budget deficits. Siddhesh Mehta, Research Analyst at Samco Securities, noted the predictability in the tax regime as beneficial for companies in financial planning, ensuring a secure business environment.
Railway Infrastructure Boost and Economic Corridors Unveiled in Budget 2024
Finance Minister Sitharaman revealed a transformative plan to enhance rail travel, converting 40,000 normal rail bogies into Vande Bharat coaches, prioritising passenger safety, convenience, and comfort. The expansion of key rail infrastructure projects, including Metro Rail and Namo Bharat, to more cities was also announced.
The budget outlined three major railway corridors – the port connectivity corridor, the energy, mineral, and cement corridor, and the high traffic density corridor. This strategic move aims to alleviate congestion, improve passenger train operations, ensuring safety, and increasing travel speed. Sitharaman emphasised the economic impact, stating that alongside dedicated freight corridors, these economic corridor programs would accelerate GDP growth and reduce logistics costs. The conversion of rail bogies aligns with the success of Vande Bharat trains, creating job opportunities and promoting tourism.
Sanjay Moorjani, Research Analyst at SAMCO Securities, highlighted the positive effects of converting rail bogies to Vande Bharat coaches, anticipating job creation, reduced travel time, and increased tourism. CRISIL noted the significance of commodity-specific economic rail corridors in decongesting existing lines, particularly in the eastern part of the country, fostering faster freight movement, reduced logistics costs (currently at 12% of GDP), and enhanced competitiveness, especially in manufacturing.
Empowering Rural Women: Expansion of ‘Lakhpati Didi’ Scheme
Finance Minister Sitharaman announced the noteworthy achievements of the ‘Lakhpati Didi’ Scheme, empowering rural women through 83 lakh self-help groups (SHGs). With 9 crore women benefiting, the scheme has surpassed its initial goal, prompting an increase in the target from 2 crore to 3 crore women. The injection of ₹1 lakh per household for one crore beneficiaries is expected to significantly boost the economic status of rural women. Veer Trivedi, Research Analyst at SAMCO Securities, highlighted the scheme’s impact on the rural economy, anticipating increased credit demand for micro-financiers, particularly from women and self-help groups. The initiative has the potential to alleviate stress on asset quality issues.
Green Energy Initiatives for Sustainable Future
The budget introduced a rooftop solarisation scheme enabling 10 million households to receive up to 300 units of free electricity monthly. Finance Minister Sitharaman emphasised the financial benefits, estimating annual savings of ₹15,000-18,000 per household through free solar electricity and surplus sales to distribution companies.
Net Zero Commitment and Diverse Measures
In alignment with the commitment to ‘net zero’ by 2070, several green energy measures were unveiled:
- Viability gap funding for offshore wind energy harnessing.
- Establishment of coal gasification and liquefaction capacity by 2030 to reduce imports.
- Phased mandatory blending of compressed biogas (CBG) in CNG for transport and PNG for domestic purposes.
- Financial assistance for biomass aggregation machinery procurement to support collection.
Boosting Electric Vehicle Ecosystem: A Forward-Thinking Strategy
In a bid to foster the electric vehicle (EV) ecosystem, Finance Minister Sitharaman outlined plans to enhance manufacturing and charging infrastructure. The promotion of e-buses for public transport networks will be facilitated through secure payment mechanisms. The focus on addressing the shortage of public charging stations, with 6,586 recorded by March 2023, demonstrates a forward-thinking strategy. Kartik Narayan, CEO at Staffing, TeamLease Services, hailed this initiative as a cornerstone for transforming India’s EV landscape, overcoming range anxiety, and positioning electric vehicles as a viable, sustainable transport solution.
Revitalising Tourism: Comprehensive Development and Global Branding
The budget emphasises the revitalization of tourism through comprehensive development of iconic tourist centres, with a global scale branding and marketing approach. A rating system based on facilities and services quality will be implemented, supported by long-term interest-free loans for states to finance these developments. Additionally, projects for port connectivity, tourism infrastructure, and amenities on islands, including Lakshadweep, aim to generate employment.
Sustaining Foreign Investments | FDI Inflow and Bilateral Investment Treaties
Finance Minister Sitharaman highlighted the golden era of Foreign Direct Investment (FDI) with an inflow of $596 billion from 2014-23, double the inflow recorded during 2005-14. To encourage sustained foreign investment, the government is actively negotiating bilateral investment treaties with foreign partners, aligning with the spirit of ‘first develop India.’ This approach aims to attract and retain foreign investments for continued economic growth.
Budget 2024 | Technological Advancements and Economic Boost:
Finance Minister Sitharaman unveils a vision for leveraging technology to transform lives and businesses, offering a significant financial incentive of a one lakh crore rupee corpus through a 50-year interest-free loan. This initiative aims to stimulate research and innovation in emerging sectors, fostering economic opportunities and affordable services. Highlighting the importance of combining the energy of the youth with technology, the FM emphasises the need for programs that harness the potential of both. This synergy is expected to contribute to India’s global leadership in technology over the next decade. A new scheme is introduced to strengthen deep-tech technologies for defence purposes, aligning with the goal of achieving self-reliance. This initiative is poised to accelerate ‘atmanirbharta’ (self-sufficiency) in the defence sector.
Ayushman Bharat Expansion:
The Ayushman Bharat coverage is extended to Anganwadi and Asha workers, and all maternal and child healthcare schemes are consolidated into a comprehensive program. This move aims to enhance healthcare access and coverage across these crucial sectors.
PM Awas Yojana:
Despite COVID challenges, the PM Awas Yojana (Grameen) continues its implementation, with the government nearing its target of constructing three crore houses. An additional plan to build two crore more houses over the next five years reflects a sustained commitment, expected to stimulate investments and activity in the construction sector, with positive effects on related industries.
Empowering MSMEs on the Global Stage:
The government prioritises training initiatives for Micro, Small, and Medium Enterprises (MSMEs) to enhance global competitiveness. Finance Minister Sitharaman emphasises the significance of facilitating their growth and announces preparations to fortify the financial sector to meet their investment needs. FM Sitharaman highlights the Skill India Mission’s role in training 1.4 crore individuals, upskilling and re-skilling 54 lakh youth, and establishing 3,000 new Industrial Training Institutes (ITIs). This strategic move aims to strengthen the Production-Linked Incentives (PLI) and Make in India programs, with the goal of increasing the manufacturing sector’s contribution to GDP from 17 percent to 25 percent by 2047, creating extensive job opportunities.
Agriculture and Food Processing Advancements:
The Finance Minister announces an escalated focus on value addition in agriculture to boost farmers’ income. Schemes like Pradhan Mantri Kisan Sampada Yojana have benefited 38 lakh farmers, generating 10 lakh employment opportunities. Pradhan Mantri Formalisation of Micro Food Processing Enterprises Yojana has assisted 2.4 lakh Self-Help Groups (SHGs) and sixty thousand individuals with credit linkages. To expedite sectoral growth, the government plans to boost private and public investments in post-harvest activities, including aggregation, modern storage, efficient supply chains, primary and secondary processing, and marketing and branding.
Fiscal Management and Key Economic Indicators:
- An overview of fiscal targets and key figures reveals that the fiscal deficit target for FY25 is set at 5.1 percent of GDP.
- The FY24 fiscal deficit target is revised down to 5.8 percent from 5.9 percent.
- Fiscal deficit for the first nine months of FY24, until December, stands at ₹9.82 lakh crore, constituting 55 percent of the annual estimates.
- FY25 witnesses an 11.1 percent increase in capital expenditure, reaching ₹11.1 lakh crore, while total expenditure is expected to be ₹30.80 lakh crore. Revised estimates for total expenditure in FY24 are ₹44.90 lakh crore.
- Strong growth momentum and formalisation in the economy are reflected in FY24 revenue receipts at ₹30.03 lakh crore, surpassing the budget estimate.
- FY25 gross market borrowing is pegged at ₹14.13 lakh crore, with net borrowing at ₹11.75 lakh crore, and the gross tax receipt target for FY25 is ₹26.02 lakh crore.