India is home to diverse cultures, architectural marvels and vast landscapes, making it a perfect destination for business, tourism and leisure. In recent years, India has positioned itself to grow as a major economy rapidly and is strategically aiming to become the third-largest economy, globally, by 2030.
India has achieved growth and progress in various domains including local manufacturing and export expansion. Budget is another crucial factor fueling its economic progress.
The United Nations predicted that India’s economy will grow by 6.2 percent in 2024. This optimistic outlook is supported by robust local demand and significant growth in both the manufacturing and services sectors.
Overview of Budget 2023-2024
As per Reuters India is anticipated to announce economic growth projections that exceed earlier expectations, potentially reaching around 7% for the fiscal year ending in March 2024.
- First Budget in the “Amrit Kaal”: Establishing the trajectory for India’s growth over the next 25 years.
- Economy Steers in the Right Direction: Projected 7% growth for FY23, surpassing major global economies.
- Strategic Emphasis on Key Sectors: Prioritising inclusive development, infrastructure, green growth, harnessing youth power, and strengthening the financial sector.
Key Announcements (2023-2024):
⇒Income Tax:
- Default status shifts to the New Tax Regime, with the option to choose the old regime.
- No income tax applicable on earnings up to Rs 7.5 lakh in the New Regime, inclusive of Rebate and Standard Deduction.
- Reduction of the highest surcharge rate from 37% to 25% in the New Regime.
- Introduction of new income tax slabs: 0-3 lakh (nil), 3-6 lakh (5%), 6-9 lakh (10%), 9-12 lakh (15%), 12-15 lakh (20%), 15 lakh+ (30%).
⇒Railways:
- Record allocation with Rs 2.4 lakh crore designated.
- Introduction of 75 Vande Bharat trains scheduled for rollout by August 2023.
⇒Capital Expenditure:
- Reported a 33% increase, reaching Rs 10 lakh crore.
- Aimed at enhancing growth, fostering job creation, and attracting private investment.
⇒Defence:
- Budget surged by 13% to reach Rs 5.94 lakh crore.
- Emphasis placed on acquiring modern weaponry, aircraft, and warships.
⇒Other Significant Points:
- Fiscal deficit target set to be under 4.5% by 2025-26.
- Enhanced funding for MSMEs, agriculture, education, healthcare, housing, and urban development.
- Initiatives implemented to encourage ease of doing business and digital services.
- Extension of the free food grain scheme until 2024.
Interim Budget 2024 Highlights
The upcoming Lok Sabha elections will be held between April and June 2024, hence, till the new government is formed, an interim budget will be announced on 1 February 2024. An Interim budget is a temporary financial plan followed by the country till the new government is formed.So, there won’t be any major policy changes or tax reforms.
Union Finance Minister Nirmala Sitharaman during her address at the CII Global Economic Policy Forum 2023 Summit on December 7, mentioned that the Union Budget 2024, set to be presented on 1 February, is not expected to include any “spectacular announcements.”
Even the Election Commission of India restricts the ruling party from making populist announcements or significant policies during an election year. However, the Interim Budget presents a full picture of India’s finances.
Across the world, we are witnessing many disruptions like war, but India must rely on its domestic factors to propel medium-term growth, and the forthcoming interim budget will lay the groundwork for the main budget later this year.
“The Government of India (GoI) is set to present the interim budget for FY25 on 1 February 2024. Using fiscal data up to December 2023 from the Controller General of Accounts (CGA) and combining it with full-year budget estimates, revised estimates for FY24 will be assessed. These revised estimates will serve as the base for formulating the budget estimates for FY25,” Srivastava wrote in the post.
Further, he indicates that India is resilient amid a global economic slowdown, and projections anticipate a growth range of 6.3% to 6.5% for FY24, surpassing the less optimistic global growth projections by the IMF. However, despite this positive outlook, uncertainties arise for FY25, with lingering challenges in various economic aspects.
What to Expect
Finance Minister Nirmala Sitharaman has played down expectations, saying that the February budget will be a basic plan to keep things running until the elections. This involves concentrating on necessary spending with minimal changes to policies.
One of the significant aspects of the Interim budget is to Vote on Account on February 1.
Let us look at some of the highlights expected from the Interim Budget 2024 –
- Focus on fiscal discipline: The primary focus is maintaining fiscal stability.
- Restrained expenditure announcements: Anticipate allocations for ongoing programs and crucial services.
- Minimal tax reforms: Don’t expect significant income tax changes or policy shifts. On 9 January 2024, a senior finance ministry official announced that there won’t be any increase in tax rebates in the New Tax Regime.
- Prioritising transparency and continuity: The budget may provide insights into the government’s economic vision and future direction.
The interim budget expected in 2024 is likely to target a growth rate of 10.5 percent in direct taxes.“Growth in direct taxes will be above the GDP growth rate. A 10.5 percent growth in direct taxes in 2024-25 is realistic. Buoyancy is likely to remain above one next year,” another senior government official commented.
However, the 2024 Interim Budget will provide insights into the country’s overall financial health and future growth opportunities. Businesses and individuals should focus on the budget’s emphasis and direction which will help make strategic plans and decisions.
After the elections, a full-fledged budget will be presented by the ruling party displaying its visions and plans for the country.
→For the Oil and Gas Industry, in the FY24 Union Budget, Finance Minister Sitharaman allocated Rs 30,000 crore for capital investments to facilitate the energy transition and established net zero-emission goals for state-owned oil marketing companies (OMCs). However, the funds have not yet been allocated to the OMCs. Experts suggest that the allocation to oil PSUs may be reduced in the upcoming budget.
“Oil companies, such as IOCL and BPCL, have announced rights issues and the government was supposed to put in their funds. While the government would put in some funds, it is expected to be less than the budgeted amount. This would mainly be done to ensure that the fiscal deficit is under control. So, the oil PSUs may see lower budgetary support in the current year,” Suman Chowdhury, Chief Economist and Head of Research, at Acuite Ratings & Research, said.
Final Takeaway
As India faces economic uncertainties, it’s crucial to have a well-balanced interim budget and insightful financial strategies. This is necessary to keep the momentum of growth intact, ensuring a strong economic future for the nation.
