Overview
Finance Minister Nirmala Sitharaman presented the Interim Budget for 2024-25 in Parliament today, the last budget before the general elections expected in May this year. With GDP growth estimated at 7% this fiscal year, Sitharaman said the Indian economy is on the right track, despite global headwinds. The budget focused on growth, job creation and infrastructure development.
Key highlights include:
- Massive outlay of Rs 10 lakh crore on capital expenditure, an increase of 33%
- Income tax slabs unchanged, some relief for middle class
- PM-KISAN scheme to cover all landholding farmers now
- New savings scheme for women – Mahila Samman Saving Patra
- Fiscal deficit target revised to 5.9% of GDP for 2023-24
Sitharaman said the budget provides stability and continuity ahead of elections, with no changes made to direct and indirect taxes. Infra spending and support to farmers, youth and women are aimed to further growth.
Infrastructure Push
The Finance Minister announced a capital outlay of over Rs 10 lakh crore for infrastructure development for 2023-24, a massive 33% jump over the current year. This will go towards roads, railways, defence, urban infra and housing among other sectors.
The increased spending is expected to create jobs, boost growth via multiplier effects and improve connectivity across the country.
| Heads | Outlay (Rs crore) | % change |
|---|---|---|
| Roads | 2.7 lakh | 11% |
| Railways | 2.4 lakh | 9% |
| Power | 1.3 lakh | 11% |
| Rural Infra | 1 lakh | 7% |
| Telecom | 88,000 | 48% |
An additional Rs 35,000 crore is allocated towards priority capital investment by the states. Sitharaman said the aim is to build a Viksit Bharat by 2047 through infrastructure development.
Relief For Taxpayers
While no changes have been made to direct and indirect taxes in the interim budget, Sitharaman announced some relief measures focused on small taxpayers.
As a one-time settlement, long pending disputes in Income Tax appeals will be withdrawn to provide relief to small taxpayers. This is expected to free up resources for the tax department as well.
The minister also proposed to increase the rebate limit to Rs 7 lakh under the new income tax regime. This is aimed to provide some relief to the middle class amid high inflation.
Over 3 crore taxpayers are expected to benefit from the enhanced rebate. However, the slabs remain unchanged.
Support to Agriculture
With agriculture being a focus area ahead of elections, the coverage of the PM-KISAN income scheme for farmers has been expanded to include all landholding categories now. Nearly 12 crore farmer families are expected to benefit from the Rs 2 lakh crore outlay.
The agriculture credit target has also been enhanced to Rs 20 lakh crore with focus on animal husbandry, dairy and fisheries. The government will promote use of drones and manure to further boost crop yields.
Schemes for Women
In a bid to encourage women investors, Sitharaman announced the launch of the Mahila Samman Saving Patra scheme which will offer fixed deposits with 7.5% interest for 2 years.
The maximum deposit limit under the new small savings scheme for women will be Rs 2 lakh.
To aid young entrepreneurs, the Stand Up India scheme has also been extended till 2025.
Election Pitch
Presenting the budget Sitharaman said, “Amrit Kaal is the 25 year period culminating in the centenary of India’s independence. This is the time to build an India that is strong, prosperous, proud and caring.”
“We have set out on a journey of strengthening the foundations of this vision over the last few years. The people of India have high aspirations. Our vision is to meet these aspirations through investment in infrastructure and manufacturing, clean energy transition, innovation, assistance to states for capital investment,” she added.
The budget announcements seem focused on wooing farmers, youth, middle class and women voters ahead of crucial state and national elections. Programmes supporting job creation, entrepreneurship, agriculture, rural infra and housing have received a boost in funding.
Revenue Position
The fiscal deficit target has been revised higher to 5.9% of GDP for 2023-24, against the earlier estimate of 5.3%. The higher market borrowing is on account of increased capital expenditure by the government.
Total expenditure for FY2024 is seen at Rs 45 lakh crore.
While tax buoyancy has improved, revenue loss on foodgrains provided through the free ration scheme is pegged at Rs 2 lakh crore.
Way Forward
The Interim Budget attempts to balance welfare spending and capital expenditure to spur growth ahead of elections. It remains to be seen whether these measures can boost job creation and rural incomes when the next government takes over.
With no changes in direct taxes and only minor tinkering in indirect taxes, continuity in policy seems to be the focus. Market reaction was mildly positive as India Inc sees infra spending giving a boost to the slowing economy. Execution will however remain key if budget targets have to be achieved.
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