- The interim budget is just a vote on account to manage the fiscal accounts of the outgoing administration and request permission for necessary spending outlays until the new government presents the entire budget
- To propel the economic growth, the government is likely to maintain its momentum on increasing capital expenditure, especially for the infrastructure sector
- RBI Governor Shaktikanta Das sheds light on the anticipated GDP growth for 2024-25, revealing a projected rate of 7%
DR PRAVIN JADHAV, JALAJ SHAH AND CHIRAYU SHARMA
The Union government is gearing up to present the interim budget for fiscal 2024-25 on 1st February, 2024. This year’s budget is an interim budget due to the ensuing Lok Sabha elections in April-May 2024. The interim budget is just a vote on account to manage the fiscal accounts of the outgoing administration and request permission for necessary spending outlays until the new government presents the entire budget. There are a lot of discussions among the academic and industry fraternity regarding the categories, nature, type and way of allocation of monetary resources in the up coming budget. The authors present a careful analysis and opinion on the predicaments in Budget 2024.
To propel the economic growth, the government is likely to maintain its momentum on increasing capital expenditure, especially for the infrastructure sector in the upcoming Budget. In 2023-24 budget, the capex outlay was increased by 37.4% to ₹10 lakh crores. Road, highway, railways, defence etc. drove the majority of the expenditure allocation. FY2023-24 saw the expansion of national highways by 60%.
Net direct tax collection rises 19%
India’s net direct tax collection has witnessed a significant rise of 19% to reach ₹14.70 lakh crore as per the latest official government data released on 11th January 2024. Moreover, the data further highlights that the tax collection has already reached 81% of the full-year target. The gross collections are at Rs 17.18 lakh crore, 16.77 per cent higher than the gross collection for the corresponding period of last year.
This information suggests that government has garnered comfortable funds to manage the allocation in some key schemes related to agriculture, women welfare and lower-middle class. RBI Governor Shaktikanta Das sheds light on the anticipated GDP growth for 2024-25, revealing a projected rate of 7%.
Women-led development
The Centre allocated over ₹1.12 lakh crore for the two departments handling school education and literacy and higher education in 2023-24. The welfare of women will also be a key pillar of FM Sitharaman’s budget speech on February 1 given PM Modi’s vision of women-led development. The Mahila Samman Savings scheme, Beti Bachao Beti Padhao scheme, working women hostel scheme, women helpline scheme etc. has attracted huge response from the neo-middle class.
PM JANMAN boosts tribal development
For the Ministry of Tribal Development, which implements schemes for the welfare of tribals, the allocation was raised sharply in 2023-24. This trend is expected to continue in 2024-25 as well. In the 2023-24 budget, a total of ₹15,000 crores was allocated under Development Action plan for ST. Additionally, PM JANMAN with a budget of ₹24,000 crores, Aadi Mahotsav and inauguration of seven Ekalavya Model Residential schools have been in focus in 2023.
Infra projects drive connectivity, job generation
Over the past five years, the government has focused on building a strong infrastructure. Infrastructure spending as a percentage of GDP increased from 1.13 percent in FY 2019-20 to a budgeted estimate of 3.3 percent of GDP in FY 2023-24.
The Bharatmala Pariyojana aimed at optimising the movement of goods across the nation is slated to be completed by 2027-28. Some key major foundation stones laid for projects in 2024 include the Delhi-Vadodara expressway, Hyderabad-Vishakhapatnam corridor, Nagpur – Vijayawada Economic corridor, Karnataka section of six lane Surat-Chennai expressway etc. This points to a fair estimate that FY2024-25 budget shall also retain a significant allocation to infrastructure projects aimed at connectivity and employment generation.
Energy-efficient policies need of the hour
Given the strong forward and backward linkages in the sector, spending helps support rural income and jobs; it is also likely to improve logistics costs. However, most spending is concentrated on roads and railways. On the other hand, over the past two years, spending on urban development and energy as a share of GDP has declined. The government is expected to divert some of its expenses towards improving the port and shipping; energy, especially green and sustainable energy; and urban infrastructure. In this budget, the government’s focus should be on the transition from carbon-dependent to energy-efficient policies.
Indian semiconductor industry set to quadruple by 2028
Currently, Indian semiconductor industry valued at $23.2 billion and is projected to reach $80.3 billion by 2028, growing at a CAGR of 17.10%. (According to the Invest India Report). The recent Vibrant Gujarat Global Investor Summit 2024 saw TATA Group committing to build India’s first semi-conductor fabrication plant. One another sunrise industry likely to feature in Budget FY2024-25 is Electric Vehicle. The Indian government aims to have EVs comprise 30% of new private vehicle registrations, amounting to 8 crore EVs, by 2030. The allocations to niche knowledge areas such as Quantum Computing, Artificial Intelligence etc. is expected to be marginally different as compared to last year, as the focus shall be more on public utilities and public infrastructure.
Art of balancing
Overall, the interim budget is bound by certain democratic tradition of not announcing any major sop. Interim budget 2023-24 is crucial for determining the voters’ attitude at large in the upcoming general elections and hence, the government has to run a tight allocation to ensure sufficient justice to different industries and sectors.
The authors of this article are Dr Pravin Jadhav, PhD (IIFT), Coordinator Humanities and social science department, IITRAM, Ahmedabad
Jalaj Shah and Chirayu Sharma, Institute of Management, Nirma University (MBA Batch of 2022-24), Ahmedabad
