Finance Minister Nirmala Sitharaman on Thursday pledged to continue with reforms, firmly resisting the temptation of resorting to populist measures in the Modi Government’s last Budget before the upcoming Lok Sabha elections, just a couple of months away. Presenting a vote on account or an interim Budget for 2024-25, she announced a substantial Rs 11.11 lakh crore spending on infrastructure. Importantly, she opted to stay on the path of deficit reduction while implementing measures targeted at specific focus groups.
Sitharaman proposed no changes in income tax rates for individuals and corporates, as well as import duties. However, she extended amnesty for disputed income tax demands from the period before 2014-15, providing relief to small taxpayers.
In her nearly hour-long Budget speech in the Lok Sabha, she listed her government’s achievements across sectors in the last 10 years and announced measures to boost tourism, housing, and renewable energy. Giving a sneak preview of what will be the Modi Government’s priority in the third term if re-elected, she said economic policies that foster and sustain growth, facilitate inclusive development, and contribute to the generation of resources to power investments will be adopted towards making India a developed country by 2047. “The next five years will be years of unprecedented development and golden moments to realise the dream of a developed India by 2047,” she said.
Guided by the principle of “reform, perform, and transform”, the government will undertake next-generation reforms and build consensus with the states and stakeholders for effective implementation, she said.
The interim Budget seeks Parliament’s authorisation for spending for four months, and the full Budget for the fiscal year starting in April will be presented in July by the government elected in the April-May general elections. Sitharaman’s Budget proposes to reduce food, fertilizer, and fuel subsidies by 8 per cent in 2024-25 compared to last year, while keeping the allocation for the rural employment scheme MGNREGA unchanged.
Spending on infrastructure, such as roads, ports, and airports, has been increased by 11 per cent to Rs 11.1 lakh crore in an effort to sustain the current world-record-beating economic growth and create more jobs. The Union government will also provide Rs 1.3 lakh crore in long-term loans to States for infrastructure spending. Additionally, the government aims to build 2 crore affordable houses in the next 5 years and will launch a housing scheme for the middle class.
“It will develop tourist centres and market them on a global scale, while also providing viability gap funding for harnessing wind energy potential, starting with an initial capacity of 1 gigawatt. Moreover, both private and public investments will be promoted in post-harvest activities, including modern storage and supply chains, to enhance self-reliance in oilseeds.
A comprehensive programme for the development of dairy farmers is being planned, along with an increase in spending on fisheries to boost productivity in the sector. All of this will be achieved while adhering to the fiscal consolidation path, which aims to reduce the fiscal deficit to 5.1 per cent of GDP in 2024-25, compared to the revised deficit estimate of 5.8 per cent for the current financial year ending March 31. Notably, the deficit for the current fiscal is lower than the 5.9 per cent projected when Sitharaman presented her last Budget in February 2023.
On tax measures, the finance minister announced that investments by sovereign wealth funds and pension funds will be tax-free for one more year.
Total revenue receipts for 2024-25 were estimated at Rs 30 lakh crore as compared to revised estimate of Rs 26.99 lakh crore in the previous year. Tax-GDP ratio is seen at 11.7 per cent as opposed to 11.6 per cent of GDP in 2023-24.
Stating that every challenge of the pre-2014 era was overcome through economic management and governance, she said the government, in its July Budget, will present a detailed roadmap to make India a developed country.
“We continue on the path of fiscal consolidation, as announced in my Budget speech for 2021-22, to reduce the fiscal deficit below 4.5 per cent by 2025-26,” Sitharaman said.
Among the headline announcements in the Budget are rooftop solar installations at one crore households to deliver up to 300 free units of electricity per month, a corpus of Rs 1 lakh crore for innovation and technology by providing financing at low or nil interest rates, and a new scheme to strengthen deep tech in the defence sector.
While there were no tax proposals, she extended the sunset dates on tax holidays for startups, tax benefits to sovereign wealth funds and aircraft leasing businesses in IFSC.
Other announcements include viability gap funding for offshore wind energy projects, announcements related to clean energy, including setting up of coal gasification and liquefaction capacity of 100 tonnes by 2030, and phased mandatory blending of Compressed BioGas (CBG) in Compressed Natural Gas (CNG) for transport and Piped Natural Gas (PNG).
Sitharaman termed her government’s track record on economy management as GDP - Governance, Development and Performance (GDP).
“Besides delivering on high growth in terms of Gross Domestic Product (GDP), the government is equally focused on a more comprehensive ‘GDP’, i.e., ‘Governance, Development and Performance’,” she said.
The FDI inflow during 2014-23 was USD 596 billion, twice the inflow during 2005-14. “For encouraging sustained foreign investment, we are negotiating bilateral investment treaties with our foreign partners, in the spirit of ‘first develop India’,” she said.
