UNION BUDGET 2024 - 25

Union Budget 2024: Key Highlights and Expectations

On July 23, 2024, during the monsoon session of Parliament, Finance Minister Nirmala Sitharaman is scheduled to deliver the first Union Budget of the Modi 3.0 government.

The Center did not announce any significant policy reforms or sops for the middle class in the interim Budget that Sitharaman presented on February 1. For the full Budget, Sitharaman faces the challenge of boosting growth, keeping inflation in check, and ensuring the economy stays on the path of fiscal consolidation. Additionally, she may have to accommodate the demands of key allies like N Chandrababu Naidu's Telugu Desam Party and Nitish Kumar's Janata Dal (United), who supported the BJP in forming its third consecutive government after the party failed to secure a Lok Sabha majority in the recent elections.

Economic Policy Goals

Transforming India into a $5 Trillion Economy: One of the primary objectives is to propose measures that will transform India into a $5 Trillion economy, making it the world's third-largest economy—a key promise made by Prime Minister Narendra Modi during the Lok Sabha election campaign.

Boosting Agriculture and Job Creation: The Budget will need to address the growing demands of the agriculture sector, create more jobs, sustain public spending, and boost tax collections.

Tax Relief for Salaried Class: The salaried class is expecting tax relief, which may come through cuts in personal tax rates or a hike in the tax exemption limit, particularly in the new tax regime introduced by the Modi government in 2020.

Inherited Economic Strength

The new government inherits a robust economy and a financial bonanza from the Reserve Bank of India (RBI), which announced the highest-ever dividend of ₹2.11 Lakh Crore for FY24. This dividend will help the Centre accelerate fiscal consolidation, lower the debt-to-GDP ratio, and reduce market borrowing, laying the foundation for long-term economic stability and growth.

Interim Budget Highlights

Fiscal Deficit: The FY25 fiscal deficit target is set at 5.1%, with the government demonstrating a commitment to the fiscal consolidation roadmap. This intent was acknowledged by rating agency S&P, which upgraded India's sovereign rating outlook to positive.

Income Tax: The interim Budget did not provide relief for taxpayers, with rates and slabs remaining unchanged under both the new and old tax regimes.

Infrastructure Boost: An allocation of ₹11.1 Lakh Crore as capital expenditure for FY25, up 11% from the current year's Budget estimate, was made to boost infrastructure growth and create a multiplier effect on other industries.

Tax Collections: The total receipts, excluding borrowings, and total expenditure for FY25 are estimated at ₹30.80 Lakh Crore and ₹47.66 Lakh Crore, respectively. Tax receipts are projected at ₹26.02 Lakh Crore.

Rural Housing: A comprehensive scheme targeting affordable housing for the middle class was announced, along with a commitment to addressing rural housing needs. The Ayushman Bharat scheme will be extended to include all ASHA and Anganwadi workers, and will also cover all those above 70, as per the BJP's manifesto.

Market Borrowings: The Centre plans to borrow ₹14.13 Lakh Crore from the markets in 2024-25 in gross terms to finance its fiscal deficit of 5.1% of GDP. However, net borrowing is slightly lower at ₹11.75 Lakh Crore compared to the revised estimate of ₹11.80 Lakh Crore for the current financial year.

Conclusion

The Union Budget 2024 is expected to be a pivotal financial roadmap for the Modi 3.0 government, addressing economic growth, fiscal consolidation, and sector-specific demands. Stay tuned for detailed updates and analyses post the Budget presentation.