10 Things to Watch out for in FY25 Full Budget

22 Jul 2024 , 09:56 AM

Finance Minister Nirmala Sitharaman will present the full Union Budget for 2024-25 on July 23, 2024, more than two-and-a-half months after she presented an interim version of the same before the Lok Sabha elections. But now that the electoral process is out of the way, the new government must now finalise what it had tentatively stated in February 2024.

While the Bharatiya Janata Party-led National Democratic Alliance government has retained a majority in the Lok Sabha, there have been changes to the political, economic, and financial landscape of India since the Interim Budget was presented on February 1, 2024. As such, there a few key things to watch out for in the full Budget.

1) New fiscal deficit target?

The interim Budget set a fiscal deficit target of 5.1% of GDP for 2024-25. With latest data showing that the fiscal deficit in 2023-24 was actually 5.6% – as against the original target of 5.9% – and the Reserve Bank of India transferring an unexpectedly large dividend of ₹2.11 Lakh Crore in May 2024, the Indian government suddenly has room to further consolidate its finances. As such, some economists see the target being pruned in the full Budget.

2) Borrowing plan

How the fiscal deficit is financed is probably the most important aspect of the Budget as it can impact interest rates in the whole economy. In this regard, the interim Budget had already sprung a surprise by estimating that the central government will borrow ₹14.13 Lakh Crore from the market by issuing bonds – down from ₹15.43 Lakh Crore in 2023-24 and well below what market participants had expected.

But with revenues looking rosy, some market participants say it is possible that the government may tinker with the borrowing target.

3) Higher capex?

A key portion of the government’s expenses is its capital expenditure. And the interim Budget for 2024-25 had pegged it at ₹11.11 Lakh Crore. This was a fresh record high and 16.9% higher than the revised estimate for 2023-24.

Could the full Budget raise the capex target even higher? Economists think so, although not by a lot. ₹11.11 Lakh Crore is a large sum and the various government ministries and departments need to be able to spend that money to begin with.

4) Sops on the cards

According to multiple reports, there could be increased funding for some states, whose parties have emerged as key allies of the government

How this is done is for the central government to decide, but these will form a key consideration in the fiscal math.

5) More money for rural jobs scheme

One of the most important schemes of the government is the Mahatma Gandhi National Rural Employment Guarantee Program or MGNREGA. In the interim Budget, the total allocation for this scheme was ₹86,000 Crore. While this is the same as the revised estimate for 2023-24, it is often seen that the allocation is increased over the course of the year as demand for jobs increases.

6) Focus on farmers?

Farmers are a key political and economic constituency and it is in the interest of any government to keep them happy and ensure their progress.

In this regard, there has news reports that the PM Kisan Samman Nidhi scheme could be expanded to ensure that farmers’ annual pay-out is increased to maybe as much as ₹12,000 from ₹6,000 at present.

7) More cash for women?

A factor in the BJP’s performance in the 2023 state elections was the role played by its women-centric schemes, namely the ‘Ladli Lakshmi’ and ‘Ladli Behna’ schemes. Under these schemes, eligible women are transferred a certain amount of money every month.

With elections set to be held in important states such as Maharashtra, Haryana, and Jharkhand later this year in 2024, a new cash-transfer scheme focussing on poor women has been reported to be in the works.

8) Rethinking privatisation plans

In a huge announcement, the Indian government had in February 2021 said that as part of its new public sector enterprises policy, it would exit from non-strategic and maintain a “bare minimum” presence in strategic sectors.

However, implementing the same has proved to be rather difficult. Media reports say that instead of selling its stake in public sector enterprises, the government may now look to improve the performance of government-owned entities.

9) Taxpayers

Every budget, particularly the one after the Lok Sabha elections, is keenly eyed for announcement related to income tax rates and slabs. While inflation, especially for food items, continues to be high and eats into the pockets of Indian consumers, the bottom-line for the government is that only a small fraction of Indians are taxpayers.

However, the government has been acting to make the new income tax regime more attractive. With no deductions and exemptions, the new regime looks to simplify the income tax system.

10) Sectoral pushes

In terms of sectors, three segments are widely expected to benefit from the Budget thanks to the government’s focus on creating jobs and boosting growth. These are, namely, housing, manufacturing, and the auto industry.

Affordable housing continues to be a priority for the government, while boosting the share of manufacturing in India’s GDP is a cornerstone of the policy to increase domestic production and become self-reliant. Finally, attracting new-age manufacturers in traditional sectors – such as electric vehicle makers within the automobile industry – will ensure India does not fall behind in the next stage of the industrial revolution.

 

FAQs

1. When will the full Union Budget for FY25 be presented?
   The full Union Budget for FY25 will be presented on July 23, 2024.
2. What was the fiscal deficit target set in the interim Budget?
   The interim Budget set a fiscal deficit target of 5.1% of GDP for 2024-25.
3. How might the fiscal deficit target change in the full Budget?
   Some economists predict that the fiscal deficit target might be revised down to 5% or lower due to better-than-expected financial data.
4. What is the significance of the borrowing amount in the Budget?
   The amount the government borrows affects interest rates and overall economic conditions. The interim Budget estimated borrowing at ₹14.13 Lakh Crore, down from the previous year.
5. What is the likely trend for MGNREGA funding?
   The allocation for MGNREGA was set at ₹86,000 Crore in the interim Budget. This amount may be increased if demand for rural jobs rises.
6. Could there be changes to farmer support schemes?
   There is speculation that the PM Kisan Samman Nidhi scheme might be expanded to increase the annual payout to farmers.
7. Will there be new schemes focused on women?
   A new cash-transfer scheme for poor women might be introduced, building on the success of existing schemes like ‘Ladli Lakshmi’ and ‘Ladli Behna.’
8. What are the expectations regarding privatization plans?
   The government may reconsider its privatization strategy, focusing instead on improving the performance of public sector enterprises rather than selling them off.