Budget FY 24 tries to do a balancing act between fiscal stimulus and fiscal consolidation

1 Feb 2023 , 05:32 PM

The big announcement of FY 24 Budget is making income up to Rs 7 lakh tax free. This will result in increasing the disposable income of people. This measure was necessary when high inflation has reduced the real income of people. Due to higher disposable income, consumption is likely to get a boost in FY 24. Tax rate for the highest income earners has also been reduced to 39% from 43%.

Capital Expenditure increased y-o-y by 33% to Rs 10 lakh crore

In order to give further boost to the economy, FY 24 budget has increased government capital expenditure by 33% to Rs 10 lakh crore.  GDP of an economy is made up of four components : Consumption, Government Expenditure, Private Investment, and Net Exports. By trying to give a boost to consumption and government expenditure, the government has tried to give a boost to Indian economy, in times of economic slowdown.

39000 compliances eliminated; 3400 legal provisions decriminalized

To increase the Ease of Business, the government announced in FY 24 Budget that it has eliminated 39000 compliances required for businesses. It has also decriminalized 3400 legal provisions. 

Incentives for MSMEs

The Budget has also announced some incentives for MSMEs. This sector was worst hit by three years of Covid lockdowns and restrictions. Additional Rs 9000 crore has been allocated in the Budget for collateral-free loans for this sector. 

Fiscal deficit target of FY 24 set at 5.9% of GDP

FY 24 Budget has announced that the government has achieved the fiscal deficit target of 6.4% of GDP for FY 24. For FY 24, the government has set a lower fiscal deficit target of 5.9% of GDP. It has set the target of bringing down the fiscal deficit to 4.5% of GDP by 2025-26. This shows the strong commitment of this government to fiscal conservatism. 

Mobile phones, television sets, toys, bicycles will get cheaper

For the middle class, the budget brings some relief in the form of lowering of import duties on components of certain household and consumer durable products. Due to this, prices of mobile phones, televisions, toys etc will come down. Customs duty on lithium-ion battery has been abolished. This will lower the prices of Electric Vehicles. Customs duty on components used in manufacturing of toys and bicycles has also been reduced.

Borrowing target of Rs 15.5 lakh crore, through issuance of bonds, set for FY 24

The Government has set Rs 11.8 lakh crore as its borrowing target from issuance of bonds for FY 24. It raised Rs 14.8 lakh crore, through issuance of bonds, in FY 23. Receipts of the Government, excluding borrowings, for FY 24, are expected to be around Rs 27 lakh crore.