India's Interim Budget: Priorities in Fiscal, Capital, Consumption, Human Capital, and Rural Sectors

29 Jan 2024 , 03:15 AM

The Union budget, set to be presented amid a relatively stable economic landscape, holds significance for providing policy direction for sustained economic growth.

As national elections approach, the budget will be an interim one rather than a comprehensive annual budget.

Policy announcements are limited due to the impending model code of conduct following the likely announcement of election dates in mid-March.

Five critical areas of focus include moving towards fiscal consolidation, continuing emphasis on capital expenditure, spurring consumption, increased spending on human capital, and a focus on agriculture and the rural sector.

Fiscal consolidation is crucial with India’s general government debt to GDP at 82%, and efforts are expected to achieve the fiscal deficit target for 2023-24.

Capital expenditure has been used post-pandemic to propel growth, and a continued focus on infrastructure is anticipated, with a 10% growth in capex to around Rs 11 trillion.

The need to spur consumption is emphasized, and measures like a small cut in excise duty on petrol/diesel are suggested to boost consumption without significantly affecting fiscal math.

Increased spending on human capital, particularly in health, education, and skilling, is seen as essential to harness India’s demographic dividend.

A focus on agriculture and the rural sector is vital, addressing issues like low agriculture productivity, improving rural infrastructure, and enabling skill development to reduce dependence on the farm sector.

Other areas like creating an enabling environment for businesses, addressing environmental concerns, and uplifting marginalized sections of society are also deemed important in the budget.

The emphasis is on ensuring equitable, sustainable, and green growth in the quality of economic development.

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