By: Damini Mehta
On February 1, 2024, Finance Minister Nirmala Sitharaman presented the Interim Budget for 2024-25 in the Indian Parliament, marking a historic occasion as she presented her sixth consecutive budget. Against the backdrop of the upcoming Lok Sabha elections where the Modi government is seeking a record third term, the budget appears to be a tool to outline a vision for a developed India by 2047, with a focus on inclusive growth and economic transformation. Notably, the government has stayed away from any populist measures or big ticket announcements as has been the norm before Lok Sabha and crucial state elections.
One of the most significant aspects of the budget is the decision to maintain the status quo on direct and indirect tax rates, providing stability and predictability for businesses and individuals alike. However, the Finance Minister introduced strategic measures that aim to alleviate the burden on taxpayers and put more money into their hands.
A notable move was the withdrawal of income tax demands up to ₹25,000 till the fiscal year 2009-10 and up to ₹10,000 for the years 2010-11 to 2014-15. The scheme is slated to benefit about one crore tax payers and is considerable in the light of the decision not to change the tax slabs this year. The move signifies a commitment to streamlining the tax administration process, providing certainty to taxpayers and promoting ease of doing business.
To address the housing needs of the middle class, the Finance Minister announced a scheme aimed at assisting individuals living in rented houses to purchase or construct their own homes. This initiative aligns with the government's broader objective of improving living standards and promoting homeownership, particularly among the middle-income segment.
Other social measures announced in the budget include extension of Ayushman Bharat- PM Jan Arogya Yojana health insurance coverage to ASHA and Anganwadi workers and helpers. Notably, the government has been laying special emphasis on social justice and development. The finance minister started the budget speech highlighting the Modi government’s steps which helped bring 25 crore people in the last 10 years out of multidimensional poverty. Furthermore, she reiterated the ‘four castes’ which are the prime focus of the Modi government– poor, women, youth and farmers.
In a boost to entrepreneurship and foreign investment, tax benefits for start-ups and incentives for investments made by sovereign wealth or pension funds were extended by an additional year until March 31, 2025. These measures are poised to stimulate innovation, job creation, and economic growth.
The budget outlined a substantial 11% increase in capital expenditure, amounting to ₹11.11 lakh crore. This significant hike reflects the government's commitment to enhancing infrastructure, creating job opportunities, and fostering sustainable development across various sectors. The focus on capital expenditure underscores the role of robust infrastructure in driving economic growth.
That fiscal responsibility remains a priority is evidenced by a lower target of fiscal deficit for FY25, at 5.1%, down from the revised estimate of 5.8% in FY24. Additionally, the government plans to borrow ₹14.13 lakh crore in the next fiscal year, demonstrating a strategic reduction compared to ₹15.43 lakh crore in FY24, balancing economic stimulus with fiscal prudence.
The budget sets ambitious targets for revenue generation, with the gross tax revenue target for FY25 increased by 11.46% to ₹38.31 lakh crore, up from ₹34.37 lakh crore in FY24. The direct tax collection target is set at ₹21.99 lakh crore, and the indirect tax target is at ₹16.22 lakh crore, emphasizing the importance of robust tax collection mechanisms.
Beyond economic measures, the government announced its intention to release a white paper on the mismanagement of the economy before 2014, emphasizing transparency and accountability. It is seen by many as a political move to compare economic development in the UPA vs NDA period. The government also highlighted that the next-generation reforms will be unveiled in consultation with states and stakeholders, showcasing a commitment to inclusive governance.
Taking a step further from asset creation by acknowledging the need for strategic planning in the face of evolving demographic dynamics, the budget called for setting up a high-powered panel to address population growth challenges and demographic changes.
In conclusion, India's Interim Budget for 2024-25 reflects a balanced approach towards economic development, tax rationalization, and inclusive governance. The measures outlined aim to provide relief to taxpayers, stimulate economic growth all the while refraining from announcing any big ticket measures before the crucial Lok Sabha polls.