A PROMISING INTERIM BUDGET 2024-25
Presented the sixth time by Finance Minister Nirmala Sitharaman, the Union Budget 2024-25 pegs fiscal deficit for FY24 at 5.8% of GDP at 5.1% for FY25. These figures give confidence in the economic stability and a hope for a more prolific full budget after the elections by the elected government. As expected, being an interim budget, there were no major announcements or sops for the industries. In a broader perspective, this budget signals the intention of government’s continued focus on infra- structure, employment generation, rural economy, welfare schemes, housing and international trade. Although, the budget did not make any monumental policy decel larations or changes, the strategic initiatives to enhance economic, digital and social infrastructure and allocation of increased funds for healthcare, education and skill development are poised to gener- ate a positive ripple effect on the economy. THE HITS & MISSES The budget has tried to clarify ambiguities and ease compliance for businesses, while maintaining current tax rates for direct and in- direct taxes, including import duties. Rationalization of GST rates and income tax relief for salaried class was given a miss. The infrastructure capex outlay augmentation to 3.4% of GDP will have a multiplier effect on economic growth and employment creation. The projects identified under PM Gati Shakti for enabling multi-modal connectivity will provide a boost to the logistics sector and in turn enhance capabilities of all the in- dustries. However, there were no timelines announced for enhancing infrastructure. The budget outlay of a hous- ing scheme for the middle-income group and the construction of 20 million homes in rural areas is a positive news for the real estate and allied sectors. But, the much-await- ed industry status, tax benefits, af- fordable housing boosts, and easing liquidity issues for real estate did not materialize. Domestic tourism which has been a major focus for the Indian government since 2020 got renewed thrust in the interim budget 2024 with announcement for state-level development of tourist centers, tourism infrastructure, and amenities. This will give the much-needed push to hospitality industry and real estate asset classes such as holiday homes and second homes. The creation of an interest-free fund for supporting R&D and in- novation will propel the Make in India agenda and encourage private sectors to scale up research and innovation, The announcement to set up a 1 lakh crore corpus for tech savvy youth from the private sector with low or nil interest free loans will provide a major boost to the start- up business. However, MSME sector that contributes nearly one third of national GDP was left disappoint- ed with no policy announcements for ease of regulatory procedures, reducing compliance burdens and greater access to loans. The budget also reaffirmed the government's focus on green energy through its 'Pradhan Mantri Suryo- day Yojna', scheme for one crore household’s solar rooftop installa- tions, harnessing India's offshore wind energy potential, supporting EV manufacturing and charging infrastructure and an ambitious goal to set up coal gasification and liq- uefaction projects. But, the effectiveness of these initiatives hinges on strong implementation. ECONOMY & TAXES BOOST TO MANUFACTURING & START-UPS The government has given 30% higher allocation for 2024-25 for production-linked incentives (PLI) across all sectors and a significant chunk of Rs 4,203 crore has been earmarked for incentives for assembly, test, and packaging plants. The substantial allotment for various manufacturing schemes is sure to provide a significant thrust to man- ufacturing sector. Other focus areas of the budget were the domestic deeptech tech- nologies for defense, which could be a big boost for India’s tech ecosys- tem and innovation and research in emerging areas. The start-ups also find their mention in the budget with extension of the tax holiday till March 31, 2025, though it is only applicable to a small proportion of Indian startups given the narrow scope of the criteria. BIG PLANS FOR WELFARE & AGRI- TECH Making it a people friendly bud- get, there has been an increased allocation for the PM-SHRI scheme to INR 6,050 Cr, up from INR 4,000 Cr last year, to boost development of schools, plans to set up new med- ical colleges by utilizing existing hospital infrastructure and extension of Ayushman Bharat Yojana to all ASHA and Anganwadi workers. Acknowledging the 55% rural population dependent on agriculture as their primary source of in- come, 2.78% of the total budget has been allocated to the agriculture and allied sectors to encourage agricultural growth, expand crop insurance coverage and setting-up of five integrated aquaparks to enhance aquaculture productivity. The supportive policies are sure to attract agritech startups to offer market linkage and supply chain management. FOCUS ON GREENING INDIA The interim budget has given 2X higher allocation for green hydrogen and solar power production and development. The roadmap includes plan to bolster the ecosystemby supporting manufacturing and charging infrastructure, rooftop solarisation scheme targeting one crore households. For the energy sector, notable announcement comprises Viability Gap Funding (VGF) for 1 GW offshore wind projects; coal gasification and liquefaction by setting up 100 MT by 2030; mandatory blending of CBG in CNG for transport and PNG for domestic purposes; and financial assistance for the procurement of biomass aggregation machinery are a shot in the arm. INFRASTRUCTURE IN THE SPOTLIGHT Continuing the focus on infrastructure development, the budget has hiked infrastructure outlay to Rs 11.11 lakh cr for FY25, which would be will be 3.4% of GDP. The focus on three major economic corridor programs — energy, mineral and cement corridor, also being referred to as Energy Economic Corridor; through port connectivity corridor and high traffic density corridors will enhance country's logistics and transportation sector. Additional- ly, urban transit systems will be improved such as Metro Rail and Namo Bharat initiatives to bridge the urban-rural divide. These ini- tiatives are being looked upon as important announcements as de- veloping new rail corridors, airports and the multi-modal connectivity will streamline the movement of goods, benefitting the logistics and making building warehouses and industrial parks in diverse locations more feasible. MAKING INDIA A TOURISM HUB Inspired by the post covid fer- vor for domestic tourism, the budget has announced, selecting 50 iconic destinations for promotion and developing physical connec- tivity and virtual connectivity to promote tourism. Other initiatives announced include, developing a dedicated mobile app to boost domestic and foreign tourism and supporting states for development of iconic tourist centers and aspects such as connectivity, entertainment, culture, food and tourist security. India being rich in culture heritage and geographical diversity, these steps will surely go a long way in making India an attractive tourist destination. INDIRECT BENEFITS FOR REAL ESTATE The real estate sector stayed devoid of any major announcement or policy changes. The PMAY (Urban) was left unaddressed. Though the proposal to add 2 crore additional houses under the PM Awas Yojana (Gramin) over the next 5 years is likely to boost housing development in the rural areas. As an indirect bud-consequence, the announcement of a scheme to help deserving sec- tions of the middle class “living in rented houses, slums and unautho- rized colonies to buy or build their own houses would propel the real estate sector. The infrastructure focus on de- veloping muti modal connectivity will further spur urbanization and growth of real estate along the new areas of development. The enhanced connectivity is also expect- ed to boost the real estate growth of tier 2 and 3 cities. Given the direction of the interim budget, it is hoped that the full budget will include more concrete measure for the real estate and address the long-standing demands and concerns of the sector. INTERIM BUDGET SETS THE CONTEXT FOR FUTURE Overall, the budget, although an interim has been strategically constructed with an eye on the addressing the deficit and growth and both immediate and long-term goals. Larger focus has been on the population needs and welfare with initiatives for government invest- ments but staying away from subsi- dies. The announcements outline the provisions to cover fiscal deficit, re- ducing borrowings and build capex growth. The specific challenges of various sectors remained untouched and hopefully will find their place in the upcoming full budget after the elections. For now, the interim budget has set the right context for the future full budget. The effective implementation and the govern- ment's ability to meet the ambitious targets as set in the budget, remains to be seen.
This year’s budget aims to reach a fiscal deficit level below 4.5 per cent of the GDP by 2025-26 and thus, the finance ministry has fixed the deficit for 2024-25 at 5.1%, on hopes of strong tax collections and expenditure rationalization.The budget has hiked capital expenditure by 11 per cent for the next fiscal to sustain the economic growth rate. The relief from dis- puted small tax demands of up to Rs 25,000 is a welcome step and reduction. In a bid to boost Inter- national Financial Services Centre (IFSC) GIFT City, there has been an extension of tax benefits till March 31, 2025, for eligible startups, sov- ereign wealth funds, pension funds, and units. Reduction in custom du- ties and GST would have added to the industry’s cheer. The budget disappointed the taxpayers, as the tax rates and income tax slabs have remained unchanged, including im- port duty.
Tags : Finance Minister Nirmala Sitharaman PMAY elected government financial assistance iconic destinations interim budget infrastructure connectivity entertainment culture food tourist security