Finance Minister Nirmala Sitharaman has begun the presentation of interim budget 2024 in the parliament. All eyes are on government's decision on rural spending, capex and fiscal deficit, among others.
Before the start of the budget session, Prime Minister Narendra Modi said that the government will follow the tradition of presenting an interim budget before the general elections. The finance minister had earlier indicated that there will be “no spectacular announcements” in this budget and it will just be a vote on account.
For the unversed, an interim budget is presented to allocate funds for the remaining months of a government’s tenure before the general elections which are expected to be held in April-May. Read More
Investors and experts are keeping a close watch on announcements related to capital expenditure and fiscal deficit. As per government’s previously stated position, India aims to cut down fiscal deficit to 4.5% by FY26. For FY24, the target has been set at 5.9%.
The fiscal deficit target has become a talking point ahead of India’s inclusion in global bond indices of JP Morgan and Bloomberg. Some experts suggest that inability to meet targets might not be appreciated by investors in government bonds.
However, a focus on fiscal consolidation has implications for the capital expenditure budget. In the last four financial years, the capex budget has grown at a CAGR of over 30%. To support growth, the Modi government has been funding infrastructure growth to make up for missing private capex. Led by government’s push, India has seen resilient growth amidst a challenging global macroeconomic environment. But with fiscal constraints ahead, will the government continue to go big on investments? Read More
Conversations with several start-ups revealed the following key demands from Finance Minister Nirmala Sitharaman’s interim budget
Simplify tax regulations and reduce regulatory complexities for startups to enhance the ease of conducting business and foster innovation.
Allocate a dedicate fund of funds to bolster funding for existing technologies like cybersecurity while also supporting emerging technologies such as Artificial Intelligence (AI), Internet of Things (IoT), and 5G.
Since access to credit remains one of the key growth challenges for smaller startups, the government should incentivize Non-Banking Financial Companies (NBFCs) to expand lending to these entities.
Bolster support for incubation centers, encourage partnerships with educational institutions, and initiate skills training initiatives tailored to the requirements of the startup ecosystem.
Anticipation fills the air as the nation awaits the interim Union Budget of 2024, with tax-related measures at the forefront of expectations. While major changes may not be expected, taxpayers are hopeful for revisions in Section 80C and home loan tax benefits. Section 80C, offering a current deduction limit of Rs 1.5 lakh, is the primary incentive for those under the old tax regime. Calls for an increase in this limit are widespread due to retail inflation. Various avenues, such as NPS, ELSS, ULIP, and PPF, provide deductions under Section 80C, while insurance premiums and contributions to Sukanya Samriddhi Account also qualify. Additionally, Section 80C covers tuition fees, registration charges, stamp duty, and home loan principal repayment. Homebuyers are eager for changes in Section 24(b), which limits the deduction for home loan interest to Rs 2 lakh. In the new tax regime, deductions on municipality tax, a standard deduction of 30%, and interest on home loans are exempted, with the interest deduction capped at the rental income received. Read More
The budget provides a detailed expenditure profile of the central government. Different ministries submit their demand for grants which is taken into consideration by the finance ministry for fund allocation. Analysis of last five budgets show how the fund allocation has evolved during Modi Government’s second tenure.
The Ayushman Bharat health insurance scheme may double its coverage to Rs 10 lakh from the current Rs 5 lakh. Critical ailments like cancer and transplants are expected to be included under the expanded coverage. The official announcement is anticipated in the upcoming interim Union Budget on February 1, 2023. The move aligns with the government's plan to double beneficiaries to 100 crore under the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB PM-JAY). The scheme aims to extend benefits to various groups over the next three years. The Ayushman Bharat Yojana presently provides health insurance coverage through cashless facilities for secondary and tertiary care hospitalization. Read More
Interim Budget 2023 will be the last budget before the Lok Sabha Elections in May this year. Stock markets are not anticipating any populism budget and the government is unlikely to go for any major announcements. However, they may show their intent on continuing on the path of pragmatic fiscal management with a continued focus on infrastructure development.
Market analysts expect the key policy reforms, such as Atmanirbhar Bharat, Make in India, and the PLI scheme, to continue and receive further impetus in fiscal 2025. sectors like railways, defense, infrastructure, power, renewable, auto, manufacturing, real estate, etc. will remain under focus.
“One area where we may expect some positive relief is on personal income tax. There may be some rationalisation of tax slabs and rates. A budget which broadly reflects the past trends while laying down the big picture for the way ahead, may be welcomed by the market and be supportive of the economy,” said Satish Ramanathan, CIO – Equity at JM Financial Asset Management Ltd. Read More
Real Estate experts are emphasizing the long-pending demand of granting Industry status to the sector to catalyze investments and streamline regulations. The sector is expecting increased tax benefits in the upcoming budget. On of the key expectations is to elevate the current Rs 2 lakh rebate on housing loan interest under Section 24 of the Income Tax Act to a minimum of Rs 5 lakh. In addition, the sector expects to boost housing, infrastructure development, sustainability and digitization to support real estate growth across segments in long term.
“EV infrastructure, renewable energy and green financing will continue to remain in focus creating a strong base for a sustainable future. Incentivisation of green buildings through minimum alternate tax or tax breaks similar to infrastructure sector will be particularly beneficial. Meanwhile, retail investors are calling for additional rationalising of the capital gains tax structure. The Union Budget 2024-25 should explore initiatives to boost greater retail engagement in REITs and InvITs,” said Badal Yagnik, Chief Executive Officer, Colliers India. Read More
The edtech sector is expecting a reduction on GST on educational products and services from 18% to 5% aiming to enhance digital learning accessibility. Industry leaders also hope for collaboration for public-private sector initiatives and emphasize financial incentives, research grants, and tax benefits to promote innovation. Hopes are high for investment’s in online higher education to overcome socio-economic barriers and promote innovation in edtech.
Benchmark equity indices Sensex and Nifty settled nearly 1 per cent higher a day before the Interim Budget 2024. While the Interim Budget is a non-event and a vote on account, market participants are expecting the government to focus on fiscal consolidation and key policy reforms.
On 31 January, the BSE Sensex jumped 612.21 points or 0.86 per cent to settle at 71,752.11. The NSE Nifty climbed 203.60 points or 0.95 per cent to close at 21,725.70. All sectors ended in green with buying seen in PSU Bank, Pharma, and Realty. Read More
India's booming e-commerce sector expects more PLIs to help support the development of local manufacturing hubs and asks for government spending on strengthening the digital infrastructure to help the economy recover from the impact of inflation on the consumer pockets. Unicorn Meesho’s CFO Dhiresh Bansal is rooting for an “all-encompassing strategy” for ease of doing business. “Simplifying the processes associated with tax compliance and lowering tax rates, especially during the initial operational years, will ease the financial strain on startups, cultivating a more advantageous business environment,” Bansal said.
Prateek Maheshwari, co-chair, India Edtech Consortium (IEC), co-founder- Physics Wallah (PW)
"In view of the upcoming interim Union Budget, we would like to appeal to the government to increase the education sector’s budget and reduce the GST slab from 18% to 5% on educational products and services. Our aim is to establish a strong foundation for the country’s children, particularly those from economically disadvantaged backgrounds. Additionally, given the evolving world and our shifting approach to education, driving a change to ensure affordable and quality education at scale needs more collaboration for public and private sectors. For this, reducing the GST on educational services would also remove financial strain on parents, promoting affordability. Apart from this, focusing on collectively enhancing youth skills to increase employability and reduce skilling gaps is imperative for the Indian economy’s growth.”
Industry watchers and experts tracking India's booming deep-tech sector expect government to roll out exclusive programmes in the upcoming budget, similar to the Production-Linked Incentive (PLI) schemes, to fuel growth and provide impetus to the sector that is likely to drive India's next wave of technological revolution. Despite the sector witnessing the rise of companies with IdeaForge, a drone-making company, and Tata Technologies entering the public markets, challenges loom large in terms of the quantum of funding, said Raj Kumar Waghray, head of the Entrepreneurship Cell at the Foundation for Science Innovation and Development (FSID), IISc's incubation cell.
Fintech sector's anticipations include extended support to the MSME sector, incentivised lending rates, and credit guarantee schemes for microfinance institutions. Fintechs also hope for the promotion of digital payments in tier 2 and 3 cities, with tax waivers for lending solutions in remote areas. Additionally, there's a call to expand the scope of DigiLocker for comprehensive digital identity and KYC purposes to enhance the digital financial ecosystem's safety.
Bipin Preet Singh, founder and CEO, MobiKwik
“In 2024, we expect the upcoming Union Budget to further drive financial inclusion by increasing the credit corpus for MSMEs. This involves extending support to microfinance institutions (MFIs) and small finance banks (SFBs), that help them meet their financing needs. To reach enterprises in remote corners of the country, we foresee incentives for fintechs that provide lending solutions beyond Tier 2 & 3 cities.
Also, a greater alignment between fintech companies and public institutions is crucial for the evolution of India's fintech ecosystem. Financial products built on top of India Stack have borne strong results in the world of digital payments. We expect the budget to provide incentives that encourage fintechs to drive further innovations for other aspects of banking like credit, investments, savings and advisory. We also expect digital lending, especially small ticket size loans, to grow significantly with the proper checks and balances in place to protect borrowers."
Global investment bank Goldman Sachs highlighted key points which investors should keep an eye on in its pre-budget expectation document. The New York-based firm said, “In our view, three key things for investors to look out for in the interim budget include: a) the government’s commitment to the medium-term fiscal consolidation path, b) if capex growth can continue with fiscal consolidation, and c) the supply of government bonds that the market may be able to absorb”
As per the firm, government is expected to meet its fiscal deficit target for this financial year. In the next financial year, it expects the government to reduce fiscal deficit to 5.2 to 5.4% of the budget.
Every scheme is allocated funds by the finance ministry keeping in mind the priorities of the government. An analysis of the last five budgets shows which schemes have gained and which have lost the most during Sitharaman’s tenure as the finance minister.
Lekha S. Chakraborty, economist and professor at National Institute of Public Finance and Policy, says the government will not deviate from its path of fiscal consolidation in the Interim Budget. She believes the significance of fiscal dominance in capital expenditure (capex) cannot be overstated for maintaining sustainable economic growth figures. It is expected to attract private investment, albeit not immediately but with a certain time lag. Therefore, maintaining a sustained emphasis on capex remains imperative. In line with this, she projects the fiscal deficit for the current fiscal year to be slightly below 6 percent.
Finance Minister Nirmala Sitharaman last year announced a strategy to encourage cities to enhance their creditworthiness, enabling them to issue municipal bonds. Following this announcement, certain market participants had expected a significant borrowing trend among municipal corporations from the debt market, but such a scenario did not materialise with Pimpri Chinchwad Municipal Corporation being the only notable issuer in 2023. Therefore, the market is hopeful that the government will consider providing additional measures in the Interim budget to deepen the corporate bond market in India given the scope of its contribution to India’s development.
President of PHD Chamber of Commerce and Industry Sanjeev Agrawal believes that government expenditure cannot be compromised just to manage fiscal deficit. He opines that capital expenditure ought to be high because India needs to support the economy in these difficult times.
The ratio of fiscal deficit, according to him, will automatically become benign. For the current year, he finds India at a comfortable spot because the country is doing better than many other economies. Fiscal deficit becomes problematic where there is no growth. If you are growing and you are growing in the higher trajectory, then your fiscal deficit also supports you in terms of creating conducive conditions for business and the youth, he adds.
Last year's challenges in the Indian IT sector are poised to improve, with industry expectations centered around cybersecurity and public-private partnerships in the upcoming budget.
Saurabh Rai, CEO, Arahas Technologies said, "Prospects of a 20 per cent budget increase for this sector is high. This boost in funding is crucial for research, development, and fostering innovation."
The focus on R&D stands as a crucial aspect, alongside the potential provision of tax incentives to stimulate investments in new tech. Moreover, strengthening cyber resilience is also going to be a key priority, with a particular focus on pushing investments in artificial intelligence across pivotal sectors such as healthcare, agriculture, manufacturing, and finance.
Aditya Birla Group Chairman Kumar Mangalam Birla referred to the popular meme adage ‘just looking like a wow’ to describe the state of Indian economy. In his annual note, KM Birla said, “In the arc of a nation’s progress, there comes a moment when you feel a certain pulse. A deeply impactful one — the pulse of a nation's confidence. Perhaps it’s time to imagine an index that captures the collective confidence of a nation. Maybe call it the national confidence index.”
Benchmark indices opened marginally higher on 1 February ahead of Interim Budget. The Sensex was up 63.63 points or 0.09 per cent at 71,815.74. The NSE Nifty was up 24.20 points or 0.11 per cent at 21,749.90.
Maruti, Power Grid, M&M, NTPC, and TCS were among the top gainers on the Sensex, while L&T, Wipro, JSW Steel, ICICI Bank and Axis Bank were among the laggards.
The US Federal Reserve kept the benchmark interest rates unchanged at 5.25 per cent to 5.50 per cent for the fourth straight meeting. Investors are now awaiting Finance Minister Nirmala Sitharaman’s budget presentation, anticipating measures to boost economic growth and fiscal consolidation.
Nalin Negi, CFO and interim CEO of BharatPe, is expecting the government to announce measures to increase capital availability for fintechs operating in underserved domains like rural credit, digital payments, and digital lending. He stated that regulations around digital banking, data governance and emerging technologies have fueled the building of sustainable fintech businesses over the last year or so, and the upcoming budget will introduce additional measures that can aid credit growth, financial inclusion and digital enablement of financial services.He added that the government should further broaden the eligibility criteria and look at providing tax reliefs to employees in start-ups around Employee Stock Ownership (ESOPs).
In line with government's priority to boost renewable energy capacity, experts expect the interim budget to show intent towards the goal for sustainable future. However, thermal capacity addition has also been a focus recently due to revival in industrial activity.
Kunal Gala, Partner of Deal Value Creation at BDO India, says, "With hopes for a spotlight on green hydrogen and natural gas, the oil and gas industry seeks reforms to boost natural gas consumption and support the adoption of renewable energy."
He adds that there's a plea to bring petroleum products under GST. "Power sector emphasises the need for incentives in green hydrogen and energy storage solutions. Industry players are urging for lower interest rates to enhance competitiveness globally," Gala opines.
As the government reacts to the developments in Indian economy in its annual budget, the key numbers related to the state of Indian economy are crucial to understand. Here are some key facts about Indian economy
GDP growth has been solid in the first two quarters of FY24. In Q1, India’s economy grew 7.8 per cent while the growth remained strong at 7.6 per cent in Q2. Government expects GDP to grow at 7.3 per cent in the current fiscal.
Inflation has been a pain point for the Indian economy. It surged to a high of 7.44 per cent in July. The CPI inflation rate stood at 5.69 per cent in December.
RBI has kept repo rate at 6.5% throughout the financial year and experts don’t anticipate a change till Q2 FY25
Current Account Deficit (CAD) narrowed to 1 per cent of GDP in Q2 FY24. Estimates of economists suggest that India’s CAD will narrow to 1.9%
In just few minutes, the finance minister will present the interim budget for FY 24-25. Union Cabinet has approved the budget which will be in place till the swearing in of the next government post 2024 elections. This is Nirmala Sitharaman's sixth budget.
In her initial remarks, finance minister said that that the Modi government doubled down on its responsibilities. "As a result of our efforts, our country has high aspirations. We are confident we will be back with a resounding mandate.
The finance minister reiterated government's programmes on rural housing, water connectivity and opening of bank accounts to suggest the government has focused on inclusive development. "We need to empower people. Social justice is a necessary and effective governance model for our government."
In the last 10 years, the government has assisted 25 crore people to get out of poverty, Sitharaman asserted in her address. She said, "Earlier approach of entitlements was not working. We have focused on fair resource allocation."
In her initial remarks, Finance Minister Nirmala Sitharaman is listing out government's achievements on several policies which include empowerment of youth, opening of bank accounts, PM Kisan Yojana and poverty reductions. "We have set up over 390 universities," she said.
The worries about food have been eliminated though free ration for 80 crore people. Minimum support prices (MSP) for the produce of annadata has been raised periodically. We expect that our government with its stupendous work will again be by the people with a resounding mandate, says Sitharaman.
Asserting that country has seen inclusive growth, the finance ministry said that all parts of the country have contributed to India's economic growth. "Indian Economy is doing well," Sitharaman said.
Talking about the state of households, the finance minister said that all parts of the economy are doing well. "Average Real Income Of People Has Increased By 50 per cent," Sitharaman said. The consumption pattern in Indian economy has been in focus recently due to concerns over K shaped recovery from Covid-19 pandemic.
Talking about tax reforms, the FM said that government's structural reforms have led to widening of tax base in the country. "The government will take next generation of reform soon and consult different states to ensure good implementation."
The India-Middle East-Europe Economic corridor will become the basis of world trade for 100 of years and history will remember that initiative, FM Sitharaman said. The corridor was announced during the G20 Summit.
To ensure that growth is not concentrated in some regions, FM said that the government will focus on developing eastern regions of the country. Sitharaman said that the government will ensure people of these regions are not left behind.
In her budget speech, Finance Minister said that the government will launch a housing scheme for deserving sections of the middle class in the country
Finance Minister said that the government will promote private investment in post harvest activities in agriculture sector to ensure higher growth. For the unversed, agri sector has been facing headwinds and its growth slowed down to 1.6% in Q2.
Finance Minister has announced a corpus of Rs 1 Lakh Crore for promoting research and development in sunrise sectors. The corpus will provide financing or refinancing at low or nil interest rates for private corporates to invest on research and development, the FM said.
Finance Minister Sitharaman said that under PM Gati Shakti yojana the government will develop three major railway corridors which will include mineral and energy corridors. "This will improve logistics chain within the country and boost economic growth," Sitharaman said.
To promote tourism infrastructure in Lakshadweep, the government will bring projects to develop tourism sector in islands, which include Lakshadweep.
In a significant announcement on fiscal consolidation, the government has committed to bringing down fiscal deficit from 5.9% in FY24 to 5.1% in FY25. "We will cut fiscal deficit below 4.5% By FY26," she said.
Finance Minister Sitharaman said that there will be no changes in tax slabs in the interim budget for FY 2024-25. "No change in direct and indirect tax rates," she said.
Ending her budget speech, the FM Sitharaman tabled the interim budget in the parliament.
- No Tax Changes In Interim Budget 2024: Finance Minister Has Retained Direct And Indirect Tax Rates For Now
- Capex Push To Continue: The government has increased capex outlay by 11.1% for FY25.
- Fiscal consolidation target: Fiscal deficit will be brought down to 5.1% of GDP In FY25
- Railway Corridors: The government will set up three railway corridors, which include corridors for minerals, port connectivity and energy.
- R&D Push: Corpus of Rs 1 lakh crore to be set up to promote investment in research and development in sunrise sectors
