Interim Budget 2024-25

Minister for Finance and Corporate Affairs, Smt. Nirmala Sitharaman, presented the Interim Union Budget for 2024-2025 in Parliament on 1st February 2024. Here are key highlights of the Budget announcement.

CapEx Outlay

·        The capital expenditure outlay for FY 2024-25 has seen a considerable increase of 11.1 percent, amounting to Rs. 11,11,111 crore, equivalent to 3.4 percent of the GDP. This surge follows a significant threefold rise in the capital expenditure outlay over the past four years, leading to a substantial multiplier effect on both economic growth and the generation of employment opportunities.

·        The scheme of fifty-year interest-free loan for capital expenditure to states will be continued this year with a total outlay of Rs. 1.3 lakh crore. A provision of Rs. 75,000 crore as fifty-year interest-free loan is proposed this year to support the milestone-linked reforms of Viksit Bharat by the State Governments.

Growth Projections

·        As per the First Advance Estimates of National Income of FY 2023-24, India's Real GDP is projected to grow at 7.3 percent. This is also in line with the upward revision in growth projections for FY2023-24 by the RBI (in its December 2023 Monetary Policy Committee meeting) from 6.5 percent to 7 percent, prompted by strong growth in Q2 of FY2023-24.

·        The Indian economy has demonstrated resilience and maintained healthy macro-economic fundamentals, despite global economic challenges. The International Monetary Fund (IMF), in its World Economic Outlook (WEO), October 2023, has revised its growth projection for India for FY2023-24 upwards to 6.3 percent from 6.1 percent projected in July 2023. This reflects increasing global confidence in India's economic prowess at a time when global growth projection for 2023 remains unchanged at 3 percent.

·        As per the IMF, India is likely to become the third-largest economy in 2027 (in USD at market exchange rate) and it also estimated that India's contribution to global growth will rise by 200 basis points in 5 years. Moreover, various international agencies such as the World Bank, the IMF, OECD and ADB project India to grow between 6.4 percent, 6.3 percent, 6.1 percent and 6.7 percent, respectively, in 2024-25.

Fiscal Balance Sheet

·        Strong growth in economic activity has imparted buoyancy to revenue with total GST collection of Rs.1.65 lakh crore in December 2023. This was the seventh time that gross GST revenues crossed Rs.1.6 lakh crore benchmark.

·        The total receipts (other than borrowings) and the total expenditure are estimated at Rs. 30.80 and 47.66 lakh crore respectively during 2024-25. The tax receipts are estimated at Rs. 26.02 lakh crore.

·        The fiscal deficit in 2024-25 is estimated to be 5.1 percent of GDP.

·        Gross and net market borrowings through dated securities during 2024-25 are estimated at Rs. 14.13 and 11.75 lakh crore, respectively.

Investment Scenario

·        FDI inflow during 2014-23 was USD 596 billion, twice the inflow during 2005-14.

·        For encouraging sustained foreign investment, negotia-tions on bilateral investment treaties with foreign partners are continuing.

Development Approach and Priorities

·        Focus on four major categories - 'Garib' (Poor), 'Mahilayen' (Women), 'Yuva' (Youth) and 'Annadata' (Farmer). Their needs, their aspirations and their welfare are the government's highest priority because the country progresses when they progress.

·        Government is working with an approach to development that is all-round, all-pervasive and all-inclusive.

·        The government is working to make India a 'Viksit Bharat' by 2047 by improving people's capability and empowering them.

·        Government will pay attention to make the eastern region and its people a powerful driver of India's growth.

·        PM Awas Yojana (Grameen) is close to achieving the target of three crore houses and two crore more houses will be taken up in the next five years to meet the requirement arising from the increase in the number of families.

·        Through rooftop solarisation, one crore households will be enabled to obtain up to 300 units of free electricity every month.

·        For tech-savvy youth, a corpus of Rs. 1,00,000 crore will be established with a fifty-year interest-free loan. It will provide long-term financing or refinancing with long tenors and low or nil interest rates. This will also encourage the private sector to scale up research and innovation significantly in sunrise sectors.

·        For Railways, three major economic railway corridor programmes will be implemented energy, mineral and cement corridors, port connectivity corridors and high traffic density corridors.

·        40,000 normal rail bogies will be converted to the Vande Bharat standards to enhance safety, convenience and comfort of passengers.

·        On Aviation Sector, the number of airports has doubled to 149 and today 517 new routes are carrying 1.3 crore passengers. Indian carriers have proactively placed orders for over 1000 new aircraft.

Removing Roadblocks to 'Viksit Bharat'

·        Government will form a high-powered committee for an extensive consideration of the challenges arising from fast population growth and demographic changes.

·        Committee will be mandated to make recommendations for addressing these challenges comprehensively in relation to the goal of 'Viksit Bharat'.

Taxation Policy and Outcomes

·        No change relating to taxation has been proposed in the Interim Budget. The same rates for direct taxes and indirect taxes, including import duties, have been retained.

·        To provide continuity in taxation, certain tax benefits to Start-Ups and investments made by sovereign wealth or pension funds as also tax exemptions on certain income of some IFC units have been extended by one year up to 31st March 2025.

·        Efforts to be made to improve taxpayer services which is in line with the government's vision to improve the ease of living and ease of doing business.

·        There are a large number of petty, non-verified, non-reconciled, or disputed direct tax demands, many of them dating as far back as the year 1962, which continue to remain on the books, causing anxiety to honest taxpayers and hindering refunds of subsequent years. The Interim Budget proposes to withdraw such outstanding direct tax demands up to Rs. 25,000/- pertaining to the period up to the financial year 2009-10 and up to Rs. 10,000/- for financial years 2010-11 to 2014-15. This is expected to benefit about a crore taxpayers.

GST: Collection and Consequences

·        GST has reduced the compliance burden on trade and industry by unifying the highly fragmented indirect tax regime in India.

·        According to a recent survey conducted by a leading consulting firm, 94% of industry leaders view the transition to GST as largely positive.

·        Tax base of GST has more than doubled and average monthly gross GST collection has almost doubled to Rs. 1.66 lakh crore in 2023-24.

·        States' SGST revenue, inclu-ding compensation released to states, in the post-GST period of 2017-18 to 2022-23, has achieved a buoyancy of 1.22.

·        The biggest beneficiaries are the consumers as the reduc-tion in logistics cost and taxes have brought down prices of most goods and services.

(Source: PIB)