Budget Breakdown: An analysis of the Indian Interim Budget 2024
Budget Breakdown: An analysis of the Indian Interim Budget 2024
A look at what the success and progress of the nation that Interim Budget highlighted and what future schemes it entails for the future
As the sun slowly rises and shines its first rays on this day, a thick fog covers the capital city of New Delhi. The fog coupled with smoke from the chimneys of factories and exhaust of cars, hazes the view of the city, but one can sense something special about today. A mundane Thursday morning, so it seems, but amongst the crowd, a sense of silence and anticipation seems to engulf them. It’s that day again. The first of February. The announcement of the Union Budget 2023-24
Flashbacks of past budget announcements sprung to mind. People eagerly tune in to watch the big Budget presentation, keeping the stock market open on the other tab. The 2019 budget led to the steep increase of the Sensex forming what people humorously term the ‘Sitharaman candle’. What was it going to be this time? The added fuel to the eagerness of such a budget announcement was the upcoming general elections to be held between April and May 2024. That meant that this was an interim budget - or simply the account of the expected revenue and expenditure for the approaching 2-3 months before the new parliament is elected and a new budget is announced.
Like fish to water, Ms. Sitharam took to the stage, sporting a blue colour saree, and announced her sixth consecutive Union Budget. One that would go into her history books for being the shortest Union Budget speech delivered by her, lasting 58 minutes and comprising 5224 words. Let’s take a look at what this hour entailed and what it told us about India today and the road ahead.
Fiscal deficit. Arguably the most looked-after announcement during the budget. But what is the fiscal deficit? It essentially is the difference between the revenue of the government (through taxation - indirect and direct) and the expenditure of the government (infrastructure, capital, subsidy programs). During a fiscal deficit, the government is spending more than it earns. During her speech, Ms. Sitharam announced that the fiscal deficit is to be reduced to 5.1% of the GDP of the nation, the goal being to reduce the deficit to below 4.5% within the next 2 years. A fair question that seems to arise around the topic of fiscal deficit is, where does the government get that ‘additional’ money to spend? Simply put, the government finances such debt through the issuing of government bonds (loans from private investors or the general public).
Sometimes the government could also choose to print more money, to have more money to spend but in certain cases, it could pose potential threats to the future of the economy. Such was the situation with Venezuela, where during a dire case of deficit, the government started printing so much money that the inflationary pressure rose exponentially creating a domino effect on currency devaluation, high unemployment, reduced international competitiveness, and so on.
Ms. Sitharaman attributes this reduction in fiscal deficit as a result of increased private investment. The inflow of FDI (Foreign Direct Investment), was around 596 billion dollars marking what she termed as a ‘golden era’ in foreign investment. FDI’s are purchases made by a foreigner or a foreign company in another country or an establishment of a foreign business in another country. A simple example would be the launching of McDonalds (American MNC) in India or investment of money in the pharmaceuticals or automobile industry by a foreign investor in India. Such an investment would be recorded under the financial account section of the balance of accounts
Additionally, she mentions that the average real incomes have risen by 50 percent, dragging over 250 million people out of poverty ensuring the widening of the tax base and its collections. The estimated tax collection for the year 2024-25 is set at 26.03 lakh crore. In fact, since 1991-92, it is only the third time that personal income tax revenue is expected to be larger than corporate tax revenue.
Over the past 4 years, capital expenditure (CapEx) has tripled with a large multiplier effect on the economy, leading to the development of infrastructure such as roads, metros, telecommunications, etc. This is believed to have increased the confidence of private investors in India and attracted them to invest in India. The government plans to up its total expenditure on capital to 11 lakh crores in the upcoming financial year.
On the other hand, the subsidy on food and fertilisers is proposed to be reduced in 2023 to 2.12 trillion rupees and 2.05 trillion rupees respectively. This raised accusations that India is “shifting its focus from the agricultural sector to the industrial sector.”
As for income tax and GST tax slabs, Ms. Sitharaman said “I do not propose to make any changes relating to taxation and propose to retain the same tax rates for direct taxes and indirect taxes including import duties”. She announced to withdrawal of any remaining outstanding, (upto Rs. 25,000 till 2009-10 and Rs. 10,000 from 2010-11) direct tax demands, which are aimed at benefiting up to 1 crore taxpayers.
In her speech, Nirmala Sitharaman sheds light on 4 important ‘castes’ that the government believes in focus on - ‘garib’ (poor), ‘mahilayen’ (women), ‘yuva’ (youth) and ‘annadata’ (farmers).
She boasts about the success of ongoing government schemes such as ‘Garib Kalyan’, ‘Direct Benefit Transfer’, ‘PM Kisan Samman Nidhi’, and ‘Skill India' and claims that as a result of such schemes, 4 crore farmers have crop insurance, 25 crore people have been freed from multidimensional poverty, female enrolment has gone up by 28% over the past 10 years, and 43% of girls enrolling themselves in STEM courses. The National Educational Policy 2020 (NEP), was also a talking point, with Ms. Sitharman calling it a “policy that is ushering in transformation reforms”. While the ‘success’ of NEP is arguably, still in progress, the government hopes to its goal of universalising education and fostering a holistic development by 2025.
A scheme to harness household solar energy to enable 10 million households to claim up to 300 units of electricity per month, free of cost was announced by the minister. The EV market in India also seems to be growing and as a measure to aid that growth, Ms. Sitharaman announced an expansion in the charging infrastructure for such vehicles.
India recently also announced an India-Middle East-Europe Economic corridor which was described as a strategic and economic game changer for India. She quoted Prime Minister Narendra Modi in calling it a “corridor that will serve to become the basis for world trade for years to come”.
58 long minutes later, she concluded her speech with ‘Jai Hind’, as the room filled with echoes of members from the ruling party (BJP), including that from the nation's very own Honourable Prime Minister, Shri Narendra Modi banging their tables in appreciation. While at this point it’s almost customary that the opposition party tries and finds its flaws with the efforts of the ruling party, it was no surprise that Congress MP’s sprung into action, questioning the reason why the Finance Minster remained silent on the matter of unemployment (particularly the youth and rural) and inflation.
Overall, it was a budget presentation that not simply brought to the forefront the efforts of the government in developing, but one spoken with hope and anticipation for what the future holds for India. It was a budget that perhaps set the political and economic atmosphere for the upcoming elections. A pro-poll budget, from a party that is confident in its ability to win the elections? We’ll have to wait and see.
Well, politics aside, simply put,
One nation. 1.4 billion people. One goal - ‘Viksit Bharat’ (developed India).