Every year, the anticipation leading up to the budget announcement in India is palpable. It is a time when the entire nation eagerly awaits to learn about the government’s fiscal plans and policies for the upcoming financial year. However, 2024 is an election year and therefore, the annual budget can be presented only after the new government is elected to the office, diverging from the typical schedule. To keep the government running, in its place, an interim budget has been unveiled. This deviation from the norm sparked curiosity and speculation among citizens, businesses, and policymakers alike, as they awaited the interim budget with keen interest to discern its implications for the economy and society at large.
What is Interim Budget and Vote on Account?
Two concepts often arise during election season – Interim budgets and vote on account. While both deal with bridging the gap until the new government presents its first full budget, their nuances can be confusing. India’s general elections occur every five years, usually around March-April. However, the financial year runs from April 1 to March 31. This creates a potential gap if elections happen close to the beginning of the financial year. Traditionally, governments nearing elections present an interim budget. This serves as a temporary financial plan covering the initial months (usually four) of the upcoming financial year. It details estimated expenditures for various sectors and presents the outgoing government’s economic vision for the future. However, to avoid undue influence on voters, it typically steers clear of major policy changes or significant spending promises. The Constitution offers a simpler alternative – the vote on account. This doesn’t present a detailed financial plan but simply seeks Parliament’s approval for funds needed to meet essential expenses like salaries, pensions, and key government functions during the initial months. It’s a quicker process with minimal economic announcements or policy changes. While the vote on account fulfils the technical requirement, the interim budget has become a customary practice. This allows the outgoing government to showcase its economic achievements and present its vision for the future, albeit with limited room for manoeuvring on policies or tax rates.
Highlights of the Budget 2024
1. Budgetary Estimates
Revised Estimates – The total receipts other than borrowings stand at INR 27.56 lakh crore, with tax receipts amounting to INR 23.24 lakh crore. Total expenditure under RE is recorded at INR 44.90 lakh crore. Revenue receipts are projected at INR 30.03 lakh crore, reflecting robust growth and formalization in the economy. The fiscal deficit for 2023-24 stands at 5.8 percent of GDP.
Budgeted Estimates – Total receipts, excluding borrowings, and total expenditure are estimated at INR 30.80 and INR 47.66 lakh crore, respectively. Tax receipts are anticipated to reach INR 26.02 lakh crore. The scheme of a fifty-year interest-free loan for capital expenditure in states continues, with a total outlay of INR 1.3 lakh crore. The fiscal deficit for 2024-25 is projected to be 5.1 percent of GDP. Gross and net market borrowings through dated securities during 2024-25 are estimated at INR 14.13 and INR 11.75 lakh crore, respectively.
2. Direct Tax Proposals
Finance Minister Nirmala Sitharaman, in her budget proposal, announced a steadfast commitment to maintaining existing tax rates for direct taxes, ensuring stability and predictability for taxpayers. Over the past decade, the government has achieved remarkable success in direct tax collection, witnessing a threefold increase, alongside a significant surge in return filers, which now stands at 2.4 times higher. Recognizing the importance of taxpayer services, the government has pledged to enhance service delivery in this regard. In a move to ease the burden on taxpayers, outstanding direct tax demands up to Rs. 25,000 for the period up to FY 2009-10 and up to INR 10,000 for financial years 2010-11 to 2014-15 have been withdrawn, benefiting approximately one crore taxpayers. Moreover, to stimulate investment and encourage entrepreneurship, tax benefits for Start-Ups and investments made by Sovereign Wealth Funds or Pension Funds have been extended until March 31, 2025. Additionally, to promote the International Financial Services Centre (IFSC), tax exemption on certain income of IFSC units has been extended for another year until March 31, 2025.
Over the years, India has embarked on a transformative journey in tax rationalization, aimed at simplifying procedures and enhancing efficiency. The upward revision of the tax exemption threshold to INR 7 lakh from INR 2.2 lakh in FY 2013-14 signifies a significant stride towards relieving the tax liability for individuals. Similarly, the increase in presumptive taxation thresholds for retail businesses and professionals has provided much-needed relief, enabling small businesses to thrive. In a bid to boost corporate investment and competitiveness, the government has substantially reduced corporate income tax rates. Existing domestic companies now enjoy a reduced tax rate of 22% from the previous 30%, while new manufacturing companies benefit from an even lower rate of 15%. Furthermore, the government has made significant strides in enhancing taxpayer services. The average processing time of tax returns has been dramatically reduced to just 10 days from a staggering 93 days in 2013-14. The introduction of Faceless Assessment and Appeal mechanisms has further streamlined processes, ensuring greater efficiency and transparency. Additionally, initiatives such as updated income tax returns, the introduction of new form 26AS, and prefilled tax returns have simplified the filing process, making it more accessible for taxpayers. Moreover, reforms in customs have led to reduced import release times, with significant reductions in processing hours at Inland Container Depots, Air Cargo complexes, and Sea Ports, fostering smoother trade operations and reducing logistical bottlenecks.
3. Indirect Tax Proposals
In her budget proposal, Finance Minister Nirmala Sitharaman announced the decision to maintain existing tax rates for indirect taxes and import duties, ensuring stability in the tax regime. The introduction of the Goods and Services Tax (GST) marked a watershed moment, unifying India’s previously fragmented indirect tax system. This consolidation has yielded remarkable results, with the average monthly gross GST collection doubling to INR 1.66 lakh crore this year and the GST tax base expanding twofold. The positive impact of GST is further evident in the buoyancy of State Goods and Services Tax (SGST) revenue, which has increased to 1.22 in the post-GST period (2017-18 to 2022-23) from 0.72 in the pre-GST period (2012-13 to 2015-16). Industry leaders have overwhelmingly viewed the transition to GST as largely positive, with 94% acknowledging its benefits. GST implementation has facilitated supply chain optimization and reduced the compliance burden on trade and industry. Furthermore, lower logistics costs and taxes have translated into reduced prices of goods and services, directly benefiting consumers.
4. Empowering the Marginalized, Enriching the Nation
Over the past decade, government initiatives such as ‘Garib Kalyan, Desh ka Kalyan’ have uplifted 25 crore individuals from multidimensional poverty. The Direct Benefit Transfer (DBT) system, utilizing PM-Jan Dhan accounts, disbursed INR 34 lakh crore, resulting in government savings of INR 2.7 lakh crore. Under PM-SVANidhi, 78 lakh street vendors received credit assistance, with 2.3 lakh beneficiaries accessing credit for the third time. The PM-JANMAN Yojana targets the development of particularly vulnerable tribal groups (PVTG), ensuring their well-being and progress. Furthermore, the PM-Vishwakarma Yojana extends comprehensive support to artisans and craftspeople involved in 18 trades, promoting their growth and sustainability.
5. The Guardians of Agriculture
The welfare of our ‘Annadata’ (food providers) is a top priority for the Government. Through the PM-KISAN SAMMAN Yojana, 11.8 crore farmers have received vital financial assistance. Additionally, the PM Fasal BimaYojana ensures crop insurance for 4 crore farmers, safeguarding their livelihoods against agricultural risks. The Electronic National Agriculture Market (e-NAM) has seamlessly integrated 1361 mandis, extending its services to 1.8 crore farmers. This integration has facilitated trading worth INR 3 lakh crore, thereby enhancing market access and opportunities for farmers across the nation.
6. Agriculture and Food Processing
In the realm of agriculture and food processing, the Pradhan Mantri Kisan Sampada Yojana has emerged as a game-changer, benefiting 38 lakh farmers and generating employment opportunities for 10 lakh individuals, thereby invigorating the rural economy. Complementing this effort, the Pradhan Mantri Formalisation of Micro Food Processing Enterprises Yojana has provided vital support to 2.4 lakh Self-Help Groups (SHGs) and 60,000 individuals through credit linkages, fostering entrepreneurship and empowering local food processing units.
7. Momentum for Nari Shakti
Under the Mudra Yojana, a commendable 30 crore loans have been disbursed to women entrepreneurs, fostering economic independence and entrepreneurship among women. Moreover, there has been a notable 28% increase in female enrolment in higher education, reflecting enhanced access to educational opportunities for women. Particularly encouraging is the fact that in STEM courses, girls and women now constitute 43% of enrolment, marking one of the highest percentages globally. Additionally, the government’s commitment to gender equality is underscored by the allocation of over 70% of houses under the PM Awas Yojana to women from rural areas, ensuring shelter security and promoting women’s socio-economic empowerment at the grassroots level.
8. Pioneering Rural Housing and Sustainable Energy
The target of three crore houses under the PM Awas Yojana (Grameen) is on track to be accomplished imminently, demonstrating the government’s steadfast commitment to providing shelter security to rural communities. Looking ahead, an ambitious plan to undertake an additional two crore houses over the next five years signifies a proactive approach towards addressing housing shortages and improving living standards in rural areas. Furthermore, the introduction of rooftop solarization initiatives under the ‘Muft Bijli’ scheme heralds a new era of sustainable energy access for rural households. A staggering one crore households are set to benefit from 300 units of free electricity every month, courtesy of rooftop solar panels. This not only promotes clean energy adoption but also promises substantial financial savings for households, with each expected to conserve between INR 15,000 to INR 18,000 annually.
9. Revolutionizing Healthcare
In a significant stride towards universal healthcare access, Finance Minister Nirmala Sitharaman announced the extension of healthcare coverage under the Ayushman Bharat scheme to all ASHA workers, Anganwadi Workers, and Helpers, ensuring the well-being of frontline healthcare workers and grassroots community facilitators.
10. Nurturing Innovation
In a bid to spur research and innovation, a landmark corpus of INR 1 lakh crore will be established, offering fifty-year interest-free loans to facilitate long-term financing or refinancing with favourable terms, aimed at catalyzing growth, employment, and overall development. Furthermore, a novel scheme will be introduced to bolster deep-tech technologies for defence purposes, accelerating the nation’s journey towards self-reliance (‘atmanirbharta’) and reinforcing India’s prowess in innovation and national security.
11. Prioritizing Infrastructure Development
In a bid to turbocharge economic growth and foster employment opportunities, Finance Minister Nirmala Sitharaman unveiled ambitious plans for infrastructure development in her budget speech. Notably, the capital expenditure outlay earmarked for infrastructure development and employment generation will witness a significant boost, surging by 11.1 per cent to reach a monumental INR 11,11,111 crore. This substantial allocation represents 3.4 per cent of the GDP, underscoring the government’s unwavering commitment to building a robust infrastructure that serves as the backbone of economic progress.
12. Revitalizing Railways
Under the PM Gati Shakti initiative, three major economic railway corridor programs have been identified, aimed at bolstering logistics efficiency and enhancing connectivity across the nation. These corridors include energy, mineral, and cement corridors, port connectivity corridors, and high-traffic density corridors, all poised to streamline transportation networks and spur economic growth. Additionally, in a move to modernize railway infrastructure, the government announced plans to convert forty thousand normal rail bogies to Vande Bharat standards, symbolizing a shift towards cutting-edge technology and superior travel experiences.
13. Taking Flights to New Heights
The number of airports in the country has now doubled, reaching a significant milestone of 149, reflecting a concerted effort to enhance air connectivity across the nation. Furthermore, the introduction of 517 new routes has facilitated the smooth transportation of 1.3 crore passengers, underscoring the sector’s robust growth trajectory. In a promising sign of confidence in the industry, Indian carriers have placed orders for over 1000 new aircraft, signalling a significant expansion and modernization of the fleet.
14. Propelling Green Energy Initiatives
By 2030, the government aims to establish a coal gasification and liquefaction capacity of 100 MT, marking a significant step towards reducing carbon emissions and transitioning to cleaner energy sources. Additionally, the budget outlines phased mandatory blending of compressed biogas (CBG) in compressed natural gas (CNG) for transport and piped natural gas (PNG) for domestic purposes. This mandate not only promotes the use of renewable energy but also fosters a greener and more environmentally friendly approach to transportation and household energy consumption.
15. Vision for Iconic Destinations
In a bid to unleash the full potential of India’s tourism sector, Finance Minister Nirmala Sitharaman announced transformative measures aimed at enhancing the country’s iconic tourist centres. States will be incentivized to undertake comprehensive development initiatives, focusing on the branding and marketing of these centres on a global scale. To ensure quality standards and enhance visitor experiences, a robust framework for rating tourist centres based on the quality of facilities and services will be established. Moreover, recognizing the need for financial support, long-term interest-free loans will be extended to states for financing such development projects on a matching basis.
16. Attracting Global Investments
Between 2014 and 2023, India witnessed an impressive FDI inflow of USD 596 billion, which marked a remarkable doubling compared to the inflow recorded during the preceding period of 2005 to 2014. This surge in FDI underscores India’s growing attractiveness as a favourable destination for global investments, reflecting the confidence of international investors in the country’s economic prospects and business environment. The substantial increase in FDI inflows is indicative of India’s emergence as a key player in the global economy and underscores the government’s commitment to fostering a conducive environment for foreign investments, thereby fueling economic growth, job creation, and innovation.
17. Empowering States for Sustainable Development
In a bid to drive comprehensive reforms and foster development at the state level, Finance Minister Nirmala Sitharaman unveiled the ‘Viksit Bharat’ initiative, proposing a substantial provision of INR 75,000 crore as a fifty-year interest-free loan. This support aims to incentivize state governments to undertake milestone-linked reforms, catalyzing progress and prosperity across the nation.
