India’s Interim Budget 2024

India’s Interim Budget 2024

KAKALI DAS

On 1^st February, an interim budget was passed in India, marking the last budget before the upcoming general election.

In election year, a full budget is not presented as a new government will be formed shortly, leading to the introduction of a new budget by the incoming administration.

Currently, what’s in place is a plan for the next 2 to 3 months. Essentially, the central government is seeking approval to withdraw funds to cover short-term expenses.

Despite its temporal focus, this budget holds significance as it establishes the groundwork for the future. It delineates policy priorities, designates fund allocation to specific areas, and introduces schemes that will play a pivotal role in shaping India’s growth narrative.

What insights does the interim budget offer? What are the focal points and key observations? Here are the ten noteworthy highlights from the budget.

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• Taxation is always a significant aspect of every budget, and the current one is no exception. The suspense around tax slabs is over – there are no alterations this time. The existing income tax slabs remain unchanged, meaning if your earnings haven’t shifted, your tax payments will stay the same.

“Over the last 10 years the direct tax collections have more than trebled and the return files swelled 2.4 times. I would like to assure the taxpayers that their contributions have been used wisely for the development of the country and welfare of its people. I appreciate the taxpayers for their continued support.” – Nirmala Sitharaman, Finance Minister

Put simply, thank you for paying your tax; keep paying it. The situation is similar for indirect taxes and import duties – no alterations in slabs. As for savings, the government will retract old income tax demands, specifically those deemed as small and insignificant notices. This initiative is expected to bring relief to 10 million taxpayers.

• The government aspires for India to transform into a developed economy by 2047, terming this phase as “Kartavya Kaal” (the era of duty) – signifying the time to fulfil our duty and propel India towards economic development within the next 23 years. Despite the numerous challenges on the path, this goal is undeniably ambitious.

“Geopolitically,  global affairs are becoming more complex and challenging with wars and conflicts. Globalization is being redefined with reshoring and disruption and fragmentation of supply chains and competition for critical minerals and technologies. A new world order is emerging after the COVID pandemic.” – Nirmala Sitharaman

• The government has outlined its focal points, centering on four key demographics: the poor, women, youth, and farmers. Policies are being formulated with a dedicated focus on these four groups to foster their upliftment.

“As our Prime Minister firmly believes, we need to focus on four major castes – they are, “garib” (poor), “mahilayen” (women), “yuva” (youth), and “annadata” (farmers). There needs, their aspirations and their welfare are our highest priority.” –  Finance Minister

And this was a recurring theme throughout the speech.

• A significant accomplishment lies in directly channelling benefits to the people, with a paramount emphasis on reducing distribution loss. The government reports notable achievements, including providing over $110 million to farmers and extending loans totalling more than $260 billion, benefiting 430 million individuals through the Mudra scheme.

These are specialized loans tailored to support small enterprises, specifically targeting companies operating at the grassroots level.

The emphasis is on direct government transfers, eliminating intermediaries, a strategy now fully integrated. The budget highlights that over $400 billion have been directly deposited into the bank accounts of beneficiaries. This approach has effectively curtailed leakages, resulting in substantial savings for the government.

7.8 million vendors have received credit assistance, while women have been granted houses through a central government scheme, constituting 70% of all rural households.

• Addressing multidimensional poverty goes beyond conventional definitions based solely on monetary considerations. Traditionally, poverty has been gauged by purchasing power, reflecting income and daily expenditures. However, this approach captures only one facet of poverty, failing to encompass the complete picture. Individuals may perceive poverty for various reasons—unable to afford essential utilities like electricity, food, or water, constrained to opt for subpar education for their children, or facing financial devastation due to the costs of necessary medical treatment. These instances represent diverse facets of poverty, where individuals might not fit the conventional definition yet experience its impact.

The government is endeavouring to address multidimensional poverty through empowerment.

“We believe in empowering the poor. The earlier approach of tackling poverty through entitlements had resulted in very modest outcomes. When the poor became empowered partners in the development process, governments power to assist them also increases manifold” – Nirmala Sitharaman

Emphasizing empowerment over mere handouts, the government claims tangible results. Over the past decade, it purports to have uplifted 250 million people with the overarching goal of diminishing poverty in all its manifestations.

• The youth are being offered interest-free loans, and there is a focus on ensuring housing for all.

“For our tech savvy youth this will be a golden era. A corpus of ₹1,00,000 crore will be established with 50 year interest free loan provided. The corpus will provide long term financing or refinancing with long tanners and low and or nil interest rates.”

• The government aims to enhance affordability in home buying, introducing a forthcoming scheme specifically targeting the middle class. Additionally, a commitment has been made to construct 20 million houses under the central government scheme, with the ambitious goal of completing the construction within a planned five-year timeframe.
• A substantial initiative is underway to advance solar energy adoption through rooftop solarisation, involving the installation of solar panels on rooftops. The objective is to identify 10 million houses for this program, providing them with solar panels and a monthly allotment of 300 units of free power.

How does it contribute? In three ways – reducing load on power grids, facilitating the shift to green energy, and simultaneously cutting down on our electricity bill. If executed effectively, these initiatives have the potential to be transformative.

• Emphasizing fiscal prudence, the government aims to borrow less while increasing spending. The fiscal deficit target has been established at 5.1%. The key questions – How will the government balance the books? How will it secure the necessary funds for welfare expenditures?

They are placing a huge bet on disinvestment, setting a steep target of approximately $6 billion as a strategy to generate funds.

• With a special focus on women, the finance minister made several announcements, particularly in the healthcare sector. The government is extending its universal healthcare scheme to include health insurance for women healthcare workers at the grassroots level, aiming to promote vaccination.
• Reports suggest the government is in discussions to lower the cost of the cervical cancer vaccine, with a dedicated focus on the financial well-being of women. An announcement was made to empower local self-help women groups, referring to their members as “lakhpati didis” or prosperous sisters. These groups are encouraged to combine resources and utilize their skills to generate a minimum of ₹1,00,000 every month, hence the term “lakhpati didi”. The government plans to increase its allocation to such groups from $240,000 to $360,000.

Following the budget speech, Prime Minister Modi characterized it as both incisive and innovative.

“This budget carries the confidence of continuity. This budget will empower all pillars of developed India – the youth, the poor, the women, and farmers” – The Prime Minister

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