Interim Budget 2024: On February 1st, 2024, Finance Minister Nirmala Sitharaman presented the Interim Budget for the 2024-25 fiscal year. This budget, coming ahead of the general elections, serves as a bridge between the previous year’s spending and the full-fledged budget to be presented by the new government. While limited in scope, the Interim Budget still offered some key insights into the government’s priorities and economic outlook. Let’s check these six key takeaways from this budget:

(1). Expectations for Nominal GDP Growth are Moderate

Nominal GDP, a key factor in budget planning, is the total value of goods and services without adjusting for inflation. Consequently, the government aims for a 10.5% nominal GDP growth, projecting India’s GDP at Rs 3,27,71,808 crore for 2024-25.

(2). Significant Drop in Fiscal Deficit

Fiscal deficit reveals government borrowing from the market to cover expenses exceeding income. Lower fiscal deficit reduces funds for private sector borrowing, affecting interest rates and economic activity. However, the government targets a fiscal deficit of 5.8% of GDP for FY25 and 5.1% for FY26.

(3). Capital Expenditure Target Not Achieved

Despite last year’s emphasis on increasing government capital expenditure to Rs 10 lakh crore, actual spending fell short at Rs 9.5 lakh crore, contributing to reduced fiscal deficit.

(4). Cuts in Health and Education Spending

Revised estimates indicate lower spending than planned in health and education sectors for the current financial year, affecting budget allocations for vital needs. Additionally, the government was supposed to spend Rs 1,16,417 crore on education but ended up spending Rs 1,08,878 crore.

(5). Reductions in Core Schemes for Marginalized Groups

Allocations for schemes benefiting marginalized communities like SCs, STs, and minorities saw cuts compared to budget estimates, impacting support for these groups.

For instance, the Revised Estimates (RE) for the Umbrella Scheme for Development of Schedule Castes are Rs 6,780 crore against the Budget Estimates (BE) of Rs 9,409 crore.

And for STs, the RE is Rs 3,286 crore against a BE of Rs 4,295 crore.

For minorities, the fall has been the sharpest. From a BE of Rs 610 crore in FY24 to an RE of Rs 555 crore.

(6). Income Tax Key Revenue Source

Income tax becomes the primary source of government revenue after borrowings. Budget forecasts indicate income tax revenue contributing 19% of total resources for FY25, followed by corporate tax (17%), GST (18%), and borrowings (28%).

Beyond the Key Takeaways:

It’s important to remember that the Interim Budget is a temporary measure and doesn’t provide a complete picture of the government’s economic vision. The full-fledged budget, to be presented by the new government after the elections, will offer a more comprehensive roadmap for the future. However, the Interim Budget still serves as a valuable indicator of the government’s current priorities and economic outlook.

Additional Considerations:

• Tax break for start-up, investments made by Sovereign wealth funds, extended to March 31, 2025.
• Finance Minister Nirmala Sitharaman proposes no change in direct and indirect tax including import tax.
• The effectiveness of the proposed schemes will depend on their implementation and execution.
• The global economic situation and upcoming elections will influence the final shape of the full-fledged budget.

The Interim Budget 2024 presented a cautious yet optimistic outlook for the Indian economy. While it lacked major reforms, it offered some positive steps towards infrastructure development, social welfare, and fiscal consolidation. The full-fledged budget, expected after the elections, will provide a clearer picture of the government’s long-term economic vision and its plans to address key challenges.