Tuesday, June 18, 2024

Interim Budget 2024 Highlights

The nation’s buzzword for now is “Interim Budget.” The budget serves as a handbook for the year, unveiling initiatives, schemes, and the latest developments in taxes and various sectors. The beginning of the month started with the sixth budget presented by Union Finance Minister Nirmala Sitharaman. The budget aims to tackle fiscal stability, promote inclusive development, invest in infrastructure, encourage green growth, and make strategic tax adjustments. GDP growth reached 7.7 percent in the first half of FY24, with a projected full-year estimate of 7.3 percent.

Let’s check out the key highlights for several sectors in the budget.

Economic Sector

  • Fiscal Deficit: The fiscal deficit for fiscal year 2024 has been revised to 5.8%, which is 0.1 lower than the previous estimates and a decrease from 6.4% in fiscal year 2023. The budget projects a further reduction to 5.1% in fiscal year 2025. A fiscal deficit represents the difference between the government’s total revenue and its total expenditure. A lower fiscal deficit is generally seen as a positive indicator of fiscal discipline and economic management.
  • Foreign Direct Investment: The period from 2014 to 2023 witnessed a golden era, with FDI inflows totaling $596 billion, double the amount recorded from 2005 to 2014. To promote continuous foreign investment, we are in the process of negotiating bilateral investment treaties with our international partners, emphasising the principle of ‘first developing India,’ stated Sitharaman, providing a fresh perspective on FDI. 

Foreign direct investment (FDI) inflows totaled US$21.3 billion in FY24 (April− November), influenced by constrained liquidity conditions and global uncertainties impacting investor sentiment worldwide.

  • CPI Inflation CPI inflation is a measure quantifying the average change over time in the prices paid by urban consumers for a basket of goods and services. It reflects the purchasing power of a currency and provides insight into the cost of living for the general population. In this year’s budget, the government has eased the CPI inflation to 5.5 percent in FY24 (April–December), primarily due to a deceleration in core inflation, which stood at 4.7 percent during this timeframe.
  • Hike in Capex: Capex, also known as capital expenditures (CapEx), are funds used by a company to acquire or upgrade physical assets such as property, buildings, or equipment. This year, there is a modest increase of 11 percent in capital expenditure to Rs 11.11 lakh crore. Previously, the government increased Capex by 37.5 percent to Rs 10 lakh crore for the current fiscal year.
  • RBI Policy Rates: The RBI has kept policy rates unchanged at 6.5% since February 2023. There is a slight chance that the central bank may adjust its monetary policy due to changing inflation dynamics.

Policy Amendments

The government plans to continue emphasising growth, technology-driven innovation, inclusivity, and sustainable development. Several noteworthy policy announcements include:

  • Electronic Vehicles: Improve EV charging infrastructure and manufacturing and improve the adoption of e-bus via a robust payment security mechanism.
  • Sustainability: Introduce proper viability gap funding for energy transition and an integrated scheme for both aquaculture and mariculture to drive climate resilience.
  • Technology: Promote research and innovation with a 1 trillion INR fund, providing a 50-year interest-free loan and a new scheme to strengthen deep tech for defence purposes.
  • Biomanufacturing: A new scheme for biomanufacturing and foundry provides financial assistance to the promotion of biomass aggregation machinery.
  • Agriculture and aquaculture:Improvement in agricultural productivity by utilising nano-diammonium phosphate across all agro-climatic zones.
  • PM Gati Shakti: PM Gati Shakti- Set up three railway corridor programmes- energy & minerals, port connectivity & high traffic density. 

Technology, Media, and Telecommunications

  • The government plans to set up a fund of INR 1 trillion to finance research and innovation in emerging sectors at low or no interest rates, fostering private-sector participation. 
  •  The government plans to introduce a new scheme to enhance self-reliance in the realm of deep-tech technologies, specifically for defence applications.
  • extend the deadline for startups to qualify for income tax exemption from March 31, 2024, to March 31, 2025.

Energy, Resources, and Industrials

  •  The allocation for infrastructure development in the upcoming year sees an 11.1% increase, constituting 3.4% of the GDP.
  •  The reduced tax rate of 15% applicable to new manufacturing and power generation entities initiating production by March 31, 2024, is not prolonged.
  •  The income tax exemption on specific incomes from investments made by sovereign wealth funds or pension funds until March 31, 2024, is extended for investments made up to March 31, 2025.

In summary, the 2024 Interim Budget reveals a strategic emphasis on crucial economic elements. Through increased capital investment in infrastructure and significant tax measures, the budget seeks to boost economic growth and reinforce self-sufficiency. The commitment to encouraging research, and innovation, and providing extended tax benefits demonstrates a dedication to create a favourable environment for businesses and startups. Overall, the budget adopts a comprehensive strategy to tackle present challenges while laying the groundwork for a resilient and progressive economic path.

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