Finance Ministers’ governance, development performance mantra.
The Interim Budget 2024, in keeping with legacy of such past exercises, would have been just a temporary financial statement to meet essential expenses until elections are held. However, in a departure from stereotype, Finance Minister Nirmala Sitharaman, in her sixth consecutive budget presentation, delivered much more. Sitharaman recast GDP as Governance, Development and Performance as the mantra to achieve high growth in India’s gross domestic product alongside the three metrics by maintaining a focus on capex and fiscal discipline, enhancing infrastructure and empowerment of people for national development. “Aligning with the ‘Panchamrit’ goals, our Government will facilitate sustaining high and more resource-efficient economic growth. This will work towards energy security in terms of availability, accessibility and affordability,” the Minister said in her Budget speech.
Coming in the backdrop of negative global headwinds, yet resilience of an economy due to its strong macroeconomic fundamentals, the Interim Budget leans on four major pillars – poor, women, youth, and farmers – to give a new shape to the socio-economic development of the country and make growth more inclusive in the coming times. The base is strong. Investments have been robust, average real income of the people has increased by 50 per cent, inflation is moderate, 51 crore bank accounts under Jan Dhan Yojana now have total deposits of over Rs 2.1 lakh crore, and net financial assets of households by March 2023, improved to 65.5 per cent of GDP. To cap it all, India has become the fastest-growing economy among G20 countries and is currently the 5th largest economy globally. Various forecasts suggest the Indian economy will achieve a growth rate at or above 7 per cent for FY24, and in FY25 as well.
Moving with that vision, the Finance Minister has kept to the fiscal deficit glide path and budgeted a lower fiscal deficit of 5.1 per cent of GDP in FY 24-25. This will provide a great boost to the Indian economy which can continue on the path of fiscal consolidation to reduce the fiscal deficit to 4.5 per cent in 2025-26. The FY24 fiscal deficit has been achieved at 5.8 per cent, exceeding the target of 5.9 per cent due to improved revenue mobilisation.
Aurodeep Nandi, India Economist, Nomura notes that “when it comes to fiscal prudence, the Budget has hit a six when only a couple of runs were needed to win”. The Finance Minister’s announcement of fiscal deficit of 5.1 per cent of GDP for FY25 marks a sharp cut from the current year and has surprised markets, which would have been happy to see it moderate to 5.2-5.4 per cent of GDP in a pre-election budget,” says Nandi.
The second big takeaway is borrowings. The FY25E gross borrowing of Rs 14.13 trillion and net borrowing of Rs 11.75 trillion is below the FY24 gross borrowing of Rs 15.1 trillion levels and is tad below the street expectations, as per a SBI Securities insight. This augurs well for private sector in the form of better availability of credit and will aid in lowering the interest rates in the economy, the report suggests.
The accolades are flying in fast and thick. Radhika Rao, Senior Economist, DBS Group Research feels the FY25 interim Budget delivered on three counts — fiscal compression, continued emphasis on capex and refrain from outright populism.
In another indication of aggressive spending, the Interim Budget continues with a capital expenditure push with the outlay for FY25 increased by 11.1 per cent YoY (over FY24 budget estimate) and 16.8 per cent YoY (over FY24 revised estimate) to Rs 11.1 trillion. Overall public sector capital investment was ₹5.6 lakh crore in FY15. Sonal Varma, Managing Director, Chief Economist – India and Asia ex-Japan, Nomura projects capex will rise 16.9 per cent y-o-y in FY25 versus 28.4 per cent in FY24. That augurs well for the future. ”Over the last 2-3 years, private capex was weak, so public capex stepped in. Now with private capex likely to pick up, the government is slowly stepping back to prevent crowding out,” points out Varma.
Sanjiv Puri, Chairman & MD, ITC believes the proposal to increase public expenditure is commendable. “This together with astute fiscal prudence and stability in taxes, inflation management and direct benefit transfer will lead to better utilisation and targeting of public funds,” says Puri.
The capex will go into funding infrastructure at an ambitious rate. Underscoring policymakers’ focus on enhancing logistics efficiency and fostering crucial multi-modal connectivity essential for the success of ‘Make in India, three major railway corridors have been announced — port connectivity corridor, energy, mineral and cement corridor and high traffic density corridor. This, along with higher allocation for NHAI projects, Har Ghar Jal, construction of 2 crore houses in the next 5 years are expected to not only drive the demand for cement and steel but also to help generate employment for millions. Railway modernization remains a key priority with plans to convert 40,000 railway bogies to Vande Bharat Standard to enhance safety, security, and comfort.
This means a lot to exporters. “The creation of logistics corridors and improved railway cargo handling will simplify trade operations, further giving boost to international trade, especially exports and imports,” says President of FIEO (officiate) Israr Ahmed. Agrees Arun Kumar Garodia, Chairman of Engineering Export Promotion Council (EEPC). “The proposed railway corridor is a significant development and is set to bring efficiency in logistics and reduce freight movement cost,” says Garodia who is hopeful of the speedy execution of projects across sectors.
In another facilitative move for exports, the RoSCTL scheme, essentially used to rebate all embedded state and Centre taxes and levies on garment and made-ups to enhance competitiveness has been extended up to 31 March 2026. Allocation of funds for the scheme has been increased from Rs 8404.66 crores to Rs 9246 crores in the Union Budget 2024-25, informs Sudhir Sekhri, Chairman Apparel Export Promotion Council.
The Union Cabinet chaired by Prime Minister Narendra Modi approved the continuation of the Scheme for Rebate of State and Central Taxes and Levies (RoSCTL) for export of Apparel/Garments and Made-ups up to 31st March 2026. “This scheme will help the apparel Industry immensely to plan the business on a consistent basis while staying competitive at a time when the traditional markets of the USA & EU are facing unprecedented recessionary trends.
As part of its plan to prioritise the poor (garib), youth (yuva), women (nari) and farmers (annadata), the GYAN approach will target tech-savvy youth for whom a corpus of Rs 1 lakh crore will be established with a 50-year interest-free loan. This will increase the innovation in the country and boost long-term technological research. A new scheme will also be launched for strengthening deep-tech technologies for defence purposes and private sector involvement in research and innovation in sunrise sectors will be encouraged.
The Interim Budget provides for two crore more houses to be built under the Pradhan Mantri Awas Yojana – Gramin and one crore households will receive up to 300 units of rooftop solar-powered electricity every month. The rural outreach of the Budget offers enhanced budgetary allocation for number of central government schemes like MGNREGA, education, health, Jal Jeevan Mission, PMGSY, PMKSY, Blue revolution and rooftop solar installation for one crore households under the Suryoday Yojana. According to Miren Lodha, Director-Research, CRISIL Market Intelligence & Analytics, this is expected to translate into capacity additions of 20-22 GW and could spawn investments of Rs 91,000-110,000 crore.
For the farmer, the Budget integration of 1361 mandis into the Electronic National Agriculture Market, benefiting 1.8 crore farmers with a trading volume of Rs. 3 lakh crore and an ‘Atmanirbhar Oil Seeds Abhiyan’ strategy to be formulated to achieve ‘atmanirbharta’ for oil seeds such as mustard, groundnut, sesame, soybean, and sunflower.
This will cover research for high-yielding varieties, widespread adoption of modern farming techniques, market linkages, procurement, value addition, and crop insurance. Despite challenges posed by the global health crisis and variability in climate conditions, the agri sector has demonstrated remarkable tenacity and resilience, growing at higher average annual rate of 3.7 per cent from FY15 to FY23. The Budget has also increased allocation under Food Storage and Warehousing Fund by 17 per cent to improve post-harvest infrastructure. This should yield sustainable benefits by reducing crop losses and boosting the processing infrastructure, according to Pushan Sharma, Director-Research, CRISIL.