When Finance Minister signalled the final stage of preparations for the Interim Union Budget 2024 with the commencement of the Halwa Ceremony on 24 January that heralds the start of Budget document printing, it was much more than the symbolic practice which every year acts as an integral prelude to the most awaited financial event of the year. The traditional ‘Halwa Ceremony’, this year, attended as always by the Finance Minister and other officials of the ministry involved in the Budget-making process inside the North Block, was the last one in an eventful 10 years of presentation of a visionary and ambitious document that has charted India’s rise to the sweet spot of the world’s fifth largest economy.
Building on this edifice towards a more ambitious growth and development trajectory and amidst the countdown to the general elections, the Interim Union Budget 2024 –though technically a vote-on-account to be presented on 1 February, 2024 — has stirred immense expectations and anticipation among policymakers, economists, industry, businesses, investors and market watchers on the roadmap that the Government is likely to roll out as it looks at transforming into the third largest economic power by 2030. A vote on account is a special constitutional provision by which the Government gets Parliament’s vote to secure funds for essential expenditures for part of the next financial year and outlines the contours of its fiscal strategy if it is voted back into power, without announcing new spending or revenue commitments.
However, there are two reasons why the interim budget is important. First, the government is in election mode and so there will be tacit targeting of its key constituents and second, with most opinion polls predicting the current government will be back in power, it is likely that the interim budget will be presented factoring in the assumption of policy continuity after the elections.
Aligned to that context, in its pre-election Budget, the Government is expected to balance politics and economics, with enhanced focus on the poor, youth, farmers and women on one side and on the other aiming for a lower fiscal deficit target of 5.3 per cent of GDP. On the first priority that the Budget may address, Sonal Varma and Aurodeep Nandi at Nomura highlight the ‘GYAN’ strategy of the Government – Gareeb (poor), Yuva (youth), Annadata (farmers) and Nari (women) – indicating the four key constituents that it is looking to target with its economic pitch. For the first, the Government might expand schemes such as PM Jan Dhan Yojana for financial inclusion, PM Awas Yojana the for affordable housing which is currently scheduled to end in December 2024) and social security initiatives – like raising the minimum pension amount (Atal Pension Yojana) and doubling health insurance cover (Ayushman Bharat).
For farmers, the Budget may bring an expansion of the annual allocation of the income transfer scheme (PM-KISAN) from INR 6000 to INR 8000, according to Varma and Nandi. There is also hint of the possible inclusion of health and life insurance coverage to the existing crop insurance programme and earmarking INR 4 trillion (1.2 per cent of GDP) for food and fertilizer subsidies, similar to the levels expected in FY24. With women emerging as an important factor in recent state election victories in Chhattisgarh, Madhya Pradesh and Rajasthan, the Budget may announce plans of doubling the annual payout to land-owning female farmers to INR 12,000 per annum.
These measures would be critical in pumping up consumer spending, especially in the hinterlands as rural demand has not yet seen sustainable growth. India grew 7.8 percent in the first quarter with a large part of this growth coming from strong domestic demand but segments such as FMCG, entry-level auto segments, and