Budget 2024: Taxpayers, industrialists await Nirmala Sitharaman’s roadmap. Top updates

Finance minister Nirmala Sitharaman will present the final Budget or Interim Budget (for the financial year 2024-25) in the second term of the Narendra Modi government at 11am on Thursday, February 1, ahead of the Lok Sabha elections, with plans expected to be fiscally prudent with a focus on infrastructure spending but heavy on political messaging.

Nirmala Sitharaman is expected to highlight the Modi government 2.0’s 10-year economic performance but will hold back on expensive schemes to lower the fiscal deficit. The Interim Budget 2024 could serve as an economic manifesto for the Bharatiya Janata Party by laying out Modi’s vision for the economy for the next five years. Modi is eyeing to win a third term in the Lok Sabha elections expected to be held by May.

The Interim Budget, however, presents an occasion for spectacle just weeks ahead of the Model Code of Conduct coming into force before the general elections.

Top points on Union Budget 2024

Snapshot of Modi government’s victories

Nirmala Sitharaman’s sixth straight Budget may present a political document with a snapshot of the Modi government’s triumphs over the last 10 years and pointers to how it wants to take the country forward.

With pressure for populist measures off after recent emphatic victories in three states of Rajasthan, Madhya Pradesh and Chhattisgarh, the finance minister is expected to stick to being fiscally prudent while sprinkling sops on sectors like agriculture and engines of the economy that would create jobs and boost consumption.

Any big announcements?

Madhavi Arora, economist at Emkay Global, told news agency Reuters that the Interim Budget would lack any big bang announcements but is likely to be watched for the pace of fiscal consolidation and policy priorities ahead.

The Centre is likely to aim to lower the fiscal deficit by at least 50 basis points in 2024-25 from its current target of 5.9 per cent of GDP, which economists expect it to meet.

To attain this, the government will cap major subsidies on food and fertiliser at the current year’s level, while announcing inexpensive welfare schemes like cash handouts for female farmers, Reuters reported.

Increase capital spending on infrastructure

The Modi government is likely to increase capital spending or expenditure on infrastructure, which has been key to pushing India’s growth.

It will spend over 3 per cent of GDP on infrastructure in the current year with a further increase of as much as 20 per cent expected for 2024-25.

State of the economy

The Indian economy is projected to grow close to 7 per cent in the financial year 2024-25 which starts this April, said the ministry of finance in a review report. The strength of domestic demand has driven the economy to a 7 per cent plus growth rate in the past couple of years.

According to projections, India is expected to become the third-largest economy in the world with a GDP of USD 5 trillion in the next three years. Subsequently, India can aspire to become a USD 7 trillion economy by 2030.

Income tax

An increase in income tax exemption limits, support to women entrepreneurs, a long-term taxation policy and steps to boost consumption and savings are among the expectations of experts from the Interim Budget.

They also demand parity in taxation among companies, partnerships and limited liability partnerships.

“This is going to be an interim budget but at least there may be some indications of full-budget benefits. There may be some concession to be offered to individual taxpayers under section 87A under which the overall tax exemption limit may be increased to ₹8 lakh from now ₹7 lakh, inclusive of rebates,” All India Federation of Tax Practitioners national president Narayan Jain said.

Bharat Chamber of Commerce president NG Khaitan said there is a need for a long-term taxation policy and parity in taxation among companies, partnerships and limited liability partnerships (LLPs) for a level playing field for small and medium firms.

MSMEs, which have a huge contribution to the country’s GDP and employment generation, are subjected to higher taxation, he said.

Hoteliers are expecting a more lenient tax structure and an increased allocation, which will give a boost to the tourism industry.

Amandeep Singh Grover, general manager of Hilton Goa is hopeful of reforms that standardise offerings within the tourism sector.

“This could involve streamlining processes, enhancing infrastructure, and ensuring a consistent and high-quality experience for tourists. Standardization would not only elevate the overall appeal but also position the country as a more enticing destination for travellers, ultimately driving growth and sustainability in the hospitality sector,” PTI quoted Grover as saying.

Shilpi Khanna, general manager at Hyatt Centric, Juhu said, “Operational costs in hotels are a big challenge for us. As costs rise, people’s spending power will decrease because of inflation.”

Khanna noted that the hospitality industry was the worst-hit sector during the Covid-19 pandemic. 2023 was a good comeback year for the sector, but it still could not cover the losses.

She also called for an increased budget allocation for the industry.

Maintaining continuity of policies

A research note from the Bank of Baroda said with the 2024-25 Budget being an interim one, the Modi government would focus on maintaining the continuity of policies while committing itself to the path of fiscal consolidation.

“In the wake of weak monsoon, and subdued Rabi sowing, the Budget will focus on steering rural growth. For this, enhanced spending on MGNREGA, PM KISAN, and PMAY can be expected. Driving investment growth will be another focus area for the government. We thus expect ₹1.5-2 lakh crore incremental increase in capex for the next year.”

Radhika Rao, senior economist, DBS Group Research, said the Budget will emphasise an “inclusive and prosperous” policy push in the context of incremental progressive steps in the roadmap over the next 20-plus years toward India@100 (a century since independence).

“In an election year, the government usually tables the vote-on-account or the Interim Budget. A vote-on-account seeks approvals for essential expenditure outlays until the polls, while the interim Budget broadly includes an assessment of the current state of the economy, current/capex expenditures, and receipts, as well as revised estimates of the current financial year and estimates for the year ahead.”

Taking a leaf off the pre-election 2019 Budget, “we expect this interim edition to propose modest pro-demand steps to address near-term risks”, she said.