In her sixth Budget presented on February 1, Finance Minister Nirmala Sitharaman addressed the nation with an ‘interim Budget’ as the current government’s term is nearing its end with upcoming elections.
It’s important to clarify that India only has an Interim Budget for 2024-25, presented in February 2024. This is because general elections were likely held earlier this year (around May 2024). After elections final budget will be presented by the new government.

Key points from the Budget include:

• Projections for gross and net borrowings in the fiscal year 2024-25 are set lower than the current fiscal year 2023-24. This move aims to free up more credit for the private sector, potentially stimulating investment on a larger scale.
• Unlike the interim Budget of 2019-20, no changes were announced in direct or indirect tax rates in this year’s Budget.
• Revised Estimates were presented, with the Fiscal Deficit projected at 5.8%, slightly below the target of 5.9%. For the next fiscal year (FY25), the Fiscal Deficit target is set at 5.1%.

These measures reflect a balance between fiscal prudence and stimulating economic growth as the government transitions towards the end of its term.

Sitharaman’s speech began with highlighting the government’s initiatives in social sectors, emphasizing the four key pillars outlined by the Prime Minister in December 2023: the poor, the youth, women, and farmers.

For Women-
Inclusion of HPV Vaccine in India’s National Immunization Program

The government’s plan to integrate the human papillomavirus (HPV) vaccine into the national immunization program. Sitharaman highlighted the aim to promote vaccination among girls aged 9 to 14 years as a preventive measure against cervical cancer.

30 cr MUDRA Yojana loans for women entrepreneurs

The Pradhan Mantri MUDRA Yojana, emphasizing the empowerment of ‘Nari Shakti’ in the financial year. It highlighted the distribution of 30 crore MUDRA Yojana loans to women entrepreneurs.

Pradhan Mantri MUDRA Yojana (PMMY), initiated by Prime Minister Narendra Modi in 2015, aims to extend loans up to Rs 10 lakh to non-corporate, non-farm small/micro enterprises. These loans fall under the category of MUDRA loans within PMMY.

For the Poor-
2 crore more houses to be built under PMAY-G

During the Budget speech, it was announced that an additional 2 crore houses would be constructed under the Pradhan Mantri Awaas Yojana-Gramin (PMAY-G) within the next five years, aiming to achieve a total of 3 crore houses under this scheme.

PMAY-G, a prominent central scheme in collaboration with states, focuses on providing permanent houses with basic amenities to rural residents who are homeless or living in temporary and dilapidated structures.

Beneficiaries are entitled to funds ranging from Rs 1.2 lakh in plains to Rs 75,000 to Rs 1.30 lakh in hilly regions, difficult areas, and tribal or backward districts under the Integrated Action Plan (IAP). The funding is shared in a 60:40 ratio between the center and states, respectively, with a target of constructing 2.95 crore houses by March 2024.

As of November 29, 2023, more than 2.94 crore houses have already been sanctioned to beneficiaries by various states and Union Territories (UTs), with construction completed for 2.50 crore houses, nearing the mandated target.

For Farmer-
Impact of Government Initiatives on Poverty Reduction and Agricultural Market Integration

The Government disclosed significant achievements during the past decade: 25 crore individuals escaped multidimensional poverty, while the government successfully curbed leakages, saving Rs 2.7 lakh crore through direct benefit transfers via PM Jan Dhan accounts, totaling Rs 34 lakh crore.

Additionally, the government’s electronic National Agriculture Market (e-NaM) initiative facilitated the integration of 1,361 mandis (APMCs), benefiting 1.8 crore farmers. This integration resulted in trading volumes amounting to Rs 3 lakh crore.

Some of the Key Highlights & Implications of the Interim Budget:

Tax Stability: The decision to maintain existing income tax slabs and rates provides stability for taxpayers. Without alterations, individuals and businesses can plan their finances without unexpected changes.

Defence Strengthening: The allocation of increased funds for modernizing the armed forces signifies a commitment to national security. This investment aims to equip soldiers with advanced technology and weaponry, enhancing defense capabilities.

Infrastructure Surge: With an 11.1% rise in infrastructure spending, the government aims to bolster the nation’s physical infrastructure. This includes investments in roads, transportation networks, and logistics, which can lead to smoother travel experiences, improved connectivity, and increased trade and tourism activities.

Fiscal Responsibility: By prioritizing responsible management of public finances, the government aims to maintain economic stability. This involves ensuring that government spending is sustainable and does not lead to excessive deficits or debt accumulation.

Focus on Social Welfare Schemes: Increased allocations for flagship social welfare programs such as the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), Ayushman Bharat health insurance scheme, and PM Awas Yojana for rural housing highlight the government’s commitment to addressing social inequalities and improving living standards for vulnerable populations.

Tax Proposals: While specific tax reforms are yet to be detailed in the full budget, the Interim Budget hinted at potential measures aimed at boosting economic growth. These could include changes to tax structures or incentives designed to stimulate investment and consumption.

Implications:

Long-Term Growth Focus: The emphasis on infrastructure development, social welfare, and fiscal responsibility suggests a focus on sustainable, long-term economic growth rather than short-term gains.

Stimulating Growth: Increased spending, particularly on infrastructure projects, is expected to stimulate economic activity by creating jobs, boosting demand for goods and services, and improving productivity.

Social Impact: Continued support for social welfare programs is likely to have a positive impact on marginalized communities, promoting inclusive growth and reducing poverty and inequality.

Inflationary Pressures: Higher government borrowing to fund increased spending may lead to inflationary pressures, as excess demand could push up prices of goods and services.

Uncertainty for Taxpayers: The lack of clarity on specific tax proposals in the Interim Budget may create uncertainty for businesses and individuals, impacting their financial planning and investment decisions.

Looking Forward:

The forthcoming full budget, expected after the formation of the new government, will provide more detailed insights into the government’s economic policies and priorities. It will be essential to monitor how the government addresses fiscal challenges, implements tax reforms, and sustains economic growth while ensuring social welfare and fiscal discipline.

Written by
gkkedia