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Policy implication and Market Reactions: Indian Budget 2024

Written by gkkedia Dt. June 11th, 2024

About Interim Budget
In the Indian fiscal calendar, interim budgets play a crucial role in bridging the transition between two full-fledged budget cycles. While they might lack the grandeur and scope of regular budgets, interim budgets carry significant implications for the economy, governance, and public sentiment.

An interim budget presented by the government is a temporary financial plan. It serves the basic functions of allocating funds for essential government operations until a new government can be formed and a regular budget can be presented. The fiscal strategy delineated is a provisional financial framework directed towards recurrent expenditures and continuous initiatives.

The budgetary motif, as declared by the Finance Minister on February 1st, 2024, is themed “Viksit Bharat Budget 2024”. She reiterated that the country continues to strive towards Atmanirbhar Bharat. In the Interim Budget 2024, paramount attention will be directed towards addressing the welfare and aspirations of the socio-economic segments including the Gareeb (poor), Mahila (women), Yuva (youth), and Annadata (farmers).

Analysing the policy implications and market reactions to the Indian Budget 2024 necessitates the comprehensive examination of multiple factors, including alterations in taxation, sector-specific allocations, governmental expenditure priorities, and the broader economic milieu.

Policy Implications

    Fiscal Policy Priorities

    The budget is anticipated to mirror the fiscal policy priorities of the government, potentially encompassing endeavours aimed at augmenting economic growth, ameliorating unemployment, enhancing infrastructure, and fortifying social welfare schemes. Predicated upon the government’s disposition, there may be a focus on either fiscal stimulus measures or endeavours towards fiscal consolidation.

    The Interim Budget for the fiscal year 2024-25 illustrates the discretionary spending facet of the government’s fiscal policy over recent periods. India appears to be progressing towards adept debt management and an elevated level of counter-cyclicality in fiscal administration.

    The government has evidenced its commitment to curbing deficits and advancing fiscal consolidation, as delineated in the Interim Budget which sets the fiscal deficit target at 5.1% of the gross domestic product (GDP) for the fiscal year 2024-25. Further, the government aims to limit the revenue deficit to 2% of GDP for the financial year 2024-25.

    Taxation Changes

    Direct Tax Proposals

  • Under section 115BAC (New tax regime), individuals with a Total income not exceeding Rs. 7 lakh will be exempt from tax liability.
  • Withdrawal of all outstanding disputed direct tax demand up to Rs 25,000 in the interim budget 2024.
  • There is a proposed extension in the time limit for certain tax benefits for start-ups and investments made by sovereign wealth funds/pension funds, and an exemption from tax for specific IFSC units has been extended from 31st March 2024 to 31st March 2025.
  • Goods and Service Tax Proposals

  • There is no change in customs rates including import duties for FY 2024-25.
  • The average monthly gross GST collection has doubled to Rs.1.66 lakh crore in FY 24.
  • Sectorial allocations

    The allocation of funds to different sectors such as healthcare, education, agriculture, and infrastructure can influence market expectations and sector-specific stock performances. Investments in sectors perceived as growth drivers or beneficiaries of government support may experience positive market reactions.

  • Health: Vaccination to prevent cervical cancer will be encouraged for girls between nine and 14 years of age. A novel platform named U-WIN is slated for deployment to oversee nationwide immunization management. Additionally, healthcare coverage under the Ayushman Bharat scheme will be expanded to encompass all Accredited Social Health Activists (ASHA) workers, as well as Anganwadi workers and helpers.
  • Housing: Over the next five years, an extra two crore houses will be constructed under the “Pradhan Mantri Awas Yojana-Grameen”. Furthermore, a new initiative is scheduled to be launched to aid middle-class individuals living in rented spaces, slum areas, and unauthorized colonies in purchasing or constructing their own homes.
  • Agriculture: Efforts will be made to encourage both public and private investment in post-harvest activities, covering aggregation, storage, supply chain management, processing, and marketing. Additionally, the application range of Nano DAP fertilizer will be expanded to cover all agro-climatic zones. Moreover, a dedicated program will be developed to offer assistance to dairy farmers.
  • The PM Matsya Sampada Yojana will undergo expansion to achieve the following objectives:

    (i) Enhance aquaculture productivity from three to five tonnes per hectare,
    (ii) Achieve a two-fold increase in seafood exports to one lakh crore rupees,
    (iii) Generate employment opportunities for 55 lakh individuals.

    Sector-specific stock performances: Bank Nifty index ended higher by 0.42% to settle at 46,188.65. Public Sector Undertaking (PSU) banks and automotive stocks demonstrated superior performance compared to other sectorial indices, whereas realty and metal stocks witnessed declines. The budget underscores a robust focus on fostering inclusive and decentralized economic growth, positioning India among the echelons of developed nations.

    Overall Economic Growth

    Government is more focusing towards development and make India developed by 2047.
    Therefore the government mentioned the four areas, which is mentioned below, government said that these are the pillars of Indian economy and development:

  • ‘Garib’ (Poor)
  • ‘Mahilayen’ (Women)
  • ‘Yuva’ (Youth)
  • ‘Annadata’ (Farmers)
  • Given the focus on inclusive development centred around the people, the Finance Minister declared:

  • The government plans to deepening and widening the tax base through making some amendment in GST.
  • Strengthened financial sector brought savings, credit and investment back on track which enhances income and financial stability in the economy.
  • There will be proactive inflation management so that market forces will be automatically adjusted and corrected in a better manner.
  • Garib Kalyan, Desh ka Kalyan

  • 25 crore Indian people have come out of poverty.
  • Credit assistance has been given to 78 lakh street vendors to empower them under PM-SVANidhi scheme.
  • Empowering the Youth

  • Indian government through his Skill India Mission providing training to youth which is 1.4 Crore total in number.
  • 43 crore loans have been sanctioned under the PM Mudra Yojana to entrepreneur to increase fostering entrepreneurial aspirations of youth.
  • Welfare of Farmers (Annadata)

  • There has been direct financial assistance provided to 11.8 crore farmers under PM-KISAN.
  • Crop Insurance has been given to 4 crore farmers under PM Fasal Bima Yojana.
  • Nari Shakti

  • There has been 30 crore Mudra Yojana loans were disbursed to women entrepreneurs for their growth.
  • There has been an increase of 28 per cent in female enrolment for higher education over a period past 10 years

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