Introduction: The recently unveiled Interim Union Budget 2024 provides a crucial insight into India’s fiscal trajectory until the comprehensive budget release in July 2024. This interim budget not only addresses transitional financial needs but also introduces revisions in tax rates, marking it as a significant fiscal event. This article delves into the key highlights and potential ramifications on economic growth, offering an in-depth understanding of the outlined fiscal policies.

Social Sector Spending:

The interim budget allocates substantial funds, approximately INR 4.3 lakh crore, to ten major schemes, emphasizing inclusive development and social welfare. Notable schemes include MGNREGA, National Health Mission, and Pradhan Mantri Awas Yojana, showcasing the government’s commitment to holistic development.

Fiscal Consolidation:

Prioritizing fiscal consolidation, the budget aims to reduce the fiscal deficit to GDP ratio by 70 basis points to 5.1% in FY25. This strategic move is expected to lower interest rates, encourage private investment, and maintain a balance between fiscal prudence and growth.

Growth Outlook:

The interim budget projects a promising nominal GDP growth of 10.5%, coupled with a real growth rate of 7%. With an optimistic outlook, the stage is set for robust economic performance in the coming fiscal year.

Tax Revenues:

Aiming for an 11.5% growth rate in Gross Tax Revenue (GTR) for FY25, the government focuses on buoyancy in direct taxes to boost revenue sources. Additional revenues may be directed towards enhancing capital expenditure growth, reflecting a pragmatic fiscal strategy.

Expenditure Priorities:

The budget emphasizes restrained growth in revenue expenditure (3.2% in FY25) while targeting fiscal discipline. Capital expenditure growth, though moderated to 16.9% in FY25, is complemented by interest-free loans to states for their capital expenditure, striking a balance between infrastructure development and fiscal prudence.

Key Policy Highlights:

Research and Innovation:

A notable allocation of INR 100,000 crore as a 50-year interest-free loan aims to foster private sector research and innovation in sunrise domains, contributing to long-term financing options.

Green Energy:

Ambitious targets for Net Zero by 2070 are coupled with viability gap funding for offshore wind energy and initiatives promoting compressed biogas (CBG) blending in natural gas for transport and domestic purposes.

Electric Vehicles (EVs):

The budget focuses on expanding and fortifying the e-vehicle ecosystem, supporting manufacturing and charging infrastructure. A push for greater adoption of e-buses in public transport networks is facilitated through a payment security mechanism.

Railways:

Three major economic railway corridor programs under PM Gati Shakti are announced, aiming to enhance logistics efficiency and reduce costs in energy, mineral, and cement corridors, port connectivity corridors, and high-traffic density corridors.

Attracting Foreign Investment:

With a focus on sustaining foreign investment, the budget outlines negotiations for bilateral investment treaties and introduces the India-Middle East-Europe Economic Corridor as a potential game-changer.

Visit Bharat Reforms in States:

A provision of INR 75,000 crore as a 50-year interest-free loan is designated to support state governments in implementing Viksit Bharat reforms.

Bio-manufacturing and Regenerative Practices:

A new scheme promoting bio-manufacturing and bio-foundry is introduced, encouraging eco-friendly alternatives such as biodegradable polymers, bio-plastics, biopharmaceuticals, and bio-agri-inputs.

Agriculture and Food Processing:

Focused on private and public investment in post-harvest activities, the budget aims to bolster aggregation, modern storage, efficient supply chains, primary and secondary processing, and marketing and branding.

Corporate Tax:

The interim budget extends the sunset date for claiming exemption in specified incomes to 31 March 2025. Highlights include tax holidays for start-ups, withdrawal of tax demands, and amendments to tax collection at source (TCS) rates.

Indirect Tax:

Changes in the Input Service Distributor mechanism and proposed penalties for non-registration of machines in the tobacco industry are introduced to streamline indirect tax processes.

Real Estate and Housing:

In alignment with ‘Housing for All,’ a housing scheme for the middle-income class and plans for 2 crore houses under Pradhan Mantri Awas Yojana (Grameen) in the next five years are introduced.

Startup Sector:

Relief for the startup sector includes an extension of the time limit for incorporation of eligible startups and an extended investment window for sovereign wealth funds and other entities.

Energy Sector:

Prioritizing e-vehicle ecosystem strength, rooftop solarization initiatives and viability gap funding for offshore wind energy are allocated. Efforts to reduce coal import dependence are also outlined.

Technology and Innovation:

Increased funds for the Domestic Industry Incentivisation Scheme and a surge in budget allocation for Bharat Sanchar Nigam Limited (BSNL) aim to foster domestic industry growth within the telecom sector.

Significant allocations for semiconductor and display manufacturing ecosystems, production-linked incentives for electronics manufacturing, and an INR 1 lakh crore corpus for innovation in sunrise domains are highlighted.

Telecom Industry:

Conclusion:

While serving as a transitional financial plan, the Interim Union Budget 2024 lays the groundwork for economic resilience, innovation, and sustainable development. With a focus on fiscal consolidation, growth-oriented policies, and strategic investments, the budget aims to propel India towards a brighter economic future. The outlined policies provide a roadmap for a holistic and inclusive approach to economic governance during this transition period.