Budget 2024: Great Expectations
It is customary for an interim budget to allocate funds for essential government operations, ongoing initiatives, and pressing needs, all the while avoiding introduction of new policies or schemes with substantial financial implications. Typically unveiled a few months before the general elections, it serves to cover government expenditures and sustain ongoing schemes during the transition till a new government takes on the reins. The interim budget may encompass estimates for government spending, revenue, fiscal deficit, financial performance, and outlook for the upcoming months but will be restricted from making noteworthy policy pronouncements that could weigh down the incoming government.
India is on the verge of witnessing its fifteenth interim budget/vote-on-account, scheduled for February 1, 2024. With a total of 91 budgets since Independence, 14 have been presented as interim budgets or votes-on-account. Adhering to the Election Commission of India's Code of Conduct, the ruling party is barred from proposing significant tax reforms in the interim budget to maintain the integrity of the voting process.
At a recent public event, Union Finance Minister Nirmala Sitharaman underscored that the upcoming budget in February 2024 is geared towards meeting expenditure requirements till a new government takes charge. Characterised as a vote-on-account, the budget is not anticipated to feature any spectacular announcements, according to the minister's statement.
In Anticipation
The finance minister will present the interim budget 2024-25 on 1 February. It's very likely that major announcements may be put on hold till after the 2024 Lok Sabha Elections. “The upcoming Union Budget presents an opportunity to address lingering concerns and set the stage for future economic growth. It is most likely that this budget would prioritise fiscal discipline and avoid populist measures," says a senior tax consultant. However, there is optimism of potential relief in the realm of personal income tax, particularly in the New Tax Regime, the expert points out.
Commenting on the fiscal economy and taking into account the fact that the upcoming event on 1 February will only be a vote-on-account, Aditi Nayar, Chief Economist, ICRA says that the capex target for FY2024, which was budgeted at Rs 10 trillion or 22.2 per cent of the total expenditure and 3.3 per cent of GDP, may be missed. "We have pencilled in a shortfall of Rs 750 billion in the FY2024 capex, which would still imply a robust y-o-y growth of ~26 per cent," she says. S. P. Sharma, Chief Economist, PHD Chamber of Commerce and Industry, wants a slew of things from the budget. Foremost is the focus on reducing the costs of doing business. "The reduced costs of doing business and a level playing field in the country will increase the competitiveness of manufacturing firms and exporters, and reduce imports of the items where India has domestic capabilities," says Sharma. "The budget must focus on reducing the costs of capital, costs of power, costs of logistics, costs of land /availability of land, costs of labour/availability of skilled labour and costs of compliance," he goes on to say. His expectations are more from the full-budget expected in July but a direction for which, he expects, can be outlined by the finance minister on the first of February.
Tax Sops Expectations
The deduction limit under Section 80D for medical insurance premiums should be increased from Rs 25,000 to Rs 50,000 for individuals and Rs 50,000 to Rs 75,000 for senior citizens, reflecting rising healthcare costs. Easing of TDS compliance for home buyers could be addressed by the finance minister, experts say. Nikhil Bhatia, Co-Founder & Chief Strategy Officer at HOP Electric Mobility, stresses the importance of a streamlined Production-Linked Incentive (PLI) scheme, seeking clarity in provisions to drive investment and growth. He advocates an expanded FAME II scheme, emphasising the need to incentivise technology transfer and manufacturing capabilities to position India as a global EV technology hub.
Sameer Aggarwal, CEO & Founder of Revfin Services, hopes for a budget aligning economic growth with environmental responsibility. He envisions a future where renewable energy powers both homes and vehicles, calling it an investment in a cleaner, brighter tomorrow. Hari Kiran, Co-Founder and COO of eBikeGo, anticipates insights into the GST landscape for entry-level two-wheelers in the 2024 Budget. Kiran emphasises the industry's call for a uniform five per cent GST on all EV spare parts, aiming for a more equitable tax structure. Vanesh Naidoo, Founder and Director of SafeCams, views the 2024 budget as an opportunity to strengthen the MSME ecosystem and empower startups for global competitiveness. Naidoo is optimistic that the budget will create a more vibrant entrepreneurial landscape in India.
Dilip Modi, Founder of Spice Money, underscores the substantial expectations of the Indian fintech sector for the 2024 budget. Modi anticipates a key focus on fortifying the regulatory framework for fintech, guiding responsible growth and innovation in the sector ‒ a focal point addressed in the upcoming budget.
What Happened in 2019?
The Union interim budget 2019 was presented by Finance Minister Piyush Goyal on 1 February 2019. Income Tax slabs remained the same for FY2020. But Goyal did announce some tax-related measures like no tax on notional rent of second self-occupied house under “Income from House Property”; Tax Rebate Limit under 87A was increased from Rs 3.5 lakhs to Rs 5 lakhs for taxpayers. The maximum limit of the tax rebate increased to Rs12,500 from the present limit of Rs 2,500; TDS limit was hiked from Rs 10,000 to Rs 40,000 on Post Office Savings and Bank Deposits, targeting the salaried class and senior citizens while also increasing the TDS threshold on rent from Rs 1,80,000 to Rs 2,40,000; The Standard Deduction for the salaried class was also increased from Rs 40,000 to Rs 50,000. For the industry, SMEs with earnings below Rs 5 crore were given the assurance that their GST returns would be filed only once in three months. Then the requirement of sourcing from SMEs by government enterprises was increased to 25 per cent with three per cent reserved for women-owned SMEs. Some benefits of maternity leave of 26 weeks was announced as additional support for women. For the farm sector, the Minimum Support Price (MSP) was announced to be fixed at 50 per cent more than the cost for all the 22 crops among others.
An analysis of the preceding four budgets, distinguishing between interim and final budgets, reveals a trend of preserving announcements and allocations, with the exception of the 2010 financial year, in the aftermath of the global financial crisis. This pattern raises anticipation that the upcoming interim budget may too play a pivotal role in shaping the future economic roadmap of India.
ashish.sinha@businessworld
