Budget 2024-25

With the Lok Sabha elections slated to be held later this year, Union Finance Minister Nirmala Sitharaman is set to present an interim Budget for 2024-25 on February 1st. Being an election budget, it is widely expected to have a populist tilt with a special focus on agriculture, healthcare and infrastructure spending.

Laying Down Roadmap for Vision 2047

The budget is likely to layout a roadmap linked to the government’s long-term Vision 2047 under which India aims to become a developed nation by the 100th year of independence. It is likely to outline reforms, policy actions and allocations across key sectors like education, health, agriculture, infrastructure, banking and others over the next 25 years.

Key Taxation Announcements Expected

There are expectations that the finance minister will announce certain taxation proposals in the interim budget speech. These could cover direct and indirect tax rates, new proposals if any, customs duty tweaking among others. Any major overhaul in the income tax slabs however is unlikely.

Revised Fiscal Deficit Targets on Cards

On the fiscal front, the budget will provide revised estimates for 2023-24 and projections for 2024-25. The finance minister is expected to highlight that the government has worked to put India back on the fiscal consolidation path over the last few years after pandemic-related slippage.

The budget may revise the fiscal deficit target for 2023-24 closer to the 6.4% mark from the 6.9% budgeted earlier. The roadmap could reiterate the government’s commitment to steadily reduce it further to 4.5% by financial year 2025-26.

Interim Spending Plan Until New Government Takes Charge

Being an interim budget (vote on account), it will essentially seek the Parliament’s nod for incurring spending for the first 2-3 months of fiscal 2024-25. This is done since a general election is due in April-May 2024 until a new government takes charge and presents a full Union Budget.

As per convention, the estimates will cover projected expenditure for the April-July period. This spending is later enveloped within the annual budget presented by the new elected government post the polls.

Schemes Across Priority Sectors Continue to be Funded

As per budget estimates for FY24, the total expenditure by the central government in FY 2024-25 has been pegged at ₹45 lakh crore. Out of this, prominent schemes across education, health, banking, agriculture, rural and urban development are expected to receive funding allocation.

This will allow key centrally sponsored schemes and central sector schemes across these priority areas to continue seamlessly until the next government makes fresh budgetary provisions.

Revenue and Expenditure Forecasts

The Budget also provides forecasts for how much revenue the government expects to earn across taxes like income tax, corporate tax, customs duties, excise duties etc. in 2023-24.

Alongside, it gives the breakup of expenditure across key ministries like education, health, rural development, defense, railways among others.

Any major changes in the direct or indirect taxes are unlikely this time. GST collections have been robust in recent months offering some cushion on the revenue side.

Proposals on Personal Income Tax Unlikely

Historically, interim budgets have not tinkered much with direct taxes like personal income tax. Major changes in income tax slabs, rates are more likely to be announced in full budgets only.

As 2024 is an election year, expectations however remain that the finance minister may still announce some minor changes or new slabs offering relief to individual taxpayers.

Tweaks in Customs Duty to Boost Manufacturing Possible

The budget may also look to boost domestic manufacturing and self-reliance across industries through some calibrations in customs duty. Some imports tariffs could potentially be raised while export duty on certain items may be reduced.

This could be done through proposals under Part B of the budget document covering Central Excise and Service Tax apart from Customs Duties.

Feb 1 Budget Validity Only Till New Government Takes Charge

It must be noted that the proposals under the interim budget will be valid only till the new government takes charge post the 2024 election outcome.

The full budget for 2024-25 to be presented by the elected government later in the year, will then become the formal budget. The taxation policies, spending allocations, programmes etc. under today’s budget will either be enveloped or overhauled completely by the new dispensation based on their fresh electoral mandate.

Thus the proposals by the finance minister on Feb 1st will essentially cover spending till July and taxation policies for only the first few months of 2024.