The interim budget is reassuring with no big surprises. The fiscal deficit target for FY24 will be met and a tighter target is proposed for FY25, freeing up space for private borrowings. The budget focuses on trade, tourism, and transportation, with investments in railway corridors, airports, and public transport. It also supports the PLI and IDEAS schemes and emphasizes managing inflation and inclusive growth. The budget addresses women’s and children’s health, housing, and sustainability through the rooftop solar scheme. Overall, it indicates the government’s intent and sets expectations for the full budget.
Continuity of policies is a characteristic of a mature economy. The interim budget is reassuring, given the lack of big surprises. Budgetary allocations to most programmes, such as those for farm and allied sectors, skill development, PLI and MSME development, remain consistent.
The key features:
A fine balance It is heartening that the fiscal deficit target for FY24 – at 5.8% – will undoubtedly be met, and a tighter fiscal deficit target of 5.1% is proposed for FY25. This will free up space for private borrowings and bond markets as they pick up pace during the year. It is also anticipated that the persistent efforts towards improving the fiscal deficit would positively affect India’s sovereign rating.
TTT Enhanced capex spending has been favoured in most budgets in the recent past, and this one is no exception. The 2024 budget, however, seeks to create a virtuous triangle of trade, tourism and transport. Trade and tourism would generate demand for transport, whereas improved transport performance would enhance the demand for trade and tourism.
Mobility matters While a capital outlay of ₹11.1 lakh crore has been proposed for infrastructure, the tilt towards transportation is evident with a thrust on the development of railway corridors and coach upgradation. Capex for expanding airports will help meet the requirements of one of the world’s fastest-growing markets.
Likewise, promoting public transport investments across metro, rail, electric buses and regional rail projects will meet several objectives by enabling urban transformation, decongesting cities and driving our decarbonisation agenda for transport. The transport development agenda has been thoughtfully linked with the tourism opportunity through the programme to develop iconic destinations in states and port connectivity projects for island destinations. This initiative is further supported by long-term interest-free loans. Early reactions indicate that the private sector is upbeat and is likely to enhance investments to promote domestic tourism.
Trade winds Apart from continuity, another important characteristic of this budget is its positive long-term view on trade in light of the impact of recent geopolitical events on India’s trade performance. Specifically, support has been reaffirmed for the India-Middle East-Europe Corridor (IMEC). The budgetary allocation for the PLI scheme has been enhanced significantly for most sectors, including notable increases for semiconductors, automotive and auto components. Furthermore, the IDEAS scheme of EXIM bank has received a substantially higher allocation of ₹3,800 crore.
Leave no one behind As the country gears up to achieve its growth ambitions – the 2024 budget was prepared under the backdrop of a projection of 7.4% real GDP growth for FY24 – inclusivity measures will be critical to ensure these dividends reach vulnerable populations. It was announced that RBI would continue proactively managing inflation at 4% with a margin of 2%. This will help ensure that the benefits of economic growth reach all citizens.
A healthy focus Women’s and children’s health has also received emphasis in the budget. At the same time, the allocations are incremental if compared with BE for FY24; they are significantly higher than RE.
Quality housing Further, the challenges the middle-class faces in securing quality housing have been recognised with a scheme of 2 crore additional housing units being under PM Awas Yojana.
Here comes the sun The proposed rooftop solar scheme would entitle households to receive 300 units of free electricity every month. It is indeed an innovative mechanism to co-deliver inclusivity and sustainability outcomes.
Although this is an interim budget, it strongly indicates the GoI’s intent and an effective teaser for the full budget that will follow.
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