The anticipation surrounding the Union Budget and the Union budget expectations for the financial year 2024-2025 is visible as the interim budget is scheduled to be presented on February 1, 2024. While it is labelled as interim, the significance of this budgetary announcement cannot be understated.
Finance Minister Nirmala Sitharaman hinted that the upcoming budget will be a vote on account, signaling a focus on maintaining the current financial course rather than introducing significant new policies. In this article, we delve into the importance of the interim budget and the key sectors and expectations that make it a crucial event in India's economic calendar.
An interim budget often called a vote on account, is a temporary financial plan presented by the outgoing government. Its primary purpose is to ensure the uninterrupted functioning of essential services until the new government, formed post-elections, can present a comprehensive full-year budget. Typically, interim budgets focus on essential expenditures, avoiding significant policy changes or introducing new schemes, as they are considered caretaker budgets and have developed many union budget expectations.
“Indian economy has undergone many structural reforms that have strengthened its macroeconomic fundamentals. These reforms have led to India emerging as the fastest-growing economy among G20 economies. In 2023-24, as per current estimates, it is estimated to have grown 7.3 per cent on top of the 9.1 per cent (FY22) and 7.2 per cent (FY23) in the previous two years, and the economy is generating jobs,” Ministry of Finance has said in its review of the Indian economy released on Monday.
Union Budget Expectations and Sectors 2024:
1. Tax Reforms:
Tax experts are advocating for an increase in the standard deduction from Rs 50,000 to Rs 1 lakh in both the old and new income tax regimes. This adjustment is a measure to align with inflation, providing citizens with more disposable income.
FM Nirmala Sitharaman extensively changed the new personal income tax regime in last year’s Budget. The new income tax regime has also been made the default income tax regime for salaried taxpayers. This indicates that the government is looking to eventually phase out the old tax regime that offers more tax exemptions and deductions.
Section 80C is not included as a deduction under the new income tax regime, and tax experts are divided on whether the government will include it eventually. While some believe that it is essential to add Section 80C under the new tax regime to incentivize savings and also push more people towards the new regime, others are of the view that the government has introduced the new income tax regime with the objective of doing away with exemptions and deductions and hence simplify the income tax return filing process.
2. Electric Vehicle (EV) Sector:
With the momentum of the EV revolution, expectations are high for the budget to consider further tax breaks for EV manufacturers, buyers, and investors. Reduced GST rates on lithium-ion batteries, income tax deductions for EV purchases, and unique tax benefits for companies investing in EV technology and infrastructure could be on the agenda.
The government has allocated $1 billion to the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME-II) scheme for the growth of the EV Industry in India. This scheme has significantly incentivized EV adoption through demand and supply-side subsidies. With the current phase ending in March 2024, its extension with increased budget allocation is highly anticipated. This will support both EV manufacturers and buyers, keeping the momentum going.
3. Infrastructure Spending:
The government plans to keep working on building things like roads and trains. They aim to spend ₹10 lakh crore in FY24 for this. People hope to increase it by 10% to ₹11 lakh crore in FY25. This shows they want to make public infrastructure better. In the past, they focused on developing things like airports, roads, and trains, especially the last part of the journey.
It seems they will keep spending a lot on building things in the budget for 2024. And when the full budget comes in July, they might spend even more to grow the country's finances. According to estimates shared by top foreign and domestic broking firms, the government may set the fiscal deficit target for 2024-25 in the 5.2 - 5.5 per cent range.
4. Tourism Sector:
The travel and hospitality industry, a big part of India's economy, hopes the interim budget will focus on making things better. They want more investment in infrastructure, improved connections, training for workers, and financial support for small businesses.
One could see the recent inauguration of the Ram Mandir in Ayodhya and the recent launch of the new Ayodhya airport; Ayodhya may attract similar footfalls of visitors. Such steps will undoubtedly improve connectivity in regions where trains or buses may be the primary mode of transportation and are part of the union budget expectations.
5. Aviation Sector:
The aviation sector anticipates continued resource allocation for infrastructure, technology, and safety measures at existing and new airports. Particularly, emphasis on tier 2, 3, and 4 cities under the UDAN scheme is expected. Spiritual tourism is poised to be a key focus, with measures aimed at enhancing infrastructure and accessibility in spiritual and cultural hubs across India.
6. Real Estate:
As India strides toward a $5 trillion economy with the aim of becoming the third-largest GDP by 2027-28, the real estate growth rate in India is on the high end of the government’s initiatives to stimulate consumer demand in the property market. is of prime focus in this budget session.
The real estate sector’s wish list for the Union Budget 2024-25 is comprehensive and strategic. It encompasses measures to stimulate demand, enhance transparency, and fortify the industry’s pivotal role in India’s economic landscape.
In conclusion, despite being interim, the Union Budget for the fiscal year 2024-2025 holds immense significance for various sectors and the overall economic landscape of India. While it may not introduce groundbreaking policies, its role in providing financial stability, addressing sector-specific needs, and setting the tone for the full budget in July is crucial in sharing high union budget expectations among the masses. The expectations and aspirations of diverse sectors underscore the importance of this interim budget as a critical determinant in shaping India's economic trajectory for the upcoming fiscal year.