India’s Interim Budget 2024 : As the nation eagerly awaits the upcoming budget announcement on February 1 by Finance Minister Nirmala Sitharaman, it’s important to note that this budget is set to be interim due to the looming elections. The Finance Minister has already clarified that the Fiscal Budget 2024-25 will refrain from major policy declarations and will primarily focus on the government’s expenditure until a new administration takes charge post-general elections.
Despite the interim nature of the budget, there is a growing buzz of pre-budget expectations. Gurmeet Singh Chawla, Director of Master Capital Services Ltd., sheds light on the anticipated fiscal plans of the government as India prepares for the Lok Sabha elections projected for April to May 2024.
India’s Interim Budget 2024 Insights and Expectations
Welfare Spending and Fiscal Deficit
Forecasts indicate that the government is gearing up to augment welfare spending, with a potential aim to reduce the fiscal deficit to 4.5% of the GDP by the financial year 2025-26. Chawla notes, “Anticipations are high that the government will increase welfare spending and potentially aim to decrease the fiscal deficit to 4.5% of the GDP by FY26.”
Tax Reduction and Support for Agriculture
Expectations include a call for the government to announce plans for tax reduction and provide support to the agriculture and rural sectors, with a specific focus on capital expenditure. Chawla emphasizes, “Government spending on capex is expected to increase to offset global growth concerns.”
Infrastructure Boost
A greater allocation of funds to the infrastructure segment is anticipated, with a special emphasis on fostering the growth of a digitized India, green hydrogen, electric vehicles (EVs), and broadband.
Subsidies for Food and Fertilizer
The government is considering earmarking approximately Rs. 4 trillion ($48 billion) for subsidies related to food and fertilizers in the forthcoming fiscal year. According to Chawla, “The Ministry of Consumer Affairs, Food, and Public Distribution has projected an expenditure of $26.52 billion for food subsidies in FY25, reflecting a 10 percent increase from the expected allocation of nearly $24.11 billion in FY24.
Increased Funding for Affordable Housing
Indications suggest that the government might increase funding for affordable housing by more than 15%, potentially reaching Rs 1 trillion ($12 billion) for the financial year 2024-2025.
Divestment Goals
The government has set a target to raise Rs 510 billion (equal to $6 billion) through divestment, signaling its intent to sell some of its assets or investments.
As the budget unfolds, these expectations will be closely watched to gauge the government’s fiscal priorities and strategies during this interim period.
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