Interim Budget 2024: Nirmala Sitharaman Presents Economic Roadmap for Modi 3.0

New Delhi, Feb 1: In her 58-minute Interim Budget speech, the country’s first full-time woman finance minister Nirmala Sitharaman neatly laid out the chess pieces in anticipation of a third term for Prime Minister Modi.

She set the tone with an interesting aside on the country’s improved performance in international sporting events, observing, “Chess prodigy and our Number-One ranked player Praggnanandhaa put up a stiff fight against the reigning World Champion Magnus Carlsson in 2023. Today, India has over 80 chess grandmasters compared to little over 20 in 2010.”

Modi-led National democratic alliance government is widely expected to return to power after general elections due this year.

As The Assam Tribune had pointed out in its pre-budget analysis, welfarism remained the prime focus of the Budget proposals with what Sitharaman on Thursday defined as the four caste groups comprising garib (poor), mahilayen (women), yuva (youth) and annadata (farmers) at their core.

“All four require and receive government support in their quest to better their lives. Their empowerment and well-being will drive the country forward,” she stated.

Sitharaman enhanced the target under the Lakhpati Didi scheme to three crores from two crore women set earlier. Launched last year, the scheme provides skills training to village women to enable them to sustainably earn Rs 1 lakh every year.

She reiterated support for other welfare schemes being run by the government for assisting street vendors, tribal groups, artisans, divyangs (specially enable), transgenders and small farmers. Besides, the building of an additional two crore houses under the PM Awas Yojana in rural areas, the creation of post-harvest infrastructure, achieving self-reliance in oilseeds, dairy development, and the promotion of fishing and aquaculture have also been proposed.

A Rs 1 lakh corpus has been proposed for providing 50-year financing with low or zero interest rates to encourage innovation by leveraging the country’s demographic dividend.

“This will encourage the private sector to scale up research and innovation significantly in sunrise domains. We need to have programmes that combine the powers of our youth and technology,” informed Sitharaman.

Giving a thumbs up to the measures, Chandrajit Banerjee, Director General of the industry body CII opined, “The measures will provide economic security to the vulnerable sections of the society, raising their standards of living and expanding the rapidly growing Indian consumer market. This expansion has a direct bearing on economic growth for the consumption-led Indian economy.”

No Tax Relief for Salaried Class

The salaried class was again left disappointed with no revision in income tax slabs. Despite the government having introduced optional tax slabs under the old and new regime categories since 2020, the long wait for an enhancement in the income tax limit under Section 80C of the Income Tax Act continues.

Section 80C is the most popular deduction among middle-class taxpayers for reducing their tax liability through investments in tax-saving instruments or incurring eligible expenses on their consolidated income and was last revised to Rs 1.5 lakh from Rs 1 lakh in 2014.

However, in consonance with the government’s stated objective to improve the ease of living and ease of doing business, Sitharaman announced the withdrawal of “petty, non-verified, non-reconciled or disputed direct tax demands”, with some dating as far back as 1962. This is expected to bring relief to one crore taxpayers.

“I propose to withdraw such outstanding direct tax demands up to Rs 25,000 pertaining to the period up to financial year 2009-10 and up to Rs 10,000 for financial years 2010-11 to 2014-15,” she said.

Emphasis on Infrastructure

The Budget proposals once again highlight the importance of physical, digital and social infrastructure in ensuring people-centric inclusive development.

Sitharaman announced three new railway corridors to improve the transport of energy minerals and cement, enhancing port connectivity and a high-traffic density corridor under the PM Gati Shakti to enable multi-modal connectivity, reduce logistics efficiency and reduce costs. She also proposed 40,000 normal railway bogies to Vande Bharat standards for passenger safety and comfort.

“This visionary initiative aims at expediting freight movement, enhancing turnaround times, and ultimately reducing logistics cost, currently standing at 12 per cent of the GDP. The increased allocation for dedicated projects signals a commitment to fostering efficiency, propelling India’s manufacturing competitiveness to new heights in the global arena,” said Jitendra Srivastava, CEO of Mumbai-based freight forwarding firm Triton Logistics & Maritime.

Sitharaman said the government would support the expansion of airports all over the country to enhance air connectivity as well as urban rail transport in large cities looking at transit-oriented development.

Aggressive on Green Energy

The Budget also reinforces the Modi government’s commitment to achieving net zero carbon emissions by 2070. Key proposals include viability gap funding (VGF) for harnessing offshore wind energy, coal gasification and liquefaction, phased mandatory blending of compressed biogas (CBG) in compressed natural gas (CNG) for transport and piped natural gas (PNG) for domestic consumption, strengthening of the electric vehicle ecosystem and a new scheme for setting up bio-manufacturing and bio-foundries.

In a follow-up to Modi’s announcement of a push to rooftop solar during the consecration of Ram Mandir in Ayodhya on January 22, Sitharaman said such households would be able to obtain up to 300 units of free electricity every month, substantially cut down on their electricity bills and sell any excess electricity produced to distribution companies.

Wholeheartedly welcoming the move, Satyanarayan Goel, Chairman & MD of the country’s largest energy exchange, India Energy Exchange (IEX) said, “The rooftop solarisation programme will help take solar energy to the grassroots and will lead to substantial savings for households. Additionally, the policy mandating phased blending of CBG for CNG and PNG will help in greening the gas supply chain.”

Increase in Capex

Given the multiplier effect of the significant increase in capital expenditure (capex) outlay in the last four years, Sitharaman announced an increase of Rs 11.11 lakh crore, which is about 3.4 per cent of the GDP.

The revised estimate of the total receipts other than borrowings is Rs 27.56 lakh crore, of which the tax receipts are Rs 23.24 lakh crore. The revised estimate of the total expenditure is Rs 44.90 lakh crore.

In some encouraging news on the fiscal front, at Rs 30.03 lakh crore, the revenue receipts are expected to be higher than the budget estimate, showing strong growth momentum and formalisation in the economy. Fiscal deficit is now seen at 5.8 per cent, which is an improvement on the budget estimate despite moderation in nominal growth estimates.

Reiterating the push towards fiscal consolidation, Sitharaman said the government remained committed to bring down fiscal deficit below 4.5 per cent by 2025-26.

“The fiscal deficit in 2024-25 is estimated to be 5.1 per cent of GDP, adhering to that path.”

“A lower fiscal deficit hinging on moderation in revenue spend and realistic GDP growth and tax collection assumptions were the highlights of this interim budget,” averred Dipti Deshpande, Principal Economist at the country’s leading analytics firm CRISIL.

“The budget relies on a mix of capex and rural spending to bolster growth. Growth in capex is slower, but its share in GDP is higher on-year, suggesting the continued dominant role of government investment,” added Deshpande.

Commentators were also of the view that despite 2024 being an election year and the strong focus on the rural economy, the Budget avoided being inflationary.

If the Modi government wins a third term – a record that is so far only held by the country’s first prime minister Jawaharlal Nehru – it is expected to further expand on the Interim Budget announcements in the Union Budget to be presented later this year.