Union Budget 2024-25: What to Expect?

As we approach the Union Budget 2024-25, there is a palpable sense of anticipation and curiosity among various stakeholders in India, from industry leaders to common citizens. The Union Budget is a critical financial document that outlines the government’s revenue and expenditure for the upcoming fiscal year. It plays a significant role in shaping the economic landscape of the country. This blog aims to delve into the expectations surrounding the Union Budget 2024-25, exploring potential policy changes, fiscal measures, and sector-specific highlights.

Finance Minister Nirmala Sitharaman is expected to announce the Union Budget 2024-25 between July 22 and August 9, 2024. This announcement is crucial as it sets the tone for the nation’s economic direction for the next fiscal year.

1. Economic Growth and Fiscal Deficit

One of the primary areas of focus for the Union Budget 2024-25 will be economic growth and managing the fiscal deficit. Given the global economic uncertainties and the domestic challenges post-pandemic, the government is expected to introduce measures to boost economic growth. This could include increased public expenditure in infrastructure, healthcare, and education sectors.

The fiscal deficit target will be closely watched. In the Union Budget 2023-24, the government aimed to bring down the fiscal deficit to 6.4% of GDP. For 2024-25, there might be a more ambitious target, potentially around 5.5% to 6%, balancing the need for growth with fiscal prudence.

2. Tax Reforms

a. Direct Taxes

The middle class and salaried individuals eagerly await tax relief. There is speculation about an increase in the basic exemption limit from the current ₹2.5 lakh to ₹3 lakh or higher. Additionally, there may be adjustments in the tax slabs to provide more disposable income to taxpayers. In 2023, there were significant changes in the personal income tax regime, and further simplifications or reliefs could be expected this year.

The government may also consider rationalizing capital gains tax structures to make investments more attractive and simplify compliance.

b. Indirect Taxes

In the realm of indirect taxes, the Goods and Services Tax (GST) may see some rationalization. The government might work towards reducing the number of GST slabs or tweaking rates to simplify the tax structure and boost compliance. Sectors like real estate, which have been lobbying for GST rate cuts, may find some relief. The previous budget introduced certain GST rate changes, and this trend might continue to further streamline the tax system.

For more understand about Direct & Indirect tax, read our blog on:- Difference Between Direct and Indirect Tax: Advantages & Disadvantages

3. Infrastructure Development

Infrastructure development remains a cornerstone for economic growth. The Union Budget 2024-25 is expected to allocate significant funds towards building and upgrading infrastructure. Key areas of focus might include:

• Transportation: Continued investment in highways, railways, and urban transportation projects.
• Smart Cities: Expansion of the Smart Cities Mission with increased funding and new project launches.
• Renewable Energy: Boosting investments in solar, wind, and other renewable energy projects to meet the country’s green energy targets.

In comparison, the 2023 budget allocated substantial funds for national highways and expanding metro projects, and we can expect a similar or greater emphasis on infrastructure this year.

4. Healthcare and Education

The pandemic underscored the importance of a robust healthcare system. The upcoming budget is likely to see enhanced allocations for healthcare infrastructure, medical research, and public health initiatives. There may be announcements related to the expansion of the Pradhan Mantri Jan Arogya Yojana (PMJAY) and other healthcare schemes.

Education is another critical area. Increased funding for digital education, teacher training, and infrastructure development in schools and higher education institutions can be expected. The National Education Policy (NEP) 2020 initiatives might see accelerated implementation with budgetary support.

5. Agriculture and Rural Development

The agriculture sector, which forms the backbone of the Indian economy, is likely to receive considerable attention. Measures to improve farmers’ income, enhance agricultural productivity, and boost rural development will be prioritized. Key expectations include:

• Increased MSP: There might be announcements regarding the Minimum Support Price (MSP) for various crops to ensure better returns for farmers.
• Irrigation Projects: Enhanced funding for irrigation projects to improve water availability.
• Agri-Tech: Incentives for adopting technology in agriculture to increase efficiency and yield.

In 2023, significant initiatives were taken to increase rural connectivity and digital infrastructure, which could see further expansion this year.

6. MSMEs and Startups

Micro, Small, and Medium Enterprises (MSMEs) and startups are crucial for employment generation and innovation. The Union Budget 2024-25 is expected to introduce measures to support these sectors, such as:

• Credit Support: Easing access to credit through schemes like the Credit Guarantee Fund Scheme for MSMEs.
• Tax Incentives: Continued tax benefits for startups and simplified compliance procedures.
• Skill Development: Programs to enhance the skill sets of the workforce to meet the needs of MSMEs and startups.

The 2023 budget introduced several supportive measures for MSMEs, including emergency credit lines, and we can expect further enhancements to these programs.

7. Digital India and Innovation

The government’s push towards a Digital India is likely to gain further momentum. Expect significant allocations towards expanding internet connectivity, promoting digital literacy, and fostering innovation. Initiatives to support emerging technologies like artificial intelligence, blockchain, and the Internet of Things (IoT) may be announced.

8. Environment and Sustainability

With climate change becoming an urgent global concern, the Union Budget 2024-25 is expected to emphasize environmental sustainability. Key areas of focus might include:

• Green Energy: Incentives for renewable energy projects and electric vehicles.
• Pollution Control: Funding for initiatives aimed at reducing pollution levels in major cities.
• Sustainable Agriculture: Programs promoting organic farming and sustainable agricultural practices.

The 2023 budget focused on green energy and sustainability projects, which are expected to be expanded further.

9. Social Welfare Programs

The government is likely to continue its focus on social welfare programs aimed at uplifting marginalized sections of society. Increased allocations for schemes like the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), Pradhan Mantri Awas Yojana (PMAY), and other social security programs can be expected.

10. Defense and Security

Given the geopolitical tensions and the need for modernizing the armed forces, the defense sector is expected to receive a substantial budgetary allocation. Investments in indigenous defense production, procurement of modern equipment, and upgrading existing infrastructure will be key focus areas.

Conclusion

The Union Budget 2024-25 is poised to be a significant milestone in India’s economic journey. As the government navigates the challenges of fostering economic growth, maintaining fiscal discipline, and addressing social welfare, the budget is expected to introduce measures that will have far-reaching implications for various sectors.

While the exact details will be revealed only when the budget is presented, the broad expectations include tax reforms, enhanced infrastructure development, support for healthcare and education, focus on agriculture, MSMEs, and startups, promotion of digital initiatives, and a strong emphasis on sustainability and social welfare.

As we await the budget announcement, it is crucial for all stakeholders to stay informed and prepared to adapt to the new fiscal policies and opportunities that will shape the economic landscape of India in the coming year.

Potential Impacts on Key Sectors

1. Banking and Financial Services

The banking sector could see a range of measures aimed at strengthening financial stability and boosting credit flow to critical sectors. Potential announcements might include:

• Recapitalization of Public Sector Banks: Infusion of capital to strengthen balance sheets.
• Non-Performing Assets (NPAs) Management: Measures to address and reduce NPAs in the banking system.
• Promotion of Digital Banking: Initiatives to enhance digital banking infrastructure and financial inclusion.

2. Automobile Industry

The automobile sector, which has been facing challenges due to economic slowdown and supply chain disruptions, might receive a stimulus package. Expectations include:

• Reduction in GST Rates: Potential reduction in GST rates for vehicles to spur demand.
• Incentives for Electric Vehicles (EVs): Enhanced incentives and subsidies for the adoption of EVs.
• Scrappage Policy: Implementation of the vehicle scrappage policy to boost sales of new vehicles.

3. Real Estate and Construction

The real estate sector is hoping for measures that can revitalize demand and address liquidity issues. Key expectations include:

• Tax Incentives: Enhanced tax benefits for homebuyers and real estate developers.
• Affordable Housing: Increased allocation and incentives for affordable housing projects.
• Ease of Doing Business: Simplified regulatory procedures to attract investment in the real estate sector.

4. Technology and IT Services

The technology sector, which has been a significant contributor to India’s GDP, could see policies aimed at fostering innovation and growth. Possible measures include:

• R&D Incentives: Increased funding and tax incentives for research and development.
• Data Protection Framework: Announcements regarding the implementation of data protection regulations.
• Startup Support: Continued support for tech startups through funding, incubators, and accelerators.

Citizens’ Expectations

1. Relief from Inflation

One of the pressing concerns for citizens is rising inflation. The budget might introduce measures to control inflationary pressures, such as:

• Subsidies on Essential Commodities: Increased subsidies on food and fuel to reduce the burden on consumers.
• Supply Chain Improvements: Investments in improving supply chain logistics to reduce costs.

2. Job Creation

With unemployment being a critical issue, the government is expected to focus on job creation through:

• Skill Development Programs: Enhanced funding for skill development initiatives to make the workforce industry-ready.
• Support for Labor-Intensive Industries: Incentives for industries that generate significant employment, such as textiles and manufacturing.

3. Enhanced Social Security

The pandemic has highlighted the need for robust social security systems. The budget might enhance social security measures, including:

• Universal Basic Income (UBI): Discussions around pilot projects for UBI to provide a safety net for the economically vulnerable.
• Pension Reforms: Improvements in pension schemes to ensure financial security for the elderly.

International Trade and Investment

1. Boosting Exports

To strengthen the economy, the government may introduce measures to boost exports, such as:

• Export Incentives: Enhanced incentives for exporters to make Indian products more competitive globally.
• Trade Agreements: Efforts to negotiate favorable trade agreements with key markets.

2. Attracting Foreign Investment

The budget is likely to include policies aimed at attracting foreign direct investment (FDI) by:

• Easing FDI Norms: Relaxation of FDI norms in sectors like defense, insurance, and retail.
• Improving Ease of Doing Business: Initiatives to further improve India’s ranking in the Ease of Doing Business index.

Conclusion

The Union Budget 2024-25 is poised to be a transformative document that will set the tone for India’s economic trajectory in the coming years. By addressing the needs of various sectors, introducing tax reforms, and focusing on sustainable development, the government aims to create a balanced and inclusive growth environment.

Stakeholders across the spectrum should stay informed and prepared to adapt to the new policies and opportunities that the budget will present. As we await the budget announcement, the collective anticipation underscores the critical role that the Union Budget plays in shaping the nation’s economic future.