As the Finance Ministry prepares to present the Union Budget 2024, it is well-positioned to offer tax relief to salaried individuals and continue improving public infrastructure and rural welfare. This is possible because the Reserve Bank of India has given the government a large dividend of Rs 2.11 lakh crore, providing plenty of funds for new initiatives. With this big financial boost, Finance Minister Nirmala Sitharaman can now increase the money for the government’s capital projects. This means more investments in building roads, bridges, and public buildings, which are important for growing the economy, creating jobs, and improving services across the country. There is also a chance to add more funds to major programs, especially those focused on rural development and welfare. Programmes like the Pradhan Mantri Awas Yojana (housing for all) and PM Kisan (financial support for farmers) could get bigger budgets, helping more people and better addressing the needs of rural areas.
Despite potential increase in spending, the government plans to keep the fiscal deficit at 5.1 percent of GDP, as outlined in the interim budget. The fiscal deficit is the gap between government spending and revenue. Maintaining this target is important for economic stability and investor trust, demonstrating the government’s commitment to responsible financial management.
The fiscal deficit is an important measure of the government’s financial health, and managing it carefully is crucial for sustainable economic growth. Balancing increased spending with a stable deficit target shows the government’s intention to support development while maintaining financial discipline.
Finance Minister Nirmala Sitharaman is expected to present the Union Budget 2024 in the third week of July. This budget will reveal the government’s financial plans and priorities for the next year, showing how they will use the available funds to benefit different sectors and the general public. People have high hopes for this budget, as it could greatly influence economic growth and public welfare by addressing both immediate and long-term needs.
The government is contemplating various tax relief measures for this group. Among the options being discussed by top policymakers is the possibility of raising the basic exemption limit for income tax from Rs 3 lakh to Rs 5 lakh. This change would significantly reduce the tax burden on middle-income earners. Another option under consideration is the restructuring of tax brackets to provide more relief across different income levels. These tax benefits are likely to be offered primarily to those opting for the new personal income tax scheme, which simplifies tax filings and offers lower tax rates in exchange for forgoing certain exemptions and deductions available in the old scheme.
In addition to tax relief, the Finance Minister, Nirmala Sitharaman, had previously promised in the interim budget that the Narendra Modi government would launch a housing scheme targeted at the ‘deserving sections’ of the middle class. This scheme is expected to be announced in the upcoming budget and aims to make housing more affordable and accessible for middle-income families.
The pre-budget discussions have also seen representatives from India Inc, the collective body of Indian businesses that advocates for continued focus on capital expenditure. Corporate leaders have emphasized the need to maintain and even expand investments in infrastructure projects, which are crucial for economic growth and job creation. Additionally, there has been a push to expand the production-linked incentive (PLI) scheme, which aims to boost domestic manufacturing by providing financial incentives to companies that achieve incremental production targets.
Tanvee Gupta Jain, Chief India Economist at UBS Securities, highlighted the key areas where the government is expected to boost spending to gain public favor. She mentioned a strong emphasis on rural programs designed to support the farming sector and rural communities. This might involve improving rural infrastructure, increasing agricultural productivity, and offering direct benefits to farmers.
Moreover, there is anticipation of changes in income tax policies, particularly aimed at lower-income groups. This could mean adjusting tax brackets or raising exemptions to provide financial relief to these households, thereby increasing their disposable income and overall spending.
Affordable housing is another sector likely to receive a push. This means more funding for programs to make homes cheaper and easier to get for low- and middle-income families. These efforts are important to solve the housing shortage and improve living conditions. Jain also expects some kind of direct financial help to people or families in need. This is meant to provide quick financial relief and boost the economy by increasing spending.
In the interim budget, the government set a high target for infrastructure spending at Rs 11.11 lakh crore. With extra funds from the Reserve Bank of India, Finance Minister Nirmala Sitharaman can increase this budget. More spending on infrastructure is expected to boost economic growth, create jobs, and improve the economy overall.
Since the Covid-19 pandemic, the Modi government has focused heavily on large infrastructure projects, believing that these initiatives, which have a significant positive impact, are the best way to create jobs, boost economic activity, and promote overall growth. This strategy includes developing roads, bridges, railways, and other major projects that require substantial investment but provide significant returns in terms of employment and economic stimulation.
The upcoming Union Budget 2024 is likely to increase funding for the rural sector the most. This change is needed because, even though the economy is growing, many households, especially in rural areas, are not seeing the benefits. Household spending is still low, so the government needs to boost support and welfare programs.
Funds for major programs like PM Kisan and Pradhan Mantri Awas Yojana (PMAY) are likely to increase from the interim budget. PM Kisan’s budget for 2024-25 is set at Rs 60,000 crore, offering direct income support to farmers to boost their financial stability and purchasing power. PMAY, which aims to provide affordable housing, has a budget of Rs 80,671 crore. The Modi government’s cabinet has approved the construction of 3 crore houses under PMAY, with 2 crore in rural areas and 1 crore in urban areas. This initiative aims to meet the housing needs of the poor and middle class, improve living standards, and stimulate the construction sector.
There is also a political reason for the government to present a positive Union Budget 2024. Shortly after taking office, the Modi administration faced significant challenges, including a major train accident and ongoing issues with entrance examinations, leading to public dissatisfaction. These events make it crucial for the government to present a budget that aims to satisfy everyone, from the general public to various economic sectors.
The government hopes that the mix of tax relief for salaried individuals, increased spending on infrastructure, and improved welfare programs for the rural sector will boost economic activity and sentiment across the country. By addressing the needs of different segments of society, the Union Budget 2024 aims to create a positive economic environment, encouraging spending and investment, and ultimately driving economic growth.
