As the customary Halwa Ceremony concludes, Finance Minister Nirmala Sitharaman is set to present the 2024 Union Budget. This budget is significant as it will be the first introduced by the Modi 3.0 cabinet, marking Sitharaman’s seventh budget presentation. Analysts from Nomura, CareEdge, and other experts predict five major themes for this year’s budget.
Focus on Welfare Schemes
Experts from CareEdge anticipate a significant increase in allocations to welfare schemes. Over the past few years, the share of revenue expenditure in welfare schemes has declined from a pre-pandemic average of 88%. For the Financial Year 2025, CareEdge predicts a 6.8% increase in revenue expenditure, leading to a Rs 750 billion higher allocation compared to the interim budget’s estimate. Key areas expected to receive higher allocations include agriculture, job creation, and rural housing. Specific schemes likely to benefit include MNREGA, PM Awas Yojana, PM Gram Sadak Yojana, and PM Kisan Samman Nidhi.
Continued Emphasis on Capital Expenditure
Nomura forecasts that public capital expenditure (Capex) will remain a cornerstone of the government’s economic strategy. The brokerage group predicts a rise in Capex outlay to 3.5% of GDP, up from 3.4% in the interim budget. The government may also enhance unconditional transfers under the 50-year interest-free loan scheme for infrastructure projects, reinforcing its commitment to infrastructure development.
Climate Change and Sustainability Initiatives
CareEdge predicts that the budget will reflect the government’s focus on climate change and sustainability. The government may promote Compressed Biogas (CBG) by offering better rates and making favorable adjustments to the ethanol policy, particularly for using sugarcane juice and B-heavy molasses. To support the goal of 20% ethanol blending in gasoline, these adjustments are crucial. Additionally, the budget might extend schemes like FAME-II and EMPS 2024 to boost the adoption of electric vehicles. In real estate and infrastructure, the budget is expected to promote green bond issuances and provide low-cost loans for green-certified buildings. Tax benefits and incentives for eco-friendly construction materials might also be introduced.
Anticipated Changes in Income Tax
Nomura suggests that to stimulate consumer demand, the government may increase the standard deduction limit for taxpayers under the new tax regime. An increase in the exemption threshold for income derived from bank interest is also expected. Additionally, there could be a reduction in personal income tax rates for individuals earning between Rs 5 lakh and Rs 15 lakh.
Boost to ‘Make in India’ and Manufacturing Sector
Nomura predicts that the government will reaffirm its commitment to domestic manufacturing in the 2024 Union Budget. Potential measures may include reinstating the 15% concessional corporate tax rate for new manufacturing entities. The budget might also revise the 2019 policy on integrating the global value chain for electronics. The Production-Linked Incentive (PLI) scheme is expected to enhance the manufacturing of electronic components, further boosting the sector.
With numerous predictions from analysts, the upcoming 2024 Union Budget holds significant anticipation. As Sitharaman prepares to reveal the highly-anticipated budget, it will be interesting to see how these themes are addressed and what new measures will be introduced to shape the future of India’s economy.
(With inputs from agencies)
