Were you among the ones who would be glued to TV to track the Budgetary announcements? If yes, then you can relate to the emotional excitement of tracking the Budget sessions has moved tremendously from an important affair to a less significant one. The moments of hope when tax reforms were going to be announced or when governments tried to floor you with their diverse network plan in the railway budget. Huff, how good were those days?
Budget Day
Before 2017, Budget Day used to be exciting as there were frequent tweaks in the tax structure every year, especially tweaking of custom & excise duty for different products. People in various industries and sectors closely monitored these changes, and the equity markets reacted aggressively to them as well. Aside from the union budget, changes in state-wise VAT were also tracked. However, such excitement no longer exists following the implementation of GST.
Finance Minister Nirmala Sitharaman will be presenting the interim budget on February 1, 2024, which will be valid till the general elections. As the budget for the next year is coinciding with the General Elections, the Finance Ministry will be presenting an interim budget for 24-25. The interim budget will be the finale of the five-year full budget.
Key Aspects to Focus in Union Budget’24
With respect to government capex, currently, the plans are focused on long-term spending with huge capex and hence they will be the key focus in the interim budget :
- Macro Parameters like government borrowing, Fiscal Deficit, percentage of fiscal deficit to GDP etc.
- Agriculture - subsidies for farmers, and agriculture-related benefits & announcements
- Manufacturing – incentives for different manufacturing industries like the Production Linked Incentive(PLI) scheme
- Sectors like import-oriented industries are still exposed to custom-duty variations.
- Spend on Health & Education, Allocation towards various Central Government sponsored schemes like rural employment through MGNREGA etc.
- People involved with the aforesaid sectors are still excited to attend the budget day and pockets of equity markets will react to the allocations in their respective sectors.
Our Expectations
- Considering the upcoming general election, Govt. may announce some more welfare schemes for farmers and lower-income groups.
- Corporate tax – No significant change in corporate tax structure and Govt should provide stability in the policies.
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Direct Tax – In the 2023 budget, the government introduced many changes and tax concessions in the new tax regime introduced in the 2021 budget. The government may announce additional tax concessions to make the new tax regime even more attractive.
- Borrowing Target – FY 2022-23 has been a great year in terms of direct tax collection and GST collection. Quantum of borrowings would now be a function of GDP growth presumption, expected inflation, targeted tax collections, new disinvestments and announcement of subsidies. It will be interesting to see the fiscal deficit target as a percentage of our GDP.
- Infrastructure spends – There is an uptrend of government capex in infrastructure and defence manufacturing. This momentum should continue.
