Interim Budget 2024 simplified: Economists dissect and highlight key hits and misses

The interim budget 2024 was presented by India`s finance minister Nirmala Sitharaman on February 1. Photo Courtesy: Mid-day file pic

Finance Minister of India, Nirmala Sitharaman, presented the anticipated Interim Budget 2024 on February 1. This was the last budget session of the current government ahead of the Lok Sabha elections that are expected to be held in April-May this year.

Different sectors of the Indian economy shared their take on the budget speaking on the positive and negative impact it can have in the upcoming financial year. For a common man to understand the impact of the budget on his life, he must know what it entails.

However, the use of terminologies and the mention of complex financial concepts can come in the way of a sound understanding of what unfolded in the Lok Sabha.

Mid-day Online got in touch with two economists, namely Dr Vishal Sarin, Economist, LPU and Dr Nilanjan Banik, Economist, Mahindra University who dive into the nitty-gritty of the budget.

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Relevance of an interim budget

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Sarin: An interim budget is a temporary financial plan presented by the government to meet essential expenses until a full annual budget is prepared. It covers a shorter period and focuses on routine expenditures, providing stability until a regular budget is passed.

Banik: The interim budget is essentially a vote on account, not a full budget. It serves as a provisional measure allowing the government to secure approval from parliament for essential expenditures within a limited time frame until a new government takes power and presents a full budget.

Interim Budget 2024 key takeaways

Sarin: Since this one was an interim budget, not much should be expected. However, there were some key announcements that everyone must know.

1. Pro-Poor and pro-rural initiatives: The budget emphasised pro-poor and pro-rural measures, with a provision of Rs 75,000 crores as a 50-year interest-free loan for milestone-linked reforms by state governments.

2. Fiscal consolidation: The government highlighted its performance in fiscal consolidation, estimating the fiscal deficit to be 5.8 per cent of GDP and expecting it to fall to around 5.1 per cent in FY25.

3. Infrastructure development: There was a continuous focus on infrastructure development, recognising its importance for economic growth and development.

4. Innovation and manufacturing: The budget introduced pro-innovation measures, including the establishment of a Rs 1 lakh crore corpus to support innovation. A concessional corporate tax rate of 15 per cent was proposed for new manufacturing companies.

5. Education sector initiatives: The budget outlined key initiatives for the education sector, such as the vision for India in 2047, the expansion of medical colleges, and the empowerment of tech-savvy youth through a significant corpus.

6. Economic policies for Amrit Kaal: The government is committed to adopting economic policies fostering growth, development, improved productivity, opportunities, and resource generation for investments.

7. Achievements and empowerment: The budget highlighted achievements in initiatives like the Fund of Funds, Startup India, and Startup Credit Guarantee Schemes, along with the positive impact of PM SHRI schools and the Skill India Mission on youth empowerment and education.

These areas reflect the government's multifaceted approach to addressing economic, social, and developmental challenges, with a focus on inclusive growth and sustainable development.

Banik: The significant takeaway from the interim budget is the government's focus on enhancing employment opportunities for rural women. This addresses the low labour force participation rate among women in India, contributing to the country's lower rank in the human development index. Incentives are provided for women engaged in the PM POSHAN scheme and those taking up jobs as Anganwadi workers. Another noteworthy aspect is the government's commitment to managing the fiscal deficit.

Further promoting renewable energy, allocating funds for physical infrastructure development, and job creation for unskilled and semi-skilled labourers through initiatives like road construction are also key areas of focus.

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Changes in taxation

Sarin: There are no changes in the tax slabs. The Finance Minister thinks a stable tax regime is preferred. The salaried class should wait for a full budget for any expectations.

Banik: Taxation remains unchanged, and the excitement around tax cuts may not be justified, considering that only a small percentage of the population pays income tax. It's essential to note that only 7.2 per cent of the population files income tax, and an even smaller percentage, around 1 to 1.9 per cent, pays taxes. Therefore, changes in tax rates have a limited impact on most of the population.

Incentives for the MSME sector

Sarin: The industry experts were hoping for incentivised lending rates, credit guarantee schemes, and increased funding channels to enhance financial resilience for the MSME sector. But no tangible contours were given as far as funding or policy measures were concerned. Nevertheless, the finance minister ensured timely and sufficient funding, relevant technologies, and proper training for micro, small, and medium enterprises (MSMEs). A key component of this involves aligning the regulatory environment to facilitate the growth of MSMEs, enabling them to compete effectively on a global scale.

Banik: While the budget lacks substantial support for MSMEs, more efforts could have been made to provide cheaper loan access and lower GST rates for MSME products. However, the allocation towards capital expenditure is seen as positive for creating employment opportunities, particularly for the youth in unskilled and semi-skilled roles.

Factors not addressed sufficiently in the budget

Sarin: For the youth, an Innovation Fund of Rs 1 lakh crore was established under the Skill India Mission which will promote entrepreneurship among youth. However, more is required to reduce unemployment in India. Further, issues related to health insurance, and pension issues of people working in the gig economy were not addressed in this budget.

Banik: The budget could have allocated more funds to the Mahatma Gandhi National Rural Employment Guarantee scheme to address the need for additional employment opportunities, particularly for unskilled labourers in rural areas.