Budget 2024 Date Highlights: All eyes on Union Budget presentation; Will FM Sitharaman table Budget 2024 on July 22?

The Reserve Bank of India, in its June meeting, decided to keep its policy rate unchanged at 6.50 per cent, for the eighth time in a row. The RBI Monetary Policy Committee (MPC) met for the first time after the Lok Sabha Elections 2024. The six-member MPC, headed by RBI Governor Shaktikanta Das, decided to keep the repo rate unchanged by a 4:2 majority. It also decided to continue with its stance of ‘withdrawal of accommodation’. Per economists, the RBI will start the rate cut cycle not before October.

Finance Minister Nirmala Sitharaman chaired the first pre-budget meeting with leading economists in Delhi, discussing the General Budget 2024-25. Key topics included boosting capital expenditure and reducing the fiscal deficit. Economists emphasized further reducing the fiscal deficit and focusing on policies to generate employment growth in the upcoming budget.

Economists anticipate India‘s retail inflation, measured by the Consumer Price Index (CPI), to continue easing in July and August 2024. In May, CPI inflation dropped to 4.75% from 4.83% in April, marking a 12-month low. This decline was largely attributed to the high base effect and moderation in food prices, as per data released by the National Statistical Office (NSO). Economists have also maintained their average inflation estimate for FY2025 around 4.4%.

Finance Minister Nirmala Sitharaman is set to present the Union Budget for FY25 (Financial Year 2024-2025). This marks her seventh consecutive Budget presentation, surpassing Morarji Desai’s record of six consecutive Budgets. Sitharaman’s last Budget presentation was the Interim Budget in February 2024, which served as the Vote On Account before the elections held in April and May.

In the run-up to the Budget the markets have been quite volatile. While new highs have been the order of the day since the recovery after the sharp correction on June 4 when election results were announced, there are some sectors that continue to be in focus. The Infra sticks have been buzzing on hopes that the outlay for these sectors may see a significant hike to push growth.

The date of the Budget is not yet officially announced but industry experts have many expectations with regards to steps to boost consumption. We have been seeing a definitive “green shoots” in terms of consumption recovery. Monsoon has set on schedule and there are estimates of above normal output. This coupled with better farm income, the consumption curve is expected to improve.

With decided push that’s on cards for public capex allocation, especially in rural areas should increase consumption and help rural economy and its recovery. Monsoon improvement is also set to address inflation.

The date of the Budget has not been announced officially but most industry observers and experts have hinted at larger capex allocation. Apart from the record advance tax collection, the record dividend payout by the Reserve Bank of India. The central Bank paid a record Rs 2.1 trillion dividend for FY24. This was higher than the Rs1 trillion estimates. So what helped the RBI in paying out such a record high dividend?

RBI’s net interest income rose substantially to Rs 2.1 trillion by the end of March. This is significantly higher than the Rs 87,420 crore the Reserve Bank of India reported the previous year.

Finance Minister Nirmala Sitharaman is expected to hold pre-budget discussions with industry representatives and stakeholders on July 20 and the actual full budget for financial year 2024-2025 or FY25 is expected to be tabled in the second half of July. According to sources that Financial Express spoke to, July 22 is one the probable dates. This would then coincide with the Monsoon Session. The Budget is expected to be presented on the first day of the Parliament’s Monsoon Session.

One of the key questions that have been coming up is why are there two Budgets this year. The Interim Budget that was presented on February 1 was more of a Vote On Account to take care of the Government’s expenses in the interim during the election process. As the new Government that’s been voted to power has taken charge and Nirmala Sitharaman has been sworn in as the Finance Minister. She will now present the full budget for FY25.

The Union Budget for FY25 or Financial Year 2024-2025 will be presented by Finance Minister Nirmala Sitharaman. This will be the seventh consecutive Budget presented by her and with this she will surpass Morarji Desai’s record of presenting six Budgets in a row. The last Budget that Sitharaman presented was the Interim Budget in February 2024. This was the Vote On Account ahead of the elections in April and May.

According to the CRISIL MI&A Research estimates, the cost of home-cooked non-veg thali declined by 7 per cent in May, while that of veg thali became dearer by 9 per cent on-year during the same month. It added that the cost of non-veg thali declined due to a drop of approximately 16 per cent on-year in the prices of broiler. The price of veg thali increased due to a surge of 39 per cent in tomato prices, 41 per cent in potato prices and 43 per cent in onion prices on-year. Furthermore, prices of rice increased by 13 per cent on-year due to a dip in acreage, resulting in subdued arrivals. The prices of pulses surged by 21 per cent on-year due to lower reservoir levels which impacted the production. Meanwhile, the prices of cumin, chilli and vegetable oil fell by 37 per cent, 25 per cent and 8 per cent, respectively.

India’s services activity recorded a slowdown in May, with the final HSBC India Services Purchasing Managers’ Index, compiled by S&P Global, softening to 60.2 in May from April’s 60.8. Despite the slowdown, the index remained comfortably above the neutral mark of 50.0 in May, highlighting a sharp upturn in output. Growth, per S&P Global, was reportedly supported by rising sales, productivity gains and demand strength. The upturn was somewhat hampered by competitive and price pressures. The survey report said that the May data showed robust increases in new business intakes which continued to underpin output growth across India’s service economy.

Data released by S&P Global showed that India’s manufacturing growth slowed to a three-month low in May to 57.5, as heatwave conditions prompted some companies to reduce working hours. However, it maintained that the factory activity remained robust overall, bolstered by strong international sales. Growth was supported by new business gains, demand strength and successful marketing efforts, it added.

On May 31, official data showed that India’s economy grew 7.8 per cent in the March quarter, pushing up the annual growth rate to 8.2 per cent. Growth in the January-March period was lower than the 8.6 per cent expansion in the December quarter. The FY24 GDP growth came in sharply higher than 7 per cent in FY23, driven by a resurgent manufacturing and steady growth in the construction (both sectors grew at 9.9 per cent), and surge in mining activities (7.1 per cent), even as the primary sectors faltered and the key services slowed.

Economists said that India’s gross domestic product (GDP) growth at 7.8 per cent in the March quarter of the previous financial year, which pushed up the annual growth rate for the whole of FY24 to 8.2 per cent, shows economic resilience.

The Reserve Bank of India, in its June meeting, decided to keep its policy rate unchanged at 6.50 per cent, for the eighth time in a row. The RBI Monetary Policy Committee (MPC) met for the first time after the Lok Sabha Elections 2024. The six-member MPC, headed by RBI Governor Shaktikanta Das, decided to keep the repo rate unchanged by a 4:2 majority. It also decided to continue with its stance of ‘withdrawal of accommodation’. Per economists, the RBI will start the rate cut cycle not before October.

States’ capital expenditure likely rose by over a quarter in 2023-24 as compared with a 18% rise in 2022-23. This was supported by the Centre’s interest-free loans to them and the states’ own robust revenue growth. Financial Express reviewed the finances of 24 states, which showed that their capex in FY24 rose to Rs 7.16 trillion compared with Rs 5.68 trillion in the previous year, up 26%. These states are: Madhya Pradesh, Andhra Pradesh, Uttar Pradesh, Maharashtra, Tamil Nadu, West Bengal, Bihar, Gujarat, Haryana, Karnataka, Kerala, Odisha, Punjab, Rajasthan, Telangana, Assam, Chattisgarh, Jharkhand, Uttarakhand, Himachal Pradesh, Tripura, Sikkim, Nagaland and Meghalay.

These states’ capex includes Rs 1.09 trillion in 50-year loans given by the Centre in FY24 compared with Rs 81,000 crore in FY23, and around Rs 15,000 crore in the year before.

In its June Global Economic Prospects report, the World Bank said that India will remain the fastest-growing of the world’s largest economies although its pace of expansion is expected to moderate with a steady average annual growth of 6.7% between FY25 and FY27. It raised India’s growth projection by 0.2 percentage points each to 6.6% for FY25 and 6.7% in FY26 compared with its projection in January this year. This is, however, way below the 7.2% projected by the Reserve Bank of India.

India’s factory output growth, as measured by the Index of Industrial Production (IIP), fell to a three-month low of 5% in April in comparison to 5.4% in March, due to a drop in manufacturing activity, data released by the National Statistical Office (NSO) showed. Manufacturing output’s growth during April eased to 3.9% from 5.8% in March, whereas mining growth rose to 6.7% from 1.3%. Electricity output’s growth also increased to 10.2% in April from 8.6% in March.

India may import about 1.1 million tonne (MT) of desi chana (bengal gram) from Australia to improve domestic supplies that have been hit by lower production. This is in addition to the import of 1.6 MT of yellow peas, which is used as a substitute for chana, after the abolition of import duty on it was announced in December last year.

Chana production which accounts for 50% of the total pulses production in the country, saw a sharp decline and so, the government has initiated several measures such as the abolition of import duties on yellow pea and bengal gram, essentially aimed at encouraging farmers in other pulses-growing countries to enhance output. The harvest from Australia is expected to arrive in the country around September.

On June 14, the government said that there will be no reduction in import duty on wheat. An official statement stated that there are “sufficient stocks” of the grain to meet the domestic requirement and undertake a market intervention.

While stating that the food and consumer affairs ministry is keeping a close watch on market prices of wheat, it said, “in addition, suitable interventions, as warranted, shall be undertaken to ensure that there is no hoarding by unscrupulous elements and the price remains stable”.

While according to the statement, “at present there is no proposal to alter the duty structure on imports of wheat”, trade sources have said that import of around 4-5 million tonne (MT) by reducing imports duties would help improve domestic supplies while allowing the government agencies to hold on to adequate stock as a buffer.

The current wheat stock with the Food Corporation of India (FCI) is 30.23 million tonne (MT) which is above the buffer of 27.58 MT for July 1.

Confederation of Indian Industry (CII) President Sanjiv Puri said that India’s economy is expected to grow at a “robust” 8% in FY25. He cited the second generation reforms that the Narendra Modi-led government will undertake, good monsoon prospects, and the improved external situation, for this growth projection. “A lot of policy interventions in the past have put the economy on a much stronger wicket,” Sanjiv Puri said. CII’s growth projection for this fiscal is way higher than the Reserve Bank’s forecast of 7.2%. In FY24, India’s economy had expanded by 8.2%.

According to economists, India’s retail inflation, based on the Consumer Price Index (CPI), is expected to ease further in July and August 2024 after it fell to 4.75 per cent in May from 4.83 per cent in April. Economists also maintained FY2025 average inflation estimate at around 4.4 per cent. CPI inflation fell to a 12-month low of 4.75 per cent in May, mainly due to the high base effect and easing food prices, data released by the National Statistical Office (NSO) showed.

The imports of edible oils – palm, soybean and sunflower — declined by 5% to 8.67 million tonne (MT) in the first seven months of the 2023-24 oil year (November-October) compared to the same period last oil year. BV Mehta, Executive Director, Solvent Extractors’ Association of India (SEA) said that the lower imports in the current oil year so far are due to bumper domestic crops of mustard and soybean and rise in the global prices. The total import of edible oil in the current oil year is projected to decline to around 16 MT, from a record 16.47 MT in 2022-23 oil year.

As of June 1, India’s edible oil stocks including those at ports and pipelines stood at 2.41 MT from 2.94 MT reported a year ago.

India’s merchandise exports rose by 9.1% on year in May to $ 38.13 billion, but a sharp 28% rise in imports of petroleum crude and products pushed imports growth to 7.7%, precipitating a trade deficit of $23.78 billion. This is the highest since October last year, official data showed. The rise in outward shipments of goods in May was the highest since February (11.9%), and was much above the subdued trend seen most of the recent months, but it was also due to a low base (-10.4%).

Price of pulses, which had been at elevated levels over the last one year, are expected to soften from next month due to imports and prospects of higher kharif crops, Nidhi Khare, Secretary, Ministry of Consumer Affairs said. “From July onwards, prices of tur, urad and chana which are at the elevated levels are likely to soften,” Khare said. She said that prices of tur, chana and urad dals have been stable in the last six months but at a high level while the prices of moong and masor dal varieties are comfortable. “We are expecting a good monsoon, more than average rainfall. We anticipate the area under pulses to improve significantly. Farmers will put more area under crops considering high market prices. Market sentiments will also improve,” she said.

The government has reduced windfall tax on domestically-produced crude oil to Rs 3,250 per tonne from Rs 5,200, with effect from June 15. The tax is levied in the form of Special Additional Excise Duty (SAED). SAED on export of diesel, petrol and jet fuel or ATF, has been retained at ‘nil’. India first imposed windfall profit taxes on July 1, 2022, joining a host of nations that tax supernormal profits of energy companies.

India’s wholesale price index (WPI)-based inflation accelerated for the third consecutive month to 2.61 percent in May, primarily due to increase in prices of food articles, manufacturing of food products, crude petroleum and natural gas, mineral oils, and other manufacturing, said the provisional data released by the Ministry of Commerce & Industry. In April, WPI inflation was at 1.26 per cent.

Fitch Ratings has raised India’s GDP growth projection for the current financial year to 7.2% from an earlier estimate of 7%, mainly due to the assumption of recovery in consumer spending. In its June ‘Global Economic Outlook’ report, the global ratings agency said that investments will continue to rise but “more slowly” than in recent quarters in FY25, while consumer spending will “recover with elevated consumer confidence”.

This is in line with the RBI’s forecast of 7.2% for the current fiscal year, but much higher than the International Monetary Fund’s (IMF) projection of 6.8%.

While the blog, till now, stated facts about and speculations on the probable date when the finance minister Nirmala Sitharaman is expected to table the Union Budget, let’s have a look at the state of Indian economy and various economic metrics that will affect the announcements in the Budget document. These include the inflation figures, GDP growth, fiscal deficit, among others.

The date of the Budget presentation has not been confirmed yet but some of the key aspects to watch out for include

1. Schemes: The first Budget by the Modi 3.0 Cabinet is expected to bet high on the welfare agenda. Most industry experts believe that several income support schemes might be in the pipeline and facilities in line with PM Kisan Yojana may be planned to boost incomes of deprived families.

2. Capex: The gradual lowing of public capita expenditure has been a point of concern after the Interim Budget. The private corporates have been doing most of the heavy lifting. However, going forward in this new Budget for FY25, the street expects to see some significant boost to Capex.

3. Increasing Healthcare & Education Spend: The other segment that’s expected to receive a boost is the allocation for Healthcare and Education. Both these sectors have been highlighted as the key growth areas.