Budget Highlights: Ahead of Union Budget, PM Modi chairs high-level meet with economists

India‘s Union Budget is the annual financial statement presented by the Union Finance Minister in Parliament. It outlines the government’s revenue and expenditure for the upcoming fiscal year, which runs from April 1 to March 31. The Union Budget includes estimates of government revenue from taxes, duties, and other sources, as well as planned expenditures on various sectors such as infrastructure, healthcare, education, defence, subsidies, and welfare schemes.

The Union Budget also includes proposals for changes in taxation policies, fiscal policies, and other economic measures aimed at achieving the government’s economic and developmental goals. It is a crucial policy document that sets the financial direction for the country for the next fiscal year and is subject to approval by Parliament.

Madhavan Menon, Executive Chairman of Thomas Cook (India) Limited, proposed exempting travel agents from Section 53 of GST, noting that airlines already pay taxes on their sales, ensuring no revenue loss for the government.

He also advocated reducing Tax Collected at Source (TCS) to 1 per cent. Alternatively, Menon suggested standardizing TCS at 5 per cent for foreign travel packages, aiming to streamline current rates which vary between 5 per cent and 20 per cent.

MakeMyTrip co-founder and Group CEO Rajesh Magow called for a uniform 12 per cent GST rate on hotels in the upcoming FY25 Union Budget, highlighting the current disparities based on room tariffs.

Under the existing system, a room priced at Rs 10,000 incurs an 18 per cent GST rate during peak season, whereas an off-season rate of Rs 7,000 falls under the 12 per cent bracket. Magow emphasized that streamlining GST rates would simplify compliance processes.

He also urged the government to address inconsistencies between e-commerce platforms and suppliers in the domestic market. Currently, customers face a 5 per cent GST charge when booking a non-AC bus through an e-commerce platform, while direct bookings from bus operators incur no such charge, regardless of whether booked online or offline.

The travel and tourism industry called on the government to establish a consistent 12 percent GST rate for hotels in the upcoming 2024-2025 budget, aiming to stimulate both domestic and international tourism. Under the current system, varying GST rates are applied based on hotel room tariffs, leading to price discrepancies.

Anshul Khurana expressed optimism about the upcoming budget; according to him, it is crucial to recognize the government’s commitment to fostering innovation and sustainable growth in the nutraceutical, health & wellness, and Ayush industries.

“Continued emphasis on R&D funding, robust skill development programs, and enhanced regulatory frameworks could solidify India’s position as a global leader in these sectors. The industry also seeks increased budget allocation for healthcare, potentially raising it to 2.5% of GDP from the current 1.8%, as recommended by the NITI Aayog. This would support infrastructure development, particularly in underserved rural areas, and address the critical shortage of healthcare professionals,” he said.

Vikrant Singh believes that simplified tax regimes and incentives for startups will not only encourage entrepreneurship but also boost employment and economic activity.

“We also expect support for infrastructure development, which is crucial for expanding our presence across the country. Investments in supply chain enhancements and cold storage facilities can significantly improve the efficiency and quality of our offerings. Additionally, initiatives that promote the use of technology in the food industry, such as subsidies for adopting advanced kitchen equipment and digital platforms, would be greatly beneficial. We are optimistic that the upcoming budget will address these areas, creating a more favourable environment for the growth of traditional and modern culinary ventures alike,” he said.

Singh suggests that to help boost the economy and tackle rising inflation, the government needs to focus on strategies that encourage spending and investment. As per Singh, simplifying GST rules, investing in job training, and changing tax brackets for consumers are essential steps.

“Keeping the 15% corporate tax rate for new manufacturing ventures would attract both local and international businesses to set up shop in India. Additionally, expanding the Production-Linked Incentive (PLI) scheme in the electronics sector can help Indian manufacturers grow,” he said.

“The Union Budget of 2024 plays a crucial role in keeping India as the world’s third-largest economy. With India contributing $3.7 trillion to the global economy and having the largest population of young people, there is a lot of untapped potential. To unlock this, the government must encourage spending,” Singh further explained.

Maheshwari said that the GST exemption related to student housing is a welcoming step. He suggests removing the ambiguities as it continues to be a grey area, given the student needs to continuously reside in that accommodation for a period of 90 days. While the aim is to benefit the students, this exemption lacks clarity on execution in terms of timeline.

“Students that hail from Below Poverty Line (BPL) and Low Income Group (LIG) families should receive 100% GST exemption from all educational expenses, be it test-prep courses or job-oriented skill courses; as it takes away a significant portion of their net disposable income. The 18% tax slab is extremely high for a need as basic as education. The government should derive a mechanism to enable more students to receive quality education while making it affordable simultaneously,” he said.

During the interim Budget 2024 presentation on February 1, Union Finance Minister Nirmala Sitharaman outlined the government’s vision of achieving ‘Viksit Bharat’ by 2047. She announced that a detailed roadmap for this vision would be unveiled during the full budget scheduled on July 23. Sitharaman also emphasized in February that India has surmounted challenges predating 2014, crediting effective economic management and governance for steering the country towards sustained high growth. She attributed this success to the government’s sound policies, genuine intentions, and timely decisions.

“For the retail and consumer sectors in Budget 2024, we anticipate a focus on measures that stimulate domestic demand and boost disposable income. Measures like tax breaks for middle-income earners, increased rural infrastructure spending, and a continued push for digitalization in e-commerce could significantly benefit both retailers and consumers.

These initiatives can translate into a more optimistic consumer outlook – potentially leading to increased spending on discretionary items like furniture. Additionally, a focus on rural development can open new markets for furniture retailers like ourselves. We’re also hopeful for policies that incentivize investments in the manufacturing sector, as this can strengthen domestic furniture production and create a more competitive market.

Ultimately, a consumer-centric budget that stimulates disposable income will benefit both retailers and consumers. It will encourage responsible spending, drive economic growth, and create a win-win situation for all stakeholders.”

As per industry experts, one anticipated change involves a potential increase in the deduction limit under Section 80TTA. Section 80TTA currently offers a deduction of up to Rs 10,000 on interest earned from savings bank deposits, applicable to individuals under the old tax regime. Those opting for the new tax regime are ineligible for this deduction.

As we approach the upcoming budget, we hope for increased government support for the electronics manufacturing sector. Enhanced incentives for research and development, along with subsidies for sustainable manufacturing practices, would significantly bolster our efforts to innovate and remain competitive globally. Additionally, streamlined regulatory processes and tax benefits for export-oriented units would facilitate smoother operations and expansion into international markets. We believe these measures will drive growth, foster technological advancements, and create more job opportunities within the industry. Furthermore, specific allocations for the development of skilled labour and upskilling programs would help bridge the talent gap, ensuring a steady pipeline of proficient workers to support our advanced manufacturing processes. We also hope for increased funding for infrastructure development in industrial hubs, which would improve logistics and reduce operational costs, enhancing overall productivity:

Shishir Gupta, CEO of Riot Labz.

Kris Gopalakrishnan, co-founder of Infosys, proposes establishing a privately managed R&D fund funded by Corporate Social Responsibility (CSR) contributions. This fund aims to accelerate research in deep technology and translational research within India. Gopalakrishnan underscores the importance of augmenting private sector investment and implementing tax incentives to stimulate research expenditures. Read more.

Industry experts expect adjustment of Goods and Services Tax (GST) rates on solar equipment. Lowering the GST on solar panels and components from 13.8% to 5% is anticipated to enhance the attractiveness and affordability of solar investments. This revision has the potential to substantially reduce the expenses associated with solar projects. Read here.

If the basic tax exemption limit is increased to Rs 5 lakh from the current Rs 3 lakh in the upcoming budget, it is anticipated that individuals earning up to Rs 8.5 lakh annually would be exempt from paying taxes. Nirmala Sitharaman is all set to present the Budget on July 23. Read more.

RBI Deputy Governor M Rajeshwar Rao has raised issues regarding the adequacy of disclosures made by certain NBFCs and called upon auditors to ensure these entities provide sufficient qualitative information to depositors and other stakeholders. He was addressing the Conference of Statutory Auditors and Chief Financial Officers of Commercial Banks and All India Financial Institutions (AIFIs).

Puneet Sharma, CEO and Fund Manager at Whitespace Alpha said, “We do not expect major regulatory disruptions or changes in corporate taxes, but there may be adjustments to the income tax regimes to make the new tax regime more appealing compared to the old one with its numerous deductions.”

Puneet Sharma, CEO and Fund Manager at Whitespace Alpha said that the Lok Sabha results have potentially weakened the BJP-led NDA’s ability to pass significant economic decisions in the budget without opposition. Consequently, the upcoming union budget will be a crucial test of the government’s resolve in implementing its agenda and will influence the dynamics between the BJP and other NDA parties.

Anticipation is building across multiple factors, including industries, farming communities, taxpayers, and the middle class, as they await the upcoming announcement, said Anil Rego, Founder and Fund Manager at Right Horizons. An ambitious 100-day plan is likely which includes the awarding of significant thermal power and transmission line contracts for energy security and transition. This plan also features a new hydro policy to promote carbon-free energy, subsidies for battery storage, and India’s first offshore wind concession.

Anil Rego, Founder and Fund Manager at Right Horizons, said that the upcoming budget aims to balance growth while funding alliance commitments, and it is expected that the government will likely maintain its tax and non-debt capital receipt projections (including disinvestment) as outlined in the Interim Budget of February 2024.

Mr. Suresh Garg, CMD & Founder of Zeon Lifesciences Ltd, said that work on vaccine development must be a key focus point. Currently, there are viruses such as Herpes Simplex Virus, HIV-1 and many more that require vaccines. Continued emphasis on R&D funding, robust skill development programs, and enhanced regulatory frameworks could solidify India’s position as a global leader in these sectors.

He added that the industry also seeks increased budget allocation for healthcare, potentially raising it to 2.5% of GDP from the current 1.8%, as recommended by the NITI Aayog. This would support infrastructure development, particularly in underserved rural areas, and address the critical shortage of healthcare professionals​.

Aman Puri, Founder, Steadfast Nutrition, hopes for an increased investment in the health care sector.

“There is an immense shortage of doctors and hospital beds. The interim budget allocation to healthcare was less than 2% of the GDP while the world average is 6%. I hope to see an increase in the GDP share to minimum 5% for the sector in the Union Budget,” he said.

Sandeep Jain, Chief Financial Officer at NDR InvIT Managers, said that increased investments in infrastructure projects, particularly in renewable energy, transportation, and logistics, will not only stimulate economic growth but also generate employment opportunities and enhance overall connectivity.

While the government has taken steps to bolster India‘s infrastructure and logistics sectors, there is also a pressing need for GST rationalization, Jain said.

Emphasising the the government’s top priority must be the education sector, Anurag Gupta, Co-Founder of STEMROBO Technologies, an ed-tech startup focused on enhancing STEM and AI education, said that the government is expected to include funding allocations for the development of digital teaching resources.

“We anticipate expanded support for STEM programs, developing infrastructure, enhanced teacher training, and the integration of AI, robotics, and 3D printing into the curriculum,” Gupta said.

Sameer Aggarwal, founder and CEO of Revfin, an EV financing platform for sustainable mobility, said that the he expects the new government under Prime Minister Narendra Modi to back green initiatives, especially the Electric Vehicles sector.

“As the fintech market in India is projected to reach $1 trillion by 2030, we look forward to the government introducing clearer regulations and supportive policies in the budget to drive innovation, focusing on streamlined regulatory processes, increased funding opportunities, and enhancements in digital lending, SME financing, and cross-border trade facilitation,” he said.

Ravi Kabra, Co-Founder of Skippi, said that the forthcoming Budget holds immense potential to catalyze growth and innovation in India’s FMCG sector.

He said that there are several challenges that require thoughtful policy interventions to overcome. “The current GST structure imposes significant burdens, particularly on essential FMCG products, particularly through potential reductions in GST rates for essential products currently burdened by high 18% taxes. Infrastructure development, especially for cold chain facilities and warehousing, is crucial to accommodate the growth in beverages and frozen goods,” he said.

Prime Minister Narendra Modi will meet eminent economists to get their views on the upcoming Budget 2024-25. Besides economists and sectoral experts, the meeting by the PM will also see the attendance of Niti Aayog Vice Chairman Suman Bery and other members. This will be the first major economic document of the Modi 3.0 government.

The Reserve Bank of India (RBI) reported that the Financial Inclusion Index rose to 64.2 in March 2024, compared to 60.1 in March 2023. This index provides a comprehensive measure of financial inclusion, ranging from 0 (complete exclusion) to 100 (full inclusion). “The value of the index for March 2024 stands at 64.2 vis-à-vis 60.1 in March 2023, with growth witnessed across all sub-indices,” the RBI said in a statement.

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