Budget Expectations 2024 Highlights: With the government expected to announce the date of the Union Budget presentation today, India expects the Finance Minister Nirmala Sitharaman to table the Budget on July 23. Moving closer to the date of the Budget presentation, there is a slew of expectations, demands and anticipation from people, industries, and economists alike.
Meanwhile, the first session of the 18th Lok Sabha that began on June 24, will end today. Earlier on June 26, Om Birla, a three-time BJP MP, was re-elected as the Lok Sabha Speaker for a second term. He won against the INDIA bloc’s candidate, Congress’ Kodikunnil Suresh, through a voice vote. The Monsoon Session of the Parliament, according to sources, is expected to begin on July 22 and the Budget presentation will coincide with this. The session is likely to continue until August 9.
Earlier on June 22, Nirmala Sitharaman presided over the 53rd GST Council meeting, which deliberated on various proposals to streamline GST applicability across goods and services, and several recommendations were made to refine tax rates and service exemptions under the GST regime.
According to Finance Ministry sources, the Budget will adhere to the fiscal deficit projection of 5.1 percent of Gross Domestic Product (GDP) for 2024-25, as outlined in the interim Budget, a Business Standard report stated.
The angel tax, initially introduced in 2012 to prevent the generation and use of unaccounted money through the subscription of shares in closely held companies at values exceeding the fair market value, was extended to include non-resident investors starting April 1, 2024. This expansion, announced during last year’s Union Budget, faced strong opposition from startups.
Ahead of the upcoming Union Budget presentation later this month, the Department for Promotion of Industry and Internal Trade (DPIIT) has supported India Inc’s request to eliminate the angel tax, an Indian Express report says. Originally implemented to curb the use of unaccounted money, this tax has been seen by startups as a barrier to crucial capital raising.
The Monsoon Session of Parliament is scheduled to run from July 22 to August 9. Finance Minister Nirmala Sitharaman is expected to present the budget on the opening day.
A survey conducted by real estate association CREDAI and investment management company Colliers found that the majority of the real estate developers expect tax rationalization, sops for affordable housing, and single window clearance from Union Budget 2024, slated to be tabled sometime later this month.
Ahead of the Union Budget presentation, Andhra Pradesh Chief Minister N Chandrababu Naidu on Friday met Union Finance Minister Nirmala Sitharaman, pressing for enhanced financial support to the debt-burdened state.
As the authorities started preparations for the assembly polls likely to be held by September as per the order of the Supreme Court, the Bharatiya Janta Party (BJP) leadership in Jammu and Kashmir has geared up to start many outreach programmes after the budget session to reach out to the people and strengthen the grassroots.
India’s merchandise exports grew 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, 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%).
The government has reduced windfall tax on domestically-produced crude oil to Rs 3,250 per tonne from Rs 5,200.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’.
The new rates are effective from June 15, an official notification said. India first imposed windfall profit taxes on July 1, 2022, joining a host of nations that tax supernormal profits of energy companies.
Union Budget FY25 should focus on fiscal rectitude while providing for social welfare, capital expenditure, and job creation through schemes and contain inflation, economists told Finance Minister Nirmala Sitharaman. In her first pre-Budget consultation, Sitharaman met over a dozen economists including National Co-Convener of Swadeshi Jagaran Manch Ashwani Mahajan, Institute for Studies in Industrial Development (ISID) Director Nagesh Kumar, Crisil chief economist Dharmakirti Joshi, Goldman Sachs India chief economist Santanu Senguptaand former chief statistician TCA Anant.
“Fiscal deficit is already in control. The focus of the government has been and should be on fiscal prudence and that is the way forward because inflation, if it occurs, affects the poor man the most,” Mahajan said.
Reserve Bank of India (RBI) Governor Shaktikanta Das said that the central bank’s timely action has moderated the growth of unsecured loans. In November 2023, RBI had hiked risk weights on unsecured credit and bank loans to non-banking financial companies (NBFCs).
Speaking at a conference held by the College of Supervisors (CoS), Das also urged banks to avoid the “mindless pursuit of bottom lines”, pointing out that some profit-driven business models may contain hidden vulnerabilities, emphasising that profitability should not come at the expense of managing these risks.
The Reserve Bank of India’s (RBI) monetary policy committee (MPC) must continue with its actively disinflationary policy stance as food inflation continues to be higher, governor Shaktikanta Das said in the monetary policy committee (MPC) meeting held earlier this month, minutes of the meeting showed.
“With persistently high food inflation, it would be in order to continue with the disinflationary policy stance that we have adopted (withdrawal of accommodation). Any hasty action in a different direction will cause more harm than good. It is important that inflation is durably aligned to the target of 4%,” Das said.
In its June 2024 meeting, the Reserve Bank of India (RBI) Monetary Policy Committee (MPC) decided to keep the benchmark repo rate unchanged at 6.5 per cent for the eight consecutive time by a 4:2 majority. It also decided to continue with its stance of ‘withdrawal of accommodation’. RBI raised its GDP growth forecast for FY25 to 7.2 per cent from 7 per cent earlier. The central bank retained the FY25 inflation forecast at 4.5 per cent.
This is the second meeting of the RBI MPC after the new financial year FY2025 started from April 1 and the third meeting of 2024 after the February Policy meeting held between February 6-8.
What were the other highlights or announcements made after the three-day MPC meeting? Read More.
To curb the surge in import of edible oils, which has adversely impacted domestic oilseed prices, the Commission for Agricultural Costs and Prices (CACP) in the agriculture ministry has recommended a “dynamic import duty structure” for these farm goods. The proposed tariff system will be based on minimum support price (MSP) for oilseeds as well as domestic and global prices.
“In addition, the duty differential between crude and refined oils should be kept at 10%-15%,” CACP in the price policy report for kharif crops marketing season (2024-25) has stated.
India’s import of edible oils – palm, soybean and sunflower – rose 17% on year to a record 16.47 million tonne (MT) in the 2022-23 oil year (October-Septemebr), helped by lower import tariffs.
With inflation only modestly above target, the risk of it rising to a very high level is low, said monetary policy committee’s (MPC) external member Jayanth Varma. “I expect that inflation will hit the target on a sustained basis in 2025-26, but even in 2024-25, it would be only modestly above target,” he said.
During a pre-Budget consultation chaired by Finance Minister Nirmala Sitharaman, the Bharatiya Mazdoor Sangh (BMS), a Rashtriya Swayamsevak Sangh (RSS)-affiliate central trade union, has demanded an extension of the MGNREGA scheme for 200 days for each family from 100 days now, and suggested inclusion of agriculture and allied sector work in the centrally-funded welfare scheme.
It also demanded the restoration of the Old Pension Scheme (OPS) and enhancing the minimum monthly pension under the Employees’ Pension Scheme (EPS), 1995 to Rs 5,000.
While there seems clarity on a broad wish list of policy interventions, what seems to worry corporate India is the readiness on the distance to be travelled and the depth and width of the measures to be taken, said Naushad Forbes, Co-Chairman, Forbes Marshall and former president of the Confederation of Indian Industry (CII).
He, like many leaders in the industry, seem to be anxiously awaiting what the budget would do on these. Naushad Forbes said that he expects to see focus on job creation through schemes to incentivise industrial investment into labour-intensive manufacturing. A big facilitator in this would also be the implementation of the four labour codes that look at wages, industrial relations, occupational safety, working conditions.
The National Council of Applied Economic Research (NCAER) said that India’s economy may grow by close to 7.5% in 2024-25. This, it added, will be underpinned by the buoyancy in economic activity witnessed in the first quarter, a keen policy focus on investment and the expectations of a normal monsoon.
Recently, the RBI raised its projections for India’s GDP growth to 7.2% from 7% in FY25. Growth projections have been upgraded by various other agencies as well with the median projection at 6.9%.
Establishing Special Employment Zones (SEZs) could be a visionary step to create five crore new jobs in India’s heartland over five years. The zones must offer a grant of Rs 2,000 p.m. per new employee enrolled in the first 12 months and Rs 1,500 p.m. for the next 12 months, in addition to bearing the employers’ cost for EPFO and ESI contributions for the first 24 months. This will mitigate training costs and lower productivity in the initial stages, said TV Mohandas Pai, Chairman, 3one4 Capital and Nisha Holla, Research Fellow, 3one4 Capital.
India is the fastest-growing large economy. Nominal GDP expanded from ₹113.5 trillion in FY14 to ₹295.4 trillion in FY24, achieving a robust 10% CAGR and a ten-year cumulative growth of 160%. This economic growth has been accompanied by a steady rise in formal employment, as evidenced by extensive data from the Employee Provident Fund (EPF) and Employee State Insurance (ESI) systems. These databases are reliable as they record new subscribers linked to Aadhar only after actual payments are received in the fund, they added.
Due to the severe heatwave that persisted in certain areas of northern and eastern India, economists expect food inflation to stay in the range of 7.5-8% in the next two-three months. According to a report by Bank of Baroda (BoB), “weather vagaries” may lead to consumer price index (CPI) inflation overshooting RBI’s projection in the first two quarters of FY25. The RBI has projected retail inflation to average 4.9% in Q1FY25, and 3.8% in Q2FY25. For the entire fiscal year, inflation is projected to average 4.5%, 90 basis points (bps) lower than FY24.
A sharp decline in capital expenditure amid the election season, and higher-than-budgeted growth in tax revenues enabled the Centre to rein in the fiscal deficit in April-May at 3% of the Budget Estimate for FY25. The Centre’s capex halved in May to Rs 44,390 crore while revenue expenditure fell a third on-year to Rs 2.33 trillion.
And thus, May saw a fiscal surplus of Rs 1.58 trillion. In absolute terms, fiscal deficit stood at Rs 50,615 crore in April-May 2024 compared with Rs 2.1 trillion in the year ago period.
The government’s food subsidy expenses are projected to witness an increase of Rs 18,000 crore or 9% to Rs 2.2 trillion in the current fiscal from the Budget Estimate of Rs 2.02 trillion, according to the interim budget document, due to the huge cost of carrying and storing surplus rice in the central pool.
Sources told FE that the current rice stocks of 50 million tonne (MT), three and half times the buffer, are likely to push up storage costs alone by Rs 16,000 crore in the current fiscal if the grains are not liquidated soon.
In FY23, expenses towards storing rice was around Rs 8000 crore.
"The bond market is waiting for stronger triggers, which could come only in the form of the full-year budget later this month", said Gopal Tripathi, head of treasury and capital markets at Jana Small Finance Bank.
Reuters
The record Rs 2.1 lakh crore dividend payout by the Reserve Bank of India will limit the need for big-ticket divestment, a domestic rating agency said on Thursday.
Care Ratings said the new government will retain the interim budget's Rs 50,000 crore target on receipts from divestments.
"With a bumper dividend from the RBI, the central government's fiscal position remains comfortable, which may limit the urgency to push ahead with big-ticket divestments," it said.
The Centre’s gross tax collections stood at Rs 4.6 trillion in the first two-months of the current financial year, up 15.9% as compared to the year-ago level, data released by the Controller General of Accounts (CGA) showed. This is against 10.6% annual growth pegged in the Budget for FY25.
Net tax revenue (after refunds, and after devolution to states) during April-May, stood at Rs 3.19 trillion, accounting for 12% of the Budget estimate of Rs 26.02 trillion. However, during the same period of FY24, net tax revenue had accounted for about 16% of the Budget target.
According to data from the Controller General of Accounts (CGA), the central government’s fiscal deficit stood at 3% of annual estimates by the end of May in the financial year 2024-25. During the corresponding period of the previous financial year, the fiscal deficit stood at 11.8% of the Budget Estimates (BE) for 2023-24.
For the current fiscal year, the government projects the fiscal deficit to be 5.1% of the GDP, amounting to Rs 16,85,494 crore.
According to data from the Controller General of Accounts (CGA), the fiscal deficit for April-May 2024 amounted to Rs 50,615 crore, or 3% of the BE for 2024-25. During the same period in the previous fiscal year, it was 11.8% of the BE.
Services activity across the country improved in June, with the HSBC India Services Business Activity Index, or services PMI, rising to 60.5 during the month from a five-month low of 60.2 in May. The uptick was mainly a result of stronger rise in new orders and an “unprecedented expansion” in international sales.
India’s current account balance recorded a surplus of $5.7 billion or 0.6% of the GDP in Q4FY24 as against deficits of $8.7 billion (1%) in the previous quarter, and $1.3 billion (0.2%) in the year-ago period, the RBI said. The last time the account saw a surplus was in Q1FY22 (0.9% of GDP). The merchandise trade deficit at $50.9 billion in Q424 was lower than $ 52.6 billion a year ago.