By Neeraj Bhatia-
An accomplished Attorney, CPA and CA-India with 35+ years expertise in international and domestic planning and compliance for startups and multinational entities. Specializing in International tax, audit and review, accounting, compliance and reporting, immigration services, and corporate compliance with offices in California, New York as well as in New Delhi, India.
India is going to general elections in the next few months, and as has been the convention in the past, the current government presented an Interim Budget, called the Vote-on-Account and left it for the New Government that is going to be elected after the election, to present a formal Budget.
Tax proposals
In keeping with this convention, the Indian Finance Minister Dr. Nirmal Sitharaman announced that she intended to retain the same tax rates for direct taxes and indirect taxes including import duties. However, to provide continuity in Taxation, she proposed to extend till March 31, 2025 certain tax benefits to start-ups and investments made by sovereign wealth or pension funds, as also tax exemption on certain income of some IFSC units which expire on 31.03.2024.
To improve the taxpayer services, she proposed to withdraw all outstanding direct tax demands up to twenty-five thousand rupees (₹ 25,000) pertaining to the period up to financial year 2009-10 and up to ten thousand rupees (₹ 10,000) for financial years 2010-11 to 2014-15. This is expected to benefit about 10 million taxpayers.
Budget Estimates 2024-25
The Finance Minister, in the interim budget, stressed on the need to continue on the path of fiscal consolidation and to reduce fiscal deficit below 4.5 percent by 2025-26. The fiscal deficit in 2024-25 is estimated to be 5.1 per cent of GDP, adhering to that path.
As against Revised estimates of 2023-24, in 2024-25 the total receipts other than borrowings and the total expenditure are estimated at ₹ 30.80 (up from ₹ 27.55) lakh crore (USD 371 Billion up from USD 332 Billion) and ₹ 47.66 (Up from ₹ 44.90) lakh crore respectively (USD 574 Billion up from 541 Billion). The tax receipts are estimated at ₹ 26.02 lakh crore (up from ₹ 23.24). The effective Capital expenditure as per the 2024-25 budget is expected to be ₹ 14.96 lakh crore (up from ₹ 12.71) (USD 180 Billion up from 153 Billion). This reflects a clear focus towards sustained infrastructure development.
The gross and net market borrowings through dated securities during 2024-25 are estimated at ₹ 14.13 and ₹ 11.75 lakh crore respectively (USD 170 Billion up from 142 Billion) and both will be less than that in 2023-24. According to the Finance Minister, this is so because private investments are happening at scale, and the lower borrowings by the Central Government will facilitate a larger availability of credit for the private sector.
A large part of the focus of the Finance Minister’s interim budget presentation was to give an account of the achievements of NDA government during the last 2 terms of 5 years each and laying down the road map of the future. From ‘Sabka Saath, Sabka Vikas’ as its ‘mantra’ in the first term of 2014-19, in the second term of 2019-24 the government strengthened its ‘mantra’ to ‘Sabka Saath, Sabka Vikas, and Sabka Vishwas’. The development philosophy covered all elements of inclusivity, namely, social inclusivity through coverage of all strata of the society, and geographical inclusivity through the development of all regions of the country.
She highlighted that the government’s humane and inclusive approach to development is a marked and deliberate departure from the earlier approach of ‘provisioning up-to-village level’. As a result, the development programs in the last ten years, have targeted each & every household and individual, through ‘housing for all’, ‘har ghar jal’, electricity for all, cooking gas for all, bank accounts and financial services for all, in record time. The worries about food have been eliminated through free ration for 800 million people. Besides, the minimum support prices for the produce of ‘Annadata’ are periodically increased appropriately.
As per the Interim-budget announcement, as part of the People-Centric Inclusive Development, the various policies of the government have included Substantive development of all forms of infrastructure-Physical, Digital and Social; Deepening and widening of tax base via GST; Strengthened financial sector brought savings, credit and Investment back on track; and Proactive Inflation management. The government also created GIFT-IFSC and the unified regulatory authority, IFSCA to provide a robust gateway for global capital and financial services for the economy.
One of the Focus areas enlisted by the Finance Minister is Garib Kalyan, Desh ka Kalyan, wherein 250 million people have been moved out of Multidimensional poverty. Credit assistance has been provided to about 7.8 million street vendors under PM-SVANidhi.
As part of empowering the youth, 14 million youth have been trained under the Skill India Mission. To foster the entrepreneurial aspirations of Youth, 430 million loans have been sanctioned under PM Mudra Yojana.
For the welfare of Farmers under the Annadata programs, direct financial assistance has been provided to 118 million farmers under PM-KISAN Yojana; Crop Insurance has been arranged for 40 million farmers under PM Fasal Bima Yojana; and Integration has been done for 1,361 mandis under eNAM, supporting trading volume of ₹ 3 lakh crore (USD 36 Billion).
Another focus Area of the government has been that of Nari Shakti, wherein 300 million Mudra Yojana loans have been disbursed to women entrepreneurs; there is an increased female enrolment in higher education by 28 percent in 10 years; there has been 43 percent of female enrolment in STEM courses; and 10 million women have been assisted by 8.3 million SHGs to become Lakhpati Didis
The Finance Minister also laid out the Government’s vision for ‘Viksit Bharat’ by 2047, that of a “Prosperous Bharat in harmony with nature, with modern infrastructure, and providing opportunities for all citizens and all regions to reach their potential”. This would entail a People-Centric Inclusive Development, which would cover Substantive development of all forms of infrastructure-Physical, Digital, and Social; Digital Public Infrastructure (DPI)-Promoted formalization and financial inclusion; Deepening and widening of tax base via GST; Strengthened financial sector brought savings, credit and Investment back on track; GIFT IFSC- A robust gateway for global capital and financial services for the economy; Proactive Inflation management; and ensuring that all parts of country becoming active participants in economic growth.
Strategy for Amrit Kaal
According to the Finance Minister, the strategy for what is called ‘Amrit Kaal’ would include the adoption of economic policies that foster and sustain growth, facilitate inclusive and sustainable development, improve productivity, create opportunities for all, help them enhance their capabilities, and contribute to the generation of resources to power investments and fulfill aspirations.
Sustainable Development – Sustainable development would include a Commitment to meet Green energy with ‘Net Zero’ emissions by 2070. To achieve this, the government aims to provide viability gap funding for wind energy, enable the setting up of coal gasification and liquefaction capacity, work towards phased mandatory blending of CNG, PNG, and compressed biogas, and provide financial assistance for procurement of biomass aggregation machinery. Besides, through rooftop solarization, ten million households would be enabled to obtain up to 300 units of free electricity every month. Other steps that are proposed include the adoption of e-buses for public transport networks and the strengthening of an e-vehicle ecosystem by supporting manufacturing and charging. The new scheme of biomanufacturing and bio-foundry is proposed to be launched to support environment-friendly alternatives.
Infrastructure and Investment – Government would ensure that the implementation of 3 major railway corridor programs under PM Gati Shakti remains a priority to improve logistics efficiency and reduce cost. Promotion of foreign investment via bilateral investment treaties would be negotiated. The government would also work towards the expansion of existing airports and comprehensive development of new airports under UDAN scheme and promotion of urban transformation via Metro rail and NaMo Bharat.
The Finance Minister reminded that Prime Minister Shastri gave the slogan of “Jai Jawan Jai Kisan”, which Prime Minister Vajpayee expanded to “Jai Jawan Jai Kisan Jai Vigyan”. Prime Minister Modi has furthered that to “Jai Jawan Jai Kisan Jai Vigyan and Jai Anusandhan”, as innovation is the foundation of development. For our tech-savvy youth, this will be a golden era. A corpus of rupees one lakh crore (USD 12 billion) will be established with the fifty-year interest-free loan which will provide long-term financing or refinancing with long tenors and low or nil interest rates. This will encourage the private sector to have programs that combine the powers of our youth and technology and to scale up research and innovation significantly.
She also announced that three major economic railway corridor programs will be implemented. These are: Energy, mineral and cement corridors, Port connectivity corridors, and High-traffic density corridors. The projects have been identified under PM Gati Shakti for enabling multi-modal connectivity to improve logistics efficiency and reduce cost and resultant decongestion of the high-traffic corridors and enhanced safety. Expansion of existing airports and development of new airports will continue expeditiously. Expansion of Metro Rail and NaMo Bharat, which can be the catalyst for the required urban transformation, will be supported in large cities focusing on transit-oriented development.
Inclusive Development – The Finance Minister proposed an aspirational District Program to assist States in faster development, including employment generation. To ensure the Health of its citizens, she announced that various schemes for maternal and child care will be brought under one comprehensive program for synergy in implementation and the Government will encourage vaccination for girls in age group of 9 to 14 years for the prevention of cervical cancer and programs such as Saksham Anganwadi and Poshan 2.0 would be expedited for improved nutrition delivery, early childhood care and development. She also announced that the U-WIN platform for immunization efforts of Mission Indradhanush will be rolled out and Health cover under the Ayushman Bharat scheme would be extended to all ASHA, Anganwadi workers and helpers.
As part of providing Housing for the middle class, she announced that Pradhan Mantri Awas Yojana (Grameen) is close to achieving the target of 30 Million houses and that an additional 20 million are targeted for next 5 years. Housing for Middle-Class scheme is proposed to be launched to promote the middle class to buy/built their own houses.
To encourage Tourism, states will be provided interest-free loans to undertake development of iconic tourist centres to attract business and promote opportunities for local entrepreneurship.
Agriculture and Food Processing – Government will promote private and public investment in post-harvest activities. Application of Nano-DAP would be expanded in all agro-climatic zones. She also announced that Atmanirbhar Oilseeds Abhiyaan-Strategy will be formulated to achieve atmanirbharta for oilseeds. A comprehensive program for dairy development will be formulated and the implementation of Pradhan Mantri Matsaya Sampada Yojana will be stepped up to enhance aquaculture productivity, double exports and generate more employment opportunities. She also proposed 5 Integrated Aquaparks to be set up.
Overall, it can safely be stated that if the present Modi government gets re-elected in 2024, the future road map is already laid out. Even if there is a change in administration, it would be hard to visualize a major departure from the current path of sustained economic development that India has taken.
