Interim Budget 2024-25 Unveiled – Emphasis on Inclusive Development & Economic Reforms

Interim Budget 2024-25

In a highly anticipated budget session, Union Finance Minister Nirmala Sitharaman presented the Interim Budget for the fiscal year 2024-25 at Parliament today. The Budget speech highlighted the government’s achievements over the past decade, focusing on inclusive development, economic reforms, and the nation’s resilience in the face of challenges.

Key Highlights

  • Estimated gross borrowing for FY25 is ₹14.13 trillion, reflecting a reduction compared to FY24.
  • Research has played a pivotal role in the growth of indigenous oilseeds such as mustard, groundnut, and sesame, contributing to India’s self-sufficiency. Currently, India spends over ₹1.5 trillion annually on importing 60% of its cooking oil.
  • Sitharaman asserted an aggressive fiscal consolidation target, with FY25 fiscal deficit goal of 5.1%, surpassing the expected 5.3%. In FY24, the fiscal deficit target of 5.8% was achieved through improved revenue mobilization compared to the targeted 5.9%.
  • Sitharaman, declared the withdrawal of outstanding disputed tax demands, benefiting approximately 1 crore taxpayers.
  • While there is no change in tax slabs in the Interim Budget 2024, including import duties, certain benefits for startups and tax exemptions for specific IFSC units expiring this fiscal year will be extended till March 2025.

Key Points

  • Sitharaman reiterated the government’s commitment to ‘Sabka Sath Sabka Vikas,’ emphasizing the successful navigation of significant challenges since assuming office in 2014.
  • Sitharaman underscored the government’s focus on policies promoting secularism, reducing corruption, and preventing nepotism. The ‘Sabka Sath, Sabka Vikas’ approach targeted the welfare of the poor, women, youth, and farmers.
  • Sitharaman highlighted the profound transformation of the Indian economy over the last decade. Structural reforms, pro-people policies, and a focus on job creation and entrepreneurship were credited for the positive trajectory.

Inclusive Development Initiatives

Direct Benefit Transfer of Rs. 34 lakh crore into PM-Jan Dhan accounts.
The success of PM-SVANidhi, PM-JANMAN Yojana, and PM-Vishwakarma Yojana.

Agricultural Sector Achievements

  • PM-Kisan Samman Yojana providing financial assistance to 11.8 crore farmers.
  • PM-Fasal Bima Yojana benefiting 4 crore farmers.
  • Electronic National Agricultural Market is integrating 1,361 Mandis.
  • Comprehensive GDP Approach: The government’s focus on Governance, Development, and Performance (GDP) was emphasized. Macroeconomic stability, robust investments, and effective program delivery were highlighted.

Infrastructure Development and Economic Growth

  • GST enabling One Nation One Market One Tax.
  • Tax reforms, the widening of the tax base, and the strengthening of the financial sector were acknowledged. Initiatives like GIFT IFSC and Unified Regulatory Authority IFSCA were noted for creating gateways for global capital.

Industry Speaks

K. Paul Thomas, MD & CEO, ESAF Small Finance Bank
“The Finance Minister’s announcement in the interim budget to prepare the financial sector to meet the investment need of the micro, medium and small enterprises (MSMEs) is a welcome development. That will address the concerns of the MSMEs access to formal credit at competitive rates. This is a very significant decision since smooth flow of formal credit will make the MSMEs more competitive not only in the domestic market but also in the global market place. However, much depends on the fine print of the policy which I am sure will be an enabling document benefitting MSMEs immensely while opening up all new window for bank lending, particularly working capital loans and discounting receivables. Extension of PMAY scheme will help solve the housing shortage also this will be an opportunity for Banks to lead in the sector. Long term interest free fund for innovation in private sector is a welcome move. Focus on creating more women entrepreneur through SHG.”

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Shailendra Singh, MD & CEO, BOBCARD Limited
“We commend the government’s interim budget for its focus on fostering economic growth through the empowerment of women and youth. The PM Mudra Yojna, with a budget of Rs 22.5 lakh crore, will bolster the entrepreneurial aspirations of our youth. Meanwhile, the Skill India program has been instrumental, having successfully trained 1.4 crore youth and upskilled/reskilled 54 lakhs. All such developments have played a pivotal role in achieving a remarkable 50% increase in the average income of our citizens. The swift development of nationwide infrastructure is turning every region into an active contributor to the expanding economy. The fortification of the financial sector is improving the efficiency of savings, credit, and investments, aligning seamlessly with our commitment to providing accessible and innovative credit solutions.

V. P. Nandakumar, MD & CEO at Manappuram Finance
“By giving a new meaning to GDP – governance, development and performance – the Finance Minister, Nirmala Sitharaman, has laid out the road map for India to become a developed nation (Vikasit Bharat) by 2047. Also commendable is the Government’s resolve to stay on the course of fiscal prudence while taking steps to ensure sustainable growth and development on a durable basis. On the whole, the interim budget has ticked most of the right boxes without straying from the fiscal glidepath, despite impending general elections.”

Sudipta Roy, Managing Director & CEO, L&T Finance Holdings Ltd
By presenting a fiscally prudent budget, the government has created conducive conditions for the private capex cycle revival. A strong push given to rural housing and agri-allied activities augurs very well for the business model of retail-oriented NBFCs. Today’s Budget will improve the international investors’ perception of India’s macro-financial stability and strengthen India’s position as one of the best investment destinations in the global space.

Niraj Kumar, Chief Investment Officer, Future Generali India Life Insurance Company Ltd.
Budget 2024 is a Holistic Budget exemplifying fiscal prudence and encompassing all the imperative sectors despite electoral compulsions. This budget gives credence to the government’s unwavering resolve to adhere to the fiscal consolidation glide path, especially after having delivered a robust growth-oriented budget in the last 3 years. The vision under Vikasit Bharat by 2047 and the top 4 priorities laid out concerning empowering the Poor, Women, Youth, and Farmers will go a long way in manifesting the long-term growth story of India. It is high on optics, and low on spending impact as fiscal consolidation remains its paramount focus. The key announcements on the power sector coupled with new energy, railways, defense, and affordable housing are indeed encouraging. While optically 11% capex growth seems lower than the 30% average growth seen in the last 3 years, it yet sticks to 3.4% of GDP which is indeed credible as it would continue to give the requisite infra-led push to sustain the growth momentum. The budget lacks any consumption and Populus measures and is thus a departure from the previous pre-election vote on accounts. Fiscal consolidation focus and low market borrowing reinstates the focus on macro-stability. With lower capex growth being the new reality, markets are likely to align with the pragmatic approach of the government and we reckon more policies will be elaborated in the July 2024 Budget. Bonds are likely to be in a favorable spot through 2025, thanks to the strong fiscal prudence and lower borrowing pressures coupled with supportive FII flows with global bond inclusion. Overall, the government has dexterously done a fine balancing act between adhering to fiscal prudence and giving requisite support to growth, despite being a Pre-Election Budget.

Kartik Narayan, CEO, Staffing at TeamLease Services
The Skill India Mission’s initiative to train 1.4 crore young individuals, along with the upskilling and re-skilling of 54 lakh youth, coupled with the establishment of 3,000 new Industrial Training Institutes (ITIs), is a progressive step towards bolstering the PLI and Make In India programs. This comprehensive approach is essential in enhancing the manufacturing sector’s contribution to the GDP from 17% to 25% by 2047, thereby creating numerous job opportunities.

Dr. Arun Singh, Global Chief Economist, Dun & Bradstreet
The Aspirational Districts Program aims to alleviate the strain on current mega-city infrastructures, thereby accelerating the pace of urbanization. Significant investments in infrastructure will contribute to enhancing India’s logistics efficiency at a lower cost, thereby bolstering India’s ambition to emerge as a global manufacturing hub.

The substantial fund of Rs 1 trillion will amplify research efforts in sunrise sectors.
The reduced fiscal deficit projection at 5.1% of GDP in FY25, down from 5.8% in FY24, will create room for increased private sector borrowings.

The government underscored the significance of providing timely and sufficient financial support for global growth and competitiveness. This becomes crucial in light of the challenges encountered by MSMEs, including a 28% rate of loan rejections. Moreover, achieving a doubling of exports to Rs 1 trillion requires a focus on the effective utilization of the benefits derived from the currently established FTAs, particularly by MSMEs.

Manick Wadhwa, Director, SKI Capital
The Interim Budget 2024 has begun on a very positive note. Finance Minister Seetharaman’s announcement of the government setting a capex target of Rs. 11.1 lakh crore for FY25 is sure to have a ripple effect across industries. AIFs can leverage the momentum by focusing on MSME investment, particularly in the infrastructure and agriculture sectors. Start-up ventures aligned with the government’s priority sectors can expect to receive significant boosts, as increasing infrastructure development creates an environment conducive to innovation and growth. The 50-year interest-free loan for a corpus of Rs. 1 lakh crore can be seen as an indispensable boon for the IT industry and sunrise sectors. We can expect the funding to bolster research and innovations, improving India’s position as a global technology leader in the coming decade.

Hardika Shah, Founder & CEO, Kinara Capital
An excellent initiative in the form of ‘First Develop India’ (FDI) was introduced in today’s Union Budget. Negotiating treaties with other countries will boost foreign investment in the world’s fastest-growing major economy as India is heading towards becoming a $30 trillion economy by 2047.

This is also the right time for the Government to reinstate the previous incentive for foreign portfolio investors (FPIs) as the tax rate was hiked from 5% to 20% on the interest earned on bonds. This rise in the tax rate will raise the borrowing costs by 30-40 basis points and create a liquidity crunch in an otherwise thriving economy with vast potential at every level. Particularly, for the NBFC sector that has been playing a pivotal role in addressing the last-mile credit needs of MSMEs, FPI investment has the potential to drive fast economic growth.

Ketan Mehta, CFO at CredAble (overall budget scenarios highlighting MSMEs, tech, and infra)
It is notable that while there were commendable announcements, there is a missed opportunity to enable the growth of MSMEs as part of the Indian ecosystem. Acknowledging MSMEs as a cornerstone of our economy is crucial for sustainable global competitiveness. Without enhancing the competitiveness of our MSMEs, India cannot generate the requisite jobs and effectively compete on the global stage. A prime illustration of the potential impact lies in the announcement of long-term interest-free loans for R&D in sunrise sectors. This implicitly recognizes that strategic debt can act as a catalyst for innovation and research, positioning the younger generation of India to excel in emerging industries. The recent governmental emphasis on tourism (which was conspicuously absent in the budget speech), encompassing the construction of new monuments, exploration of remote areas, and a call for celebrating milestones within the country, necessitates robust tourist infrastructure development, both in terms of rail and air connectivity. This impetus for localized infrastructure growth is poised to catalyze the expansion of MSMEs, fostering their overall development.

Additionally, the budget’s recognition of technology’s transformative role across sectors, particularly the proposed scheme for enhancing deep technology in defense for achieving self-reliance (‘atma nirbharta’), is noteworthy. India currently boasts world-class digital public infrastructure, set to strengthen over time, facilitating easier access to both self-owned and borrowed funds. While the budget speech lacked focus on skill development in AI, a critical area for our future, we anticipate and hope for such initiatives in subsequent announcements.

Alok Aggarwala, Chief Research & Investment Officer, BajajCapital Ltd
In presenting the Union Budget 2024-2025, Finance Minister Nirmala Sitharaman echoed a resolute commitment to building comprehensive infrastructure at an unprecedented pace, encompassing digital, social, and physical realms. Underlining the nation’s prosperity, Sitharaman emphasized the critical role of empowering the youth, recognizing them as key architects of our collective future.

The budget reflects a transformative approach, with a focus on rural welfare evident through initiatives like the Fasal Bima Yojana and the extension of crop insurance to 4 crore farmers. Sitharaman reiterated the mantra ‘Garib Kalyan is desh ka kalyan,’ emphasizing the government’s dedication to the welfare of the underprivileged.

Looking ahead, Sitharaman foresees the next five years as a period of unprecedented development, navigating a new world order post-Covid. Proactive inflation management has been instrumental in keeping inflation within the targeted band.

In essence, the Union Budget 2024-2025 encapsulates a vision for progress, sustainability, and inclusive development, with a steadfast commitment to meeting the evolving needs and aspirations of the nation.

Ajay Chaurasia, Vice President, RupeeRedee
It’s genuinely exciting to learn about India’s new plan outlined in this interim budget, focusing on building infrastructure and leveraging more technology. It’s like laying the foundation for the country’s growth, be it through cutting-edge tech, physical development, or improved connections. What’s particularly commendable is the government’s trust in the younger generation to bring in fresh tech ideas and innovations, recognizing the potential they hold for positive change.

Moreover, the provision of interest-free loans for up to 50 years is a significant support system for individuals and businesses, allowing them to kickstart and sustain their endeavors. This move has the potential to not only create more jobs but also foster the growth of entrepreneurship, enabling people to build and sustain their businesses. These initiatives seem to be crafting a conducive environment for growth, fostering new ideas, and empowering individuals. It’ll be fascinating to witness how these plans unfold and contribute positively to different regions of the country in the years to come.

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Abhay Bhutada, Managing Director, Poonawalla Fincorp
The 2024 Interim Budget is a decisive step towards India’s economic sustainability, in line with the ‘Viksit Bharat by 2047’ vision. The fiscal responsibility reflected in the 5.8% GDP fiscal deficit is commendable. The ‘First Develop India’ focus promotes FDI, aligning with our global collaboration goals. I anticipate progressive policies supporting fintech, digital lending, and digital skills.

Parimal Heda, Chief Investment Officer, Digit General Insurance
The Interim Budget presented by the finance minister was largely in line with expectations moving ahead on the fiscal consolidation path. The budget’s focus was on empowering people and thereby to create a pathway towards the government’s objective of a ‘Viksit Bharat’ by 2047. Though no direct announcements were made related to the insurance sector, various measures announced by the FM will have a trickle-down effect in multi-fold ways.

Akash Sinha, Co-founder & CEO, Cashfree Payments
The budget lays out a strategic roadmap towards building ‘Viksit Bharat’ by 2047. The emphasis on ‘innovation being the foundation of development’ is a big booster for entrepreneurs to adopt a research and innovation-led approach while building their businesses. This is an indication of how India wants to further scale up in developing and building technologies, products and services for the global economy. The focus on Digital Public Infrastructure reflects the government’s ambition towards inclusive growth and development through the process of digitisation. The strong emphasis on technology, research and innovation coupled with financial support will have a huge multiplier impact on employment and entrepreneurship leading to sustainable growth and opportunity creation for the youth.

Harshvardhan Lunia, founder & CEO, Lendingkart
The interim budget for 2024-2025 resonates with a forward-looking vision, strategically leveraging digital acceleration to empower diverse segments of society. The continued emphasis on grassroots, women, and youth empowerment is commendable, fostering inclusivity in the developmental trajectory. The proposed infrastructural and sectoral reforms are poised to fortify the economic landscape, unlocking a myriad of opportunities for entrepreneurs, SMEs, and MSMEs. This budget underscores India’s commitment to fostering innovation and digitization, charting a course for sustained economic growth and resilience.

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