The 2024 budget cycle in India has seen significant shifts from the Interim Budget presented in February to the Final Budget in July. Both these budgets aim to address the country’s economic and social challenges, but they diverge in certain aspects reflecting the changing political and economic priorities. Finance Minister Nirmala Sitharaman presented the Interim Budget 2024 in February and emphasized several sectors that were to receive further attention in the final one. However, the final budget showed a shift in focus, with some sectors receiving less emphasis than anticipated and more about shifting numbers than introducing important changes. This further draws an interesting comparison between the two budgets. The Interim Budget was essentially a precursor to the Final Budget. It focused on maintaining continuity and setting the stage for future politics. Total receipts (excluding borrowings) were estimated at Rs. 30.80 lakh crore, with total expenditure capped at Rs. 47.66 lakh crore. The capital expenditure saw a notable allocation with the continuation of the fifty-year interest-free loan scheme for states, allocated Rs. 1.3 lakh crore. The interim budget also outlined significant sectoral allocations with an emphasis on the healthcare sector with continued support for Ayushman Bharat and the promotion of digital health infrastructure. The Final Budget presented on the 23rd of July 2024 addressed specific initiatives and revised financial allocations aimed at sustained economic growth, infrastructure development and social welfare. Total receipts were adjusted to Rs. 32.07 lakh crore and total expenditure to Rs. 48.21 lakh crore, increasing the budget size by Rs. 54,744 crore compared to the Interim Budget. The Capex target remained unchanged from the interim budget at Rs. 11.11 trillion. The fiscal deficit target became more conservative and dropped to an estimated 4.9% of GDP from 5.1%. The agriculture sector received more focused attention with increased funding for schemes like Pradhan Mantri Kisan Samman Nidhi and the Crop Insurance Scheme. The February budget maintained existing tax slabs. There was no proposal to make changes relating to any tax rates for direct and indirect taxes. However, a 50% rise in Standard Deduction in the Final Budget came as an income tax relief for the middle class. With the standard deduction now up to Rs. 75,000, contrasting to the previous deduction capped at Rs. 50,000, the New Tax Regime aims to lower taxable income and increase disposable income for salaried taxpayers. The shift in tax reforms aims to encourage more prudent financial planning among taxpayers while sustaining economic growth. The final budget introduced several adjustments in customs and duties intended to rationalize tariffs and improve trade competitiveness. While the interim budget focused on facilitating international trade, the rejig of customs duties in the final directed its attention towards domestic manufacturing and addressing trade imbalances. There has been a substantial reduction in customs duty in certain commodities. A notable focus was on mobile phones, where domestic production has quadrupled and exports have increased in the last six years. Additionally, changes in customs were made to support the processing and refining of critical minerals like lithium, cobalt, copper and other rare earth elements. Adjustments were seen for medical devices, solar energy, marine products, petrochemicals and telecom equipment to incentivize local manufacturing. To enhance domestic value addition in precious metal jewellery, customs duty on gold and silver was reduced to 6% and that of platinum to 6.4%. Healthcare The interim budget placed a significant emphasis on enhanced healthcare spending, including investments in Ayushman Bharat and extension of that scheme to all ASHA and Anganwadi workers. Digital health infrastructure was also in focus with talks of a new platform, U-WIN, to manage immunization across the country. However, the final budget shifted focus, with healthcare allocations mainly seen as adjustments of customs duties on medical devices and allied products to incentivize local manufacturing rather than substantial new investments, indicating a strategic relocation of resources. Agriculture The February budget talked about the promotion of investment in post-harvest activities, a vague program to support dairy farmers and the expansion of the PM Matsya Sampada Yojana. While the interim budget may have underscored the agriculture sector, the final budget demonstrated a more pronounced commitment to it. Allocation of Rs. 1.52 lakh crore was made to farming and allied sectors, with a focus on promoting natural farming and making an effort to initiate farmers in it. FM Sitharaman also announced that agriculture research will be reviewed to develop climate-resilient varieties and raise productivity. Implementation of Digital Public Infrastructure for Agriculture and digital crop survey of Kharif crops was another major initiative that will be taken up by the government. Infrastructure and Capital Expenditure The most significant change was probably seen in capital expenditure, the interim budget proposed an 11% increase in capex amounting to 3.4% of GDP which the final budget kept intact. This increase emphasizes the government’s focus on infrastructure as a key driver of economic growth. The allocation towards the National Infrastructure Pipeline (NIP) was reiterated, focusing on key projects in roads, railways, and urban development. However, the final budget also emphasized sector-specific investments, including an increase in allocation for rural infrastructure and housing. The unchanged capex target reflects a steady approach to large-scale infrastructure investments, balancing fiscal prudence with growth aspirations. The government also manage the sluggish private capex by increasing public capex and spending on infrastructure like roads and railways. Special Allocations for Andhra Pradesh and Bihar The final budget made specific allocations for Andhra Pradesh and Bihar, which were not featured in the Interim Budget. FM Sitharaman outlined a bunch of monetary aid and development projects for both these states, which after the Lok Sabha election results points in the direction of ‘coalition politics’. A Rs. 15,000 crore allocation for Andhra’s development with the assurance of further funding was announced in addition to emphasizing the Andhra Pradesh Reorganisation Act and the development of the state’s capital city. The disputed Polavaram irrigation project also garnered the full support of the FM in the budget, reflecting the political significance of the project. Bihar, similarly, saw increased allocations for infrastructure and social welfare schemes with Rs. 26,000 crore for building highways in Bihar. A proposal to accelerate the Bihar government’s plea for loans was also made. Provisions to construct new airports, medical colleges and sports infrastructure in Bihar were announced and financial assistance totalling Rs. 11,500 crore has been pledged for flood-related disasters in the state. These allocations, among other things, can be seen as a response to the sudden change in political dynamics post the election results of 2024, where regional demands and priorities played a significant role. The comparison between the Interim and Final Budgets 2024 reveals a nuanced shift in the government’s approach to addressing economic challenges. While the interim budget laid down a broad framework for certain priorities, the final union budget fine-tuned allocations and policies to reflect changing priorities and ground realities. The two budgets give us an elaborate understanding of what changed in these few months and what it has in bag for the upcoming fiscal year. The focus on specific sectors, adjustments in tax structures, and rejigging of target allocations give us insight into the government’s strategy to balance growth with fiscal responsibility and political considerations. INTERIM BUDGET VS FINAL BUDGET 2024
OVERVIEW OF THE BUDGETS
TAXATION AND FISCAL MEASURES
SECTOR-WISE ALLOTMENTS AND SHIFTS
Conclusion
21 Aug 2024
Vanshika Misra
