The upcoming Union Budget in 2024 will mark the final one from the present government as the nation approaches general elections next year. This budget is anticipated to focus on enhancing energy-efficient policies and increasing capital expenditure, setting the stage for key reforms.
Fiscal Outlook and Economic Environment
Union Finance Minister Nirmala Sitharaman is gearing up to deliver her Budget
speech from the new parliament building on February 1, 2024. Notably, it is important to recognize that the full Budget for FY25 will be presented in July after the formation of the new government.
Amidst global uncertainties, the Budget 2024 is being unveiled against the backdrop of a robust domestic economic environment. India’s Gross Domestic Product (GDP) growth in the July-September 2023 quarter stood at 7.6%. Even in the first quarter of FY24, the economy expanded by a sturdy 7.8% driven by strong domestic demand, counterbalancing the impact of global economic slowdown on exports.
According to Deloitte India, the current economic scenario presents upside risks such as strong economic growth, resilient infrastructure spending, and the resurgence of the micro, small, and medium enterprises (MSME) sector. Conversely, downside risks include the possibility of inflation escalation, election uncertainties, geopolitical concerns, and diverging demand gaps.
Over the past five years, the government has emphasized the development of robust infrastructure. It is widely expected that the forthcoming budget may allocate resources towards improving port and shipping infrastructure, driving energy advancements, particularly in green and sustainable energy, and bolstering urban infrastructure.
Deloitte India anticipates that the government’s focus in Budget 2024 will be on the shift from carbon-dependent to energy-efficient policies. This transition is deemed crucial in alignment with global sustainability goals and environmental consciousness.
Substantial emphasis is also placed on the anticipation of higher capital expenditure spending by the government
to stimulate capital investment. Nonetheless, attaining this goal would necessitate government incentives and strategic measures, as outlined by Deloitte India.
Addressing Export Growth and Rural Economy
Export growth witnessed a contraction of 7.7% in Q1FY24 after experiencing double-digit growth for eight consecutive quarters. As major economies experienced deceleration, reinvigorating exports in both existing and emerging markets becomes imperative.
Furthermore, redirecting savings from subsidies to support sustainable income growth in rural households is expected to be a key focus in the upcoming budget. This initiative aims to boost disposable income within the rural economy, potentially through increased spending on rural infrastructure or the implementation of incentivizing cash flow improvements.
Reform Recommendations and Initiatives
Deloitte India advocates for the expansion of Production-Linked Incentive (PLI) schemes to encompass sectors such as chemicals and services, thereby generating demand for increased manufacturing. Additionally, the government is encouraged to extend financial support for export promotion initiatives like the Remission of Duties and Taxes on Exported Products (RoDTEP).
In conclusion, the Budget 2024 is poised to underpin fundamental reforms concentrated on energy-efficient policies amidst the country’s shifting economic landscape. The strategic allocation of resources to prioritize sustainable growth, coupled with the incentivization of key sectors, is anticipated to pave the way for enhanced economic prospects and trajectory.
This article is based on information provided by www.livemint.com.