Beyond the horizon
In a marked departure from the ‘populist’ Interim Budget of 2019, the Budget announced by the Union Finance Minister Nirmala Sitharaman ahead of the 2024 General Elections rightly sticks to the ideal notion of provisioning for a transitory phase. However, her speech sounded highly political in nature. In a Budget speech that was understandably short, there was very little substance to read into. The Finance Minister lost no opportunity in heaping political praises upon the Modi government’s ten-year stint. It digressed further to use the opportunity for castigating pre-2014 governments for their mismanagement. Unfortunately, the FM’s speech sounded more like a compiled synopsis of prime minister’s speeches.
Moreover, in what has become a norm lately, the in-principle focus of Union Budgets has shifted from the time-span they are meant to cover to broader timelines. The Union Finance Minister, exhibiting a nonchalant confidence, asserted that the government plans to present a detailed roadmap for its vision of a developed India by 2047 in July, implying an inevitable return to power. Ideally, neither the Budget speech should be used as a tool for political targeting, nor should it completely overlook the stipulated time span it is supposed to focus upon.
As a matter of fact, there were no changes in direct and indirect tax rates. A significant move involved the government's decision to withdraw income tax demands for amounts up to Rs 25,000 for the period until 2009-10 and Rs 10,000 for the years spanning from 2010-11 to 2014-15. This move is expected to benefit approximately one crore taxpayers. Additionally, the budget introduced a novel scheme aimed at assisting the middle class residing in rented accommodations to realise their homeownership aspirations by facilitating the purchase or construction of their own houses. Furthermore, in a bid to boost infrastructure development, the government substantially increased capital expenditure by 11 per cent, allocating Rs 11.11 lakh crore. The intent is to foster economic growth and development through strategic investments in key sectors.
However, over the last couple of years, the capex push has failed to stir comprehensive private investment, with benefits largely being cornered by limited pockets. The Union Government still appears to struggle to come out of the illusion that increasing the supply of goods, services and facilities will spur growth. On the contrary, glaring unemployment, simmering inequalities, and lack of private consumption among large sections of population continue to act as dampeners. The most prominent and basic engine of growth stands crippled in India while the government might be screwing with the wrong bolts!
The nominal GDP growth for FY25 is projected at 10.5 per cent. When adjusted for inflation to give the real GDP, it may amount to an unsatisfactory percentage. India is a fast-developing country with high potential and its GDP growth rate cannot be justifiably compared to that of developed economies which are more or less approaching saturation. Notably, India’s nominal GDP averaged 12.22 from Jun 1997 to Jun 2023. A bright spot in the Interim Budget 2024 emerged in the form of alignment with the fiscal deficit target. This is partly the result of better tax compliance. But curtailment of allocation in some crucial sectors also played a role in it.
