The Ultimate Interim Budget 2024-25 Breakdown

Dear Yubi Community,

February in India is synonymous with one thing: The Union Budget. 

However, this year was different. ‘Tis the year of general elections!

This year, amidst the buzz of the upcoming elections, Finance Minister Nirmala Sitharaman presented the "Viksit Bharat Budget" (Developed India Budget) on February 1st, 2024. With high expectations swirling, the interim budget focused on fiscal prudence, infrastructure development, and social welfare initiatives, laying the groundwork for India's economic trajectory in the coming years. 

Retrospecting Previous Budget: A Year in Review

Total expenditure is budgeted to increase by 6.1%, with both revenue expenditure (up 3.2%) and capital expenditure (up 16.9%) seeing moderate growth. Revenue receipts are projected to jump by an impressive 11.8%, exceeding the revised estimate for 2023-24. This suggests a robust economic recovery and potentially wider tax collection. Even borrowings are expected to dip slightly by 2.8%, suggesting a more sustainable approach to financing the government's activities.

Overall, budget 2024-25 strikes a balance between supporting economic growth through targeted spending and maintaining fiscal discipline. Key Highlights of the “Viksit Bharat” Budget 

It’s time to dive into the pivotal moments and transformative initiatives outlined in the 2024-25 interim budget. 

Key Highlights of the “Viksit Bharat” Budget

It’s time to dive into the pivotal moments and transformative initiatives outlined in the 2024-25 interim budget.

Financial Landscape:

• Expenditure: Anticipated spending for 2024-25 reaches ₹47,65,768 crore, a robust 6% increase compared to the previous year's revised estimate. However, a quarter of this outlay, representing 40% of revenue receipts, is dedicated to servicing interest payments, highlighting continued debt management efforts.
• Receipts: Non-borrowing receipts are projected to hit a remarkable 12% upswing to ₹30,80,274 crore, exceeding the revised estimate for 2023-24. This positive trend is largely driven by a 12% anticipated increase in tax revenue, indicating economic buoyancy.

Growth Trajectory:

• GDP: The government paints an optimistic picture with a projected nominal GDP growth of 10.5% for 2024-25, signifying the anticipated continuation of post-pandemic recovery

Fiscal Consolidation:

• Deficits: Commitment to fiscal prudence is displayed through a targeted reduction in both revenue and fiscal deficits compared to the previous year. The revenue deficit is slated to shrink to 2% of GDP, while the fiscal deficit is expected to decrease to 5.1% of GDP, reflecting progress towards sustainable public finances.
• New Schemes: A noteworthy allocation of ₹70,449 crore is channeled towards new capital expenditure initiatives under the Department of Economic Affairs. While details remain undisclosed, this significant investment suggests strategic prioritization of future-oriented projects.

No Tax Proposals

Tax rates remain unchanged for both direct and indirect taxes, ensuring stability in the tax regime. Certain entities, including startups, sovereign wealth funds, pension funds, and some IFSC units, will continue to benefit from tax incentives extended until March 2025, fostering growth and investment.

The Policy and Sector Breakdown: Shifting Priorities?

This year's budget reveals a shift in priorities compared to the previous year. 

The top 13 ministries, including Defense (₹6,21,541 crore, 13% of total budget), Road Transport & Highways (5.8% of total expenditure), Railways (5.4% of total expenditure), and Consumer Affairs, Food & Public Distribution (4.5% of total expenditure), consume over half of the budget. 

The Finance Ministry's new "New Schemes" program receives a massive ₹70,449 crore (84% of its allocation) for capital expenditure, details still pending. Communications Ministry sees a significant increase (11.8%) due to BSNL capital infusion (₹82,916 crore), while Defense spending slightly decreases (0.4%) due to reduced allocation for military supplies (₹16,873 crore, 26% decrease from 2023-24).

Railways:

• Introducing three significant economic railway corridor programs focusing on energy, mineral, cement, port connectivity, and high-traffic density corridors
• Enhancing passenger safety and comfort by upgrading 40,000 standard rail bogies to Vande Bharat standards

Housing:

• Committing to construct an additional two crore houses under the Pradhan Mantri Awas Yojana Grameen within the next five years
• Launching a new scheme to assist middle-class individuals in acquiring homes in rented accommodations, slums, and unauthorized colonies

Health:

• Encouraging vaccination against cervical cancer for girls aged nine to 14
• Introducing the U-WIN platform to streamline immunization management nationwide
• Expanding healthcare coverage under the Ayushman Bharat scheme to include ASHA workers, Anganwadi workers, and helpers

Energy:

• Initiating rooftop solarization for one crore households
• Mandating the phased blending of compressed biogas in CNG and PNG to achieve net-zero emissions by 2070
• Installing coal gasification and liquefaction capacity of 100 metric tonnes by 2030

Environment:

• Strengthening and expanding EV manufacturing and charging infrastructure
• Promoting the adoption of E-buses for public transport to reduce emissions
• Launching the Blue Economy 2.0 scheme to revive coastal aquaculture and mariculture
• Introducing a new scheme to provide eco-friendly alternatives such as biodegradable polymers, bio-plastics, and bio-pharmaceuticals

Agriculture:

• Promoting public and private investment in post-harvest activities to improve the agricultural supply chain
• Expanding the application of Nano DAP fertilizer in all agro-climatic zones
• Formulating a program to support dairy farmers and expanding the PM Matsya Sampada Yojana to enhance aquaculture productivity, double seafood exports, and create employment opportunities

Demographic Changes:

• Establishing a high-powered committee to address challenges arising from rapid population growth and demographic changes

Research:

• Establishing a corpus of one lakh crore rupees to encourage private sector research and innovation, providing long-term loans at low or nil interest rates.

Scheme-wise Allocation

The upcoming pre-election budget is expected to focus on welfare schemes for key sections like women, youth, farmers, and tribals. Allocations for existing schemes are likely to increase and new ones might be announced. Education, skill development, PM-Kisan Samman Nidhi (farmer income support), and tribal welfare programs are expected to see significant boosts. This strategy aims to appeal to both the masses and the well-off while pursuing development goals.

Receipts vs Expenditure: Numbers That Matter

Receipt and Payment Account reflects the actual cash inflows and outflows that took place, while income and expenditure Account presents the revenues and expenses incurred during a specific period.

Fiscal Deficits and Budget Management Targets 

The Fiscal Responsibility and Budget Management (FRBM) Act, 2003 requires the central government to progressively reduce its outstanding debt, revenue deficit and fiscal deficit, and to give three year rolling targets for these. 

• Medium-Term Fiscal Policy Statement has not provided rolling targets for budget deficits since 2021-22. In the Budget speech, the Finance Minister reiterated the government’s aim to reduce fiscal deficit to below 4.5% of GDP by 2025-26
• Fiscal deficit is an indicator of borrowings by the government for financing its expenditure. The estimated fiscal deficit for 2024-25 is 5.1% of GDP
• Revenue deficit is the excess of revenue expenditure over revenue receipts. Such a deficit implies that the government needs to borrow funds to meet recurring
• expenses which may not provide future returns. The estimated revenue deficit for 2024-25 is 2% of GDP

• Outstanding liabilities is the accumulation of borrowings over the years. A higher debt implies that the government has a higher loan repayment obligation over the years.
• Centre’s outstanding liabilities in 2024-25 are estimated to be 57% of the GDP
• Outstanding liabilities had declined from 51% in 2013-14 to 48% in 2018-19. From 2019-20 onwards, outstanding liabilities have been increasing, reaching a high of 61% in 2020-21 and being moderated thereafter.
• Interest payments as a percentage of revenue receipts increased from 37% in 2013-14 to 42% in 2020-21. It is estimated to be 40% of revenue receipts in 2024-25

Closing Thoughts 

Interim Budget 2024-25 paints a positive picture for the Indian fintech landscape. Focusing on infrastructure, digital inclusion, financial literacy, and innovation creates fertile ground for growth. However, successful implementation, regulatory clarity, and collaboration between fintechs and traditional finance institutions will be crucial in translating potential into concrete benefits.

We eagerly await the unwritten forthcoming chapters of 2024, where the threads of innovation, prudence, and opportunity intertwine. Till then, let’s be hopeful.