Interim Budget: A pleasant non-surprise

The Interim Budget that Finance Minister Nirmala Sitharaman presented on Wednesday, 1 February, 2024, was a pleasant non-surprise. Pleasant because she was able to stay the course of fiscal consolidation without cutting capital expenditure, thus ensuring that infrastructure building (which is the characteristic feature of the India story) is not adversely affected. So, the capital expenditure outlay for 2024-25 has been increased by 11.1 per cent to Rs 1,111,111 crore, which would be 3.4 per cent of the gross domestic product (GDP). At the same time, emphasis on fiscal prudence and targeted welfarism persists.

Sitharaman pegged the fiscal deficit in 2024-25 at 5.1 per cent of GDP. This doesn’t look unrealistic as the revised estimate of the fiscal deficit for the current fiscal is 5.8 per cent is an improvement over the 5.9 per cent of the Budget estimate. In fact, she hopes to bring it down to 4.5 per cent in 2025-26.

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Budget 2024-25 is also unsurprising, given the Narendra Modi government’s commitment to fiscal prudence and infrastructure building. It may be recalled that even during the Covid-19 pandemic when economic experts of statist disposition (that is, most of them) were beseeching the finance minister to loosen the purse strings on the grounds that the situation warranted it, the government didn’t oblige them. Neither the purse strings were loosened nor capital expenditure went southwards.

February 2024 is also different because the general elections are a few months away, but the government doesn’t seem bothered about that. It believes that there would be continuity, as Prime Minister Modi said that on Wednesday—that is, a day before the Budget. Since liberalization in 1991, seldom has an incumbent government seemed so confident.

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So—unlike in the last Interim Budget of 2019 in which it announced Pradhan Mantri Kisan Samman Nidhi (PM-Kisan) and a hike in the standard deduction for salaried persons raised from Rs 40,000 to Rs 50,000—there was no relief to the middle class in terms of income tax. In general, no tax rates, corporate as well as personal income, were touched.

“In the last five years, our focus has been to improve taxpayer services,” Sitharaman said. “The age-old jurisdiction-based assessment system was transformed with the introduction of faceless assessment and appeal, thereby imparting greater efficiency, transparency, and accountability… Average processing time of returns has been reduced from 93 days in the year 2013-14 to a mere ten days this year, thereby making refunds faster.”

The Interim Budget withdrew the outstanding direct tax demands up to Rs 25,000 pertaining to the period up to 2009-10, and up to Rs 10,000 for 2010-11 to 2014-15. This, she said, is expected to benefit about a crore tax payers.

That may be true, but Sitharaman should have been more considerate towards the middle class. One hopes that the Modi government, if re-elected, would rectify this mistake in the full Budget for 2024-25.

In a bid to capital expenditure the finance minister announced the continuation of the scheme of 50-year interest free loan to states will be continued for another year with total outlay of Rs 1.3 lakh crore.

Such a loan is also available for the promotion of tourism, she said. “States will be encouraged to take up comprehensive development of iconic tourist centres, branding and marketing them at global scale. A framework for rating of the centres based on quality of facilities and services will be established.”

For our tech-savvy youth, this will be a golden era, she said. “A corpus of Rs 1 lakh crore will be established with a 50-year interest-free loan. The corpus will provide long-term financing or refinancing with long tenors and low or nil interest rates. This will encourage the private sector to scale up research and innovation significantly in sunrise domains.”

Sitharaman was bullish on economic activity, which has imparted buoyancy to revenue collections. She pointed out that the GST collection stood at Rs 1.65 lakh crore in December 2023. For 2024-25, the total receipts other than borrowings and the total expenditure are estimated at Rs 30.8 lakh and Rs 47.66 lakh crore, respectively. The tax receipts are estimated at Rs 26.02 lakh crore.

Even as she presented the Interim Budget focused on fiscal consolidation and infrastructure building, she used the opportunity to score political points. “The earlier approach of tackling poverty through entitlements had resulted in very modest outcomes… With the pursuit of ‘Sabka ka Saath’ in these 10 years, the government has assisted 25 crore people to get freedom from multidimensional poverty.”

Also, she said direct benefit transfer of Rs 34 lakh crore from the government using PM-Jan Dhan accounts has led to savings of Rs 2.7 lakh crore for the government, the finance minister said, adding that this has been realized through avoidance of leakages.

“As our Prime Minister firmly believes, we need to focus on four major castes. They are ‘garib’ (poor), ‘mahilayen’ (women), ‘yuva’ (youth), and ‘annadata’ (farmers),” the finance minister said.

In another political flourish, she said “focused on a more comprehensive GDP, i.e., Governance, Development and Performance.”

In a nutshell, the Interim Budget attempts to please people without losing sight on the fundamentals of public finance and economic development.

The author is a freelance journalist. Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect Firstpost’s views.

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