Budget 2024: 5 key changes we can expect this year

On February 1, Finance Minister Nirmala Sitharaman is scheduled to deliver the Union Budget 2024–25. The Finance Minister must strike a balance between the need to reduce the fiscal deficit and growth demands as the 2024 Lok Sabha election approaches. Thus, let’s examine five important charts that provide insight into the interim Budget’s chances before it is announced: Total Revenue vs Expenditures Revenue and spending are the most frequently followed budget metrics, particularly in relation to the growth of the economy. The relationship between revenue and spending in relation to GDP is an essential component of any budget. According to the prediction, revenue will account for 9.2% of GDP this year, which is very similar to the 9.8% average for the previous 30 years. Spending, however, is presently declining to 15.2% after peaking at 17.7% during the Covid-19 outbreak, suggesting a gradual return to normalcy. As part of its attempts to achieve fiscal consolidation, the government said in a half-yearly review report that it will strategically reallocate public spending to protect the most disadvantaged in response to global budgetary concerns. Fiscal Trends The fiscal deficit, a vital measure of the state of the finances, has evolved over time. It peaked at 9.2% in 2021 and is predicted to decline to 5.9% by the budget estimate for the fiscal year 2024. This change implies a calculated approach to borrowing and recuperation. In spite of nominal GDP statistics that were below expectations, the government is on course to fulfill its FY24 budget deficit target of Rs 17.9 trillion. According to the Controller General of Accounts, as of November 2023, the government’s fiscal deficit was Rs 9.06 trillion, or 50.7% of the annual budget objective. Tax Revenue by Category India’s tax-to-GDP ratio rose to 11.1 percent in FY23 in a post-pandemic bounce, above the pre-pandemic level of 10.9 percent in FY19. However, it is unlikely to surpass the 11.3 percent peak from FY18, since projections indicate stability in FY24. The amount collected by the central government has increased dramatically, rising by 33.7% in FY22 and by 10.3% in 2023. But this strong increase is slowing down. A recalibration of fiscal strategy is indicated by a decrease in non-tax receipts and a reduction in tax buoyancy. Government Spending The primary focus of the government’s spending plan is capital expenditure, which is expected to increase by 37% to Rs 10 trillion in FY24. This capital spending emphasis indicates a preference for long-term asset building, even in the face of a little increase in revenue expenditure. According to CGA data, the Center spent Rs 26.52 trillion, or 58.9% of its estimated 2024 budget, as of November 2023. This amount was split between Rs 5.85 trillion for capital accounts and Rs 20.66 trillion for income. Budget Size Because of the clearance of subsidy dues and enhanced fiscal transparency, the Union Budget’s share of GDP grew throughout the pandemic. It is currently declining, though, with the budget for 2024 projected to be 14.9% of GDP, indicating a return to pre-pandemic levels. It is unlikely that the nation will make any major policy adjustments as the interim budget approaches. Budgets usually try to increase consumption by raising income levels before to elections. Plans to increase consumer discretionary income are now anticipated; these will probably take the form of increased infrastructure spending and increased funding for rural development.