The forthcoming Union Budget in 2024 will be the final from the current administration before the country heads to political elections next year. Budget 2024 would be more of a Vote on Account than a complete Budget before the election.
On February 1, 2024, Union Finance Minister Nirmala Sitharaman will deliver her Budget speech from the new parliament building. The full Fiscal Year 25 Budget will be revealed in July, following the establishment of the new administration.
Despite global uncertainty, the Budget 2024 is presented against the backdrop of a robust domestic economic situation. The growth rate of India's Gross Domestic Product (GDP) in the July-September 2023 quarter was 7.6%. Even as the global economic slowdown weighed on exports, the economy grew by 7.8% in the first quarter of FY24, thanks to strong local demand.
According to Deloitte India, the current environment's positive risks include strong economic growth, significant infrastructure spending, and resurgence in the MSME sector. The downside risks, on the other hand, include rising inflation, election uncertainty, geopolitical concerns, and divergence demand gaps.
"India will have to rely on domestic demand, specifically private consumption and investment spending, to drive growth." Inflation, on the other hand, may have an impact on growth stability. "Over the next 1.5 years, we expect higher prices; prices are expected to remain in the upper range of the RBI's inflation target band," stated Rumki Majumdar, Economist, Deloitte India.
Over the last five years, the administration has prioritised infrastructure development. It is intended to redirect some of its spending towards port and shipping improvements, energy, particularly green and sustainable energy, and urban infrastructure.
Deloitte India expects the government's focus in this budget to be on the shift from carbon-dependent to energy-efficient policies. Increased government capex spending is projected to drive out capital spending. However, according to Deloitte India, certain government incentives and a few actions in this area will be required.
In terms of GDP, export growth decreased by 7.7% in Q1FY24 after increasing by double digits for the previous eight quarters. Because the recession was mostly caused by a slowdown in major economies' growth, increasing exports to diverse and new markets while assisting existing markets to grow is critical.
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Furthermore, the government is anticipated to redirect savings from subsidies towards investment that can support long-term income development among rural households, thereby increasing the rural economy's disposable income. According to Deloitte India, one method could be increased spending on rural infrastructure or providing incentives to boost revenue flow.
In line with predictions, Deloitte India suggests incentives such as expanding the scope of PLI schemes to include sectors such as chemicals and services that generate demand for increased production. It also suggests that the government contribute funding to the Remission of Duties and Taxes on Exported Products (RoDTEP) programme and other export promotion measures.
