Key Highlights of Budget 2024: Finance Minister Nirmala Sitharaman concluded her interim budget speech within an hour. The following are the six main takeaways from the Budget 2024-25 documents, based on both the revised estimates for the current year and the Budget Estimates for the upcoming financial year (2024-25).
As this is an interim budget, the more significant aspects to examine are the revised estimates for the current year. This is because the Budget Estimates for the next year are likely to be altered when the full budget is presented in July after the elections.
- Conservative expectations for nominal GDP growth
Nominal GDP stands as a pivotal factor in any budgetary framework. The commonly discussed real GDP growth is derived from Nominal Gdp growth, accounting for the impact of inflation. For the upcoming financial year (2024-25), the government anticipates a nominal GDP growth of 10.5%. As per the latest Budget documents, the government envisions India’s nominal GDP to reach Rs 3,27,71,808 Crore, assuming a 10.5% expansion over the estimated nominal GDP of Rs 2,96,57,745 crore in the current financial year (2023-24).
- Substantial Reduction in Fiscal Deficit
The fiscal deficit is a key indicator revealing the extent to which the government resorts to borrowing from the market to cover the disparity between its expenditures and income. It is closely monitored as increased government borrowing limits the available funds for the private sector, resulting in elevated interest rates and subsequent economic slowdown.
Anticipated to be around 5.9% of GDP, the government’s fiscal deficit target was slightly surpassed as the Finance Minister announced a reduction to the 5.8% level. Moreover, ambitious targets were set for the upcoming fiscal years, aiming for 5.1% of GDP in FY25 and 4.5% of GDP in FY26.
While this reduction is favorable, it prompts inquiries about the methods employed for fiscal consolidation and its potential impact on economic growth.
- Unrealized Achieve Capital Expenditure
Target Last year’s Budget unveiling emphasized a significant surge in government capital expenditure. Commendation was received for elevating the capex target to Rs 10 lakh crore. However, the Revised Estimates data reveals that the capex goal was not reached, settling at Rs 9.5 lakh crore. This partially accounts for the reduction in fiscal deficit.
- Reductions in Health and Education Expenditure
While budget allocations for health and education in India are often considered insufficient for the country’s needs, the revised estimates indicate that even these modest targets were not met in the current fiscal year. The intended spending on education was Rs 1,16,417 crore, but the actual expenditure amounted to Rs 1,08,878 crore. Similarly, the allocated health budget was Rs 88,956 crore, but the realized spending was only Rs 79,221 crore.
- Reductions in Funding for Core Schemes Benefiting Marginalized Sections
Similar reductions are observed in the allocations for core schemes aimed at supporting marginalized sections such as Scheduled Castes (SCs), Scheduled Tribes (STs), and minorities. For instance, the Revised Estimates (RE) for the Umbrella Scheme for the Development of Scheduled Castes are Rs 6,780 crore, compared to the Budget Estimates (BE) of Rs 9,409 crore. In the case of STs, the RE is Rs 3,286 crore, down from a BE of Rs 4,295 crore. The funding decline is most pronounced for minorities, decreasing from a BE of Rs 610 crore in FY24 to an RE of Rs 555 crore. Additionally, for the Umbrella Programme for the Development of Other Vulnerable Groups, the RE is Rs 1,918 crore, a decrease from a BE of Rs 2,194 crore.
- Income Tax Emerges as the Primary Revenue Source for the Government
While a significant portion of government finances is derived from borrowings, income tax revenues have become the second-largest contributor, now leading in revenue generation. According to the Budget documents, income tax revenues are projected to constitute 19% of all government resources in FY25. Corporate tax is anticipated to contribute 17%, GST 18%, and borrowings 28%.
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