Echoing Finance Minister Nirmala Sitharaman’s statement that the FY 2024 budget will follow the spirit of precedents, economists expect it to be a pragmatic budget rather than a populist one, even if this is the last full budget before the 2024 general election.
According to Kirtika Suneja and Yogima Seth Sharma, the budget should continue to focus on capital spending as an engine of growth and boost manufacturing while continuing post-pandemic fiscal consolidation.
1.G row orientation
The budget will attempt to limit the impact on the Indian economy due to the global slowdown.
Global slowdown weighing on exports and industry.
Russian-Ukrainian crisis, monetary tightening, main concerns.
Key Suggestions
Further increase capital spending from 2.9% of current GDP to almost 3.5%.
Streamline personal income tax rates to stimulate demand.
Reduce the maximum GST rate by 28%.
Improve the ease of doing business.
Urban Employment Guarantee Program.
2. Manufacturing Stimulation
The budget should continue to focus on reviving domestic manufacturing.
Sluggish exports are dragging down the manufacturing sector.
Pockets of weak demand relating to rural value chains.
LIP programs for labor intensive sectors likely in budget.
27 sectors in Focus Make in India 2.0.
Key Suggestions
Extend corporate tax of 15% on new investments to all sectors.
Increase cash lending to MSMEs without collateral.
Amend classification standards for MSME APMs.
Reduce taxes on electric vehicles.
RoDTEP program for all sectors to increase exports.
3. Fiscally Responsible
The budget should continue to focus on post-Covid fiscal consolidation
Economists expect a fiscal gap of 5.5 to 5.8 percent of GDP for FY24.
The food and fertilizer subsidy bill should be lower.
High nominal growth could keep taxes strong.
The gross tax catch-up for financial year 24 is 14 to 16% higher than that for financial year 23 BE.
A resurgence of the pandemic is a major risk.
Financial turbulence and a sharper-than-expected global slowdown other risks.
Key Suggestions
Accelerate the monetization and privatization of assets.
