Interim Budget 2024: Five key areas government could focus on

Although the finance minister has ruled out making any "spectacular announcement" in this year's interim budget, investors and market watchers are still anticipating some big announcements.

"It is a matter of truth that the February 1, 2024, budget that will be announced will just be a vote on account because we will be in an election mode. So the budget that the government presents will just be to meet the expenditures of the government till a new government comes to play," the finance minister had said.

A full budget will be announced for the financial year 2024–25, only once the new government will come to power after the April–May Lok Sabha polls.


Here are the top five areas which could get the maximum weightage in this year's Interim Budget:

Jobs in focus

As we are heading towards the general elections in the middle of this year, the Opposition has intensified its attack on the Modi government for a lack of adequate jobs for India's burgeoning youth. Each year, more than 1 million youths join India's workforce. Thus, it is imperative for the ruling dispensation to provide a clear-cut path; otherwise, India's demographic dividend could turn into a demographic disaster. Nirmala Sitharaman may announce certain incentives to boost funding for rural infrastructure and broaden the scope of production-linked incentive (PLI) programs to include industries like services and chemicals.

“One of the ways could be higher spending on building rural infrastructure or providing incentives that improve cash flow... Broadening the scope of PLI schemes to sectors such as chemicals and services can create demand for more manufacturing," Deloitte said.
To be fiscally prudent or not?

The key question is whether the government would engage in prolifgacy to improve its chances ahead of the polls or opt for cautious measures to keep the the fiscal deficit in check. It would be interesting to see, although Sitharaman might not let up much and try to further reduce the fiscal deficit in the budget to 5.3% of India's GDP. “We see the Centre's fiscal deficit to consolidate further to 5.3 per cent of GDP, despite poll pressure," BofA Securities said in a note. The government will meet the FY24 commitment to reduce the fiscal deficit to 5.9 per cent, it added.

Capital Expenditure

In the last four years, the Modi government has spent a lot in its quest to improve India's infrastructure. Well, the current dispensation is probably going to keep up its trend of raising capital expenditure in the next budget, particularly for the infrastructure sector, in order to spur economic development.

While sharing its views on the pre-budget expectations, ICRA said, “We estimate Government of India to budget for a capex of ?10.2 lakh crore in FY25, implying a relatively sedate YoY expansion of about 10 per cent, compared to over 20 per cent expansion seen in each of post-COVID years. The slowdown in capex growth is likely to have some bearing on economic activity and GDP growth."

Consumption

According to a Redseer report, India's private consumption has been growing stronger since 2019 and reflects an increasing tendency to spend in categories that are driven by prosperity. But there is a spoke in the wheel of India's consumption story, as rural India is lagging behind urban India to a great extent, and that could push the government to take some measures. The finance minister may propose some policies that will increase demand for consumption in an attempt to advance the agricultural economy.

Social sector schemes

In the upcoming interim budget, the Union government may raise its funding for social sector initiatives because higher tax revenue may be available to it. Collections from income and corporate taxes have been showing buoyancy in the current fiscal year, and the total direct tax mop-up is likely to exceed budget estimates by about Rs 1 lakh crore, said PTI citing sources.