There was widespread expectation that the Narendra Modi government would be tempted to give in to the compulsions of electoral politics and resort to populist measures with an eye on the 2024 Lok Sabha election. But the Interim Budget 2024 has eschewed any such measure and the government must be commended for it.
While the larger world economy continues to grapple with severe economic challenges, the Indian economy is cruising along quite well due to the far-sighted policies and reforms of the Modi government. Therefore, sticking to the maxim ‘if it ain’t broke, don’t fix it’, Finance Minister Nirmala Sitharaman has kept the budget limited to prudent macroeconomic management and the focus on inclusive and sustainable growth. For inclusivity, farmers, women, poor, and the youth occupy the centre stage in the Interim Budget 2024.
One of the highlights of the budget is the fiscal management by the government. The revised estimate of fiscal deficit for FY 2023-24 is 5.8 per cent of GDP, compared to 5.9 per cent in the budget estimate. This is a big achievement on the part of the Modi government on fiscal consolidation, considering that there is a fall in the wholesale price index (WPI), which affects nominal GDP growth, and the government has also increased its expenditure under various social welfare schemes. The fiscal deficit target for next year is equally ambitious at 5.1 per cent of GDP. The government’s gross and net market borrowing for the coming year will also be less than those for the current year. It will ensure reduced cost of capital for investment by the private sector.
Another important landmark of the government on fiscal prudence is the debt-to-GDP ratio. The estimated gross borrowing for 2024-25 is Rs 14.13 lakh crore, which is much lower than the current year’s borrowing of Rs 15.43 lakh crore, and with the increase in nominal GDP to $4 trillion, the debt-to-GDP ratio will fall drastically in the coming year. Additionally, it will also create space for the government to follow expansionary policy in times of crisis.
Capital expenditure by the government has been the most important driver of economic growth since the outbreak of Covid-19 pandemic. It has been so meticulously planned that apart from generating demand for current goods and services in the economy, such investments are raising the productive capacity of our economy and crowding in private sector investment. With public capital expenditure for FY 2024-25 budgeted at Rs 11.1 lakh crore, the government will continue to play an important role in infrastructure development in the coming year as well, helping in ease of living for the middle class and ease of doing business for the business class.
Also read: ‘Walked the path of fiscal prudence’ — what economists say about interim budget 2024’s fiscal maths
Taxpayers, R&D—and a vision document
The approach of the Modi government towards taxpayers has witnessed a sea change from that of previous governments. This, together with leakage and corruption free delivery of welfare programmes, has encouraged people to pay income tax and file tax returns. The number of ITR filed in 2013-14 was 3.79 crore, which doubled to 7.78 crore in 2022-23. A small but significant decision that shows that the government is truly committed to the ideas of ‘Citizen First’ and ‘Minimum Government Maximum Governance’ is its decision to withdraw income tax demand notices, going back from the financial year 1962 till FY 2010 for up to Rs 25,000, and up to Rs 10,000 from FY 2011 to FY 2015, announced in Budget 2024. This is expected to benefit approximately one crore taxpayers.
The Modi government rightly argues that a country cannot be truly Aatmanirbhar until it undertakes cutting-edge research and development activities. A highlight of the interim budget is the creation of a ‘research and development fund’ with a corpus of Rs 1 lakh crore. Recognising the nature of scientific research where a breakthrough can take a long time, this fund will provide long-term finance to R&D projects at low or zero interest rate. Merging the imperatives of green growth and identifying the new engines to propel the Indian economy further, Budget 2024 has provisions of viability gap funding for harnessing wind energy. It has also allocated money for coal gasification. It’s also going to give 300 units of electricity free of cost to one crore households per month and sell the surplus to the grid, under the rooftop solar scheme. This will go a long way in boosting the income and energy security of Indian households.
When the BJP came to power in 2014, India’s position with regard to economic parameters was in doldrums and the country was classified as one of the fragile five economies of the world. In spite of suggestions by many quarters to bring out a white paper on the bad economic situation, Prime Minister Modi decided against it in the national interest of not destabilising the economy further. In the last ten years, India’s economy has come out of all the major challenges and is the fastest growing and the fifth-largest economy of the world. Finance Minister Sitharaman has now announced that the government will bring out a white paper on the economy to continue on the path of economic reform and boost the economy further.
In her interim budget speech, she spoke of the government’s commitment to release in July 2024—when it will present the full budget—a document on its vision of a ‘Viksit Bharat’ by 2047 and a roadmap to realise it. This statement makes it amply clear that the government is confident of being voted back to power in the upcoming general election and this continuity augurs well for the economy and the people of India.
Gopal Krishna Agarwal is the national spokesperson of the BJP. He tweets @gopalkagarwal. Views are personal.
(Edited by Prashant)