By Manoj Kumar
NEW DELHI (Reuters) – Finance Minister Nirmala Sitharaman said on Thursday that India’s economy was going through a transformation as she presented the government’s last budget to parliament before general elections due by May.
She announced the government would spend 11.1 trillion rupees ($134 billion) on infrastructure in the next fiscal year, about 11% higher when compared to allocations for the current fiscal year.
The fiscal deficit target for the next fiscal year has been reduced to 5.1% of GDP compared to the revised deficit estimate of 5.8% for the current fiscal year.
The interim budget for 2024/25 is being seen as an economic manifesto for Prime Minister Narendra Modi’s ruling Bharatiya Janata Party (BJP) and will give cues to the market on its plans for fiscal consolidation, borrowings and future taxation policy.
Here are the highlights of her budget speech:
* Govt brought 250 million people out of poverty in 10 years
* Crop insurance scheme benefits reach 40 million farmers
* India skill mission trained 14 million workers
* Govt provided small loans to 225 million households
* Govt provided small loans to 300 million women enterprises in 10 years
* Inflation has moderated and economic growth has picked up
* Pro-active inflation management has helped contain inflation within the target band (2%-6%)
ECONOMIC GROWTH
* Average real income of people increased by 50%
* The next five years will see unprecedented economic growth
* Next-generation reforms to be undertaken in consultation with states
* Govt to subsidise construction of 30 million affordable houses in rural areas
* Affordable housing scheme close to achieving 30 million houses
* Govt to pay special attention to making eastern India a powerful driver of growth
INFRASTRUCTURE SPENDING
* Allocation for infrastructure for 2024/25 raised to 11.1 trillion rupees ($134 billion), up 11.1% y/y
* Federal govt to allocate 3.86 trillion rupees to states for spending on infrastructure in 2024/25
* Corpus of 1 trillion rupees to be set up with a 50-year interest-free loan for research in the sunrise sector
* Viability gap funding to be provided for offshore wind power
* 10 million houses to get free electricity via rooftop solar programme
* To set up 5 integrated aqua parks
FISCAL DEFICIT
* India’s fiscal deficit for 2023/24 revised to 5.8% of GDP from 5.9%
* India’s fiscal deficit for 2024/25 target reduced to 5.1% of GDP
* Net borrowings for 2024/25 seen at 11.75 trillion rupees
* Federal gross borrowings for 2024/25 seen at 14.13 trillion rupees
NO NEW TAX
* No change in tax structure
* Investments by sovereign wealth funds and pension funds will be tax-free for one more year
* Tax reforms have widened the tax base and increased tax collections
* Total revenue receipts in 2024/25 estimated at 30 trillion rupees vs revised estimate of 26.99 trillion rupees in 2023/24
MARKET REACTION
* India rupee rises to 82.9325 against 82.9800 before the budget speech
* India 10-year benchmark govt bond yield falls to lowest level since July 19 after 2024/25 govt borrowings pegged at lower than market estimates
($1 = 82.9400 Indian rupees)
(Reporting by Manoj Kumar; Editing by YP Rajesh)
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