New Delhi: With Nirmala Sitharaman returning as Finance Minister, her focus will be on fiscal consolidation, job creation, and welfare measures as she prepares the Union Budget 2024-25.
Immediate Priorities:
Sitharaman is expected to continue her policy focus on fiscal consolidation while emphasising job creation and welfare measures in the upcoming Budget. The finance ministry, having allocated ₹1.37 lakh crore for tax devolution to states, remains in high gear, swiftly responding to domestic and international developments.
Union Budget 2024-25:
The top priority is finalising the Union Budget 2024-25, to be presented next month. It’s anticipated that the Budget will maintain a focus on fiscal consolidation while addressing rural distress and boosting manufacturing investments. Support for micro, small, and medium enterprises (MSMEs) facing funding and expansion challenges is also expected.
‘With the cabinet formation now out of the way, focus shifts to the Union Budget,’ said Shreya Sodhani, Regional Economist at Barclays. ‘We may see some changes in spending patterns, with an increase in revenue expenditure and a focus on social sector schemes targeting rural consumption.’
The government’s strong fiscal position, bolstered by a large RBI dividend and higher tax collections, suggests the fiscal deficit target will remain at 5.1% of GDP, with no changes to the borrowing program. The middle class hopes for tax relief, particularly in the capital gains tax regime and higher exemptions under the old income tax system.
Growth and Economic Challenges:
Sitharaman must navigate economic challenges, sustain growth, and curb inflation. Despite global uncertainties affecting export growth, India’s economy has revived post-pandemic, growing over 7% in the three years till FY24 and projected to grow by 7.2% this fiscal. Creating adequate jobs for the growing workforce remains a critical mission.
Legislative Agenda:
A busy legislative agenda awaits the Finance Minister, with several pending economic Bills, including amendments to the Insolvency and Bankruptcy Code and the Companies Laws. Reforms in the insurance sector, amendments to the Insurance Act, 1938, and the Insurance Regulatory and Development Authority of India Act, 1999, are also pending. The draft Digital Competition Bill and the Central Excise Bill, 2024, replacing the Central Excise Act, 1944, are up for consultation.
Goods and Services Tax (GST):
As chair of the GST Council, Sitharaman will tackle various issues, including a pending meeting to discuss the steady revenue growth from the indirect tax regime. The online gaming industry hopes for a review of the 28% tax on the sector. Industry stakeholders also anticipate progress on the rate rationalisation exercise by the Group of Ministers of the GST Council.
With a packed agenda, FM Nirmala Sitharaman’s strategic decisions will be crucial in shaping India’s economic landscape and achieving the government’s ambitious targets.
