NEW DELHI: India’s Finance Minister Nirmala Sitharaman on Thursday unveiled plans to spend nearly $134 billion on infrastructure and focus on long-term reforms to drive growth and contain the fiscal gap despite pressures to raise spending before elections.
She said the next generation of reforms will be carried outin consultation with state governments.
The government has simplified India’s complicated tax structures, invested in new ports and roads but has struggled to liberalise land acquisition and labour laws.
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.
India’s Modi likely to lay out modest economic manifesto in pre-election budget
The interim budget for 2024/25 is being seen as an economic manifesto for Prime Minister Narendra Modi’s ruling Bharatiya Janata Party (BJP), giving cues to the market on its plans for fiscal consolidation, borrowings and future taxation policy.
Here are the highlights of the interim budget:
Economic growth
Nominal GDP growth for 2024/25 seen at 10.5% y/y
Inflation has moderated and economic growth has picked up
Pro-active inflation management has helped contain inflationwithin the target band (2%-6%)
Govt says its policies brought 250 million people out ofpoverty in 10 years
Infrastructure spending
Allocation for infrastructure for 2024/25 raised to 11.1trillion rupees ($134 billion), up 11.1% y/y
Federal govt to allocate 3.86 trillion rupees to states forspending on infrastructure in 2024/25
Corpus of 1 trillion rupees to be set up with a 50-yearinterest-free loan for research in sunrise sectors
Federal govt to allocate 2.55 trillion rupees ($30.7 billion)for spending by railways in 2024/25
2024/25 budget allocations for the road transport ministryseen at 2.78 trillion rupees
Viability gap funding to be provided for offshore wind power
10 million houses to get free electricity via rooftop solarprogramme
Govt to subsidise construction of 20 million affordable housesin rural areas
No new tax
No change in tax structure
Investments by sovereign wealth funds and pension fundswill be tax-free for one more year
Tax reforms have widened the tax base and increased taxcollections
Total revenue receipts in 2024/25 estimated at 30 trillionrupees vs revised estimate of 26.99 trillion rupees in 2023/24
Tax-GDP ratio in 2024/25 seen at 11.7% of GDP vs revised11.6% estimate for 2023/24
Increase in spending
2024/25 federal budget spending estimated at 47.66trillion rupees, 6.1% higher compared to revised spendingestimate of 44.9 trillion rupees in 2023/24
Education budget for 2024/25 seen at 1.25 trillion rupees,14.5% higher than revised estimate of 1.09 trillion rupees for2023/24
Health budget for 2024/25 seen at 901.7 bln rupees, 13.8%higher than revised estimate of 792.2 billion rupees for 2023/24
Govt’s 2024/25 spending on affordable housing programmeseen at 806.7 bln rupees, 49% higher compared to revisedestimate of 541 bln rupees in 2023/24
Subsidies
Fertiliser subsidies for 2024/25 seen at 1.64 trillionrupees vs 1.89 trillion rupees in 2023/24
Food subsidies for 2024/25 seen at 2.05 trillion rupees vs2.12 trillion rupees in 2023/24
Govt spending on rural jobs programme seen at 860 blnrupees in 2024/25, at the same level as revised estimates ofcurrent fiscal
Fiscal deficit
India’s fiscal deficit for 2023/24 revised to 5.8% of GDP from5.9%
India’s fiscal deficit for 2024/25 target reduced to 5.1% ofGDP
Net borrowings for 2024/25 seen at 11.75 trillion rupees
Federal gross borrowings for 2024/25 seen at 14.13 trillionrupees
Govt to spend 11.9 trillion rupees ($143.4 billion) oninterest servicing in 2024/25, more than one-third of govtrevenue receipts