The Finance Minister has presented a visionary, confident and judicious Budget.   A fiscal deficit target of 5.1% along with an increase in capital expenditure by 11% for next year is a big positive.  The proposals for building three major railway corridors and green energy programmes for sustainable development augur well for the economy.  

On the tax front, stability in tax rates and extension of time line for tax benefits available to Start-Ups, Sovereign Wealth funds and Pension funds and IFSC units earlier expiring on 31 March 2024 are welcome measures. The extension of the SWF and Pension fund provisions will facilitate new entrants and augur well for the National Monetisation Program of the Government. The extension for the IFSC units in aircraft leasing will be important given the growth aspirations of the Indian aviation industry. The plan to withdraw old outstanding small tax demands benefitting 1 crore taxpayers should help reduce the levels of disputes.

Overall, a growth focused positive Interim Budget to maintain India’s growth momentum amid global challenges.

Budget of Agri Development

The budget focuses on critical areas of economic growth and wealth  for marginalized sectors, prioritizing productivity, employment, and sustainability. It welcomes initiatives like increasing productivity and doubling exports, particularly in fast-growing and critical sector like fisheries. Similarly, it emphasizes a comprehensive approach to dairy. The budget also focuses on historically lacking private sector investments in post-harvest infrastructure, import substitution for key crops, R&D investment, and enhancing productivity across the value chain. The extension of Nano DAP application signals ongoing innovation in the farm input sector, while the emphasis on income generation for women through Lakhpati Didi showcases the government's commitment to women's economic empowerment.

The ESG attributes were lucidly interwoven across the interim budget of FY 24-25. To reach Net Zero commitment, the budget emphasizes the deployment of low carbon/clean energy interventions to combat climate change include rooftop solarisation for 1 Crore households, viability gap funding for enhancing offshore wind energy up to 1 GW, coal gasification and liquefaction of 100 MT by 2030, compressed bio gas, bio manufacturing and bio foundry to produce bio-degradable environmental friendly polymers and products, scale up plans for electric vehicles and charging infrastructure for clean environment, nano DAP expansion for smart agriculture and three separate railways corridors for freight movement to improve logistics efficiency. The social attributes to enhance social inclusivity and alleviate poverty include empowerment of women in terms of providing loan for entrepreneurship, increased women in workforce, Investment of INR 1 Lakh Crore on Research and innovation on New Age Technologies for tech savvy youth, improve health cover and efforts to enhance coverage of lakhpati didi from 1 Cr women to 2 Cr in the near term. The new definition of GDP (Governance, Development and Performance) reinforces the mindset of minimise government and maximise governance to push the laid-out budget agenda for a profound growth of India in the coming years.

EV charging infrastructure signals investment opportunities and employment

With a focus on expanding charging infrastructure and deploying more electric buses, the government is poised to attract significant investments into the electric vehicle sector.

The Interim Budget for 2024-25 accords the highest priority to restoring fiscal consolidation. The Budget shows the reduction in the fiscal deficit to GDP ratio by 60, 70, and 60 basis points in three consecutive years so as to reach 4.5% of GDP by 2025-26. Accordingly, the reduction in the Centre’s debt-GDP ratio from 60.8% in 2020-21 which was at its peak in the Covid year to 56% in 2024-25 (BE) is 4.8% points. This will have a positive impact on the ratio of interest payments to revenue receipts. In terms of the FRBM debt-GDP benchmark of 40%,the GoI still has some distance to cover.

The latest budget proposal refines the Input Service Distributor (ISD) scheme, aligning it with Circular 199. Now, ITC distribution through ISD is limited to services directly benefiting distinct branches in different states/GST registrations. This clarifies ambiguities and eases compliance for businesses, as it doesn't encompass all received services. However, careful analysis is crucial to determine if services fall under the "distinct person" rule for ISD or constitute a separate supply in itself. Importantly, this change applies prospectively, protecting past cross-charges from disputes.  While positive, a case-by-case approach is essential to navigate the "distinct person" rule effectively to avoid future disputes.

Given the Government’s perspective of keeping the interim budget an on-account vote, the Finance Minister did not dwell into any specifics, leaving the changes for the full budget post elections.  While she spoke of the past performance, as far as the Health Science Sector is concerned, there was some perspectives on things to come in future. 

There was a commitment to focus on setting up medical colleges in existing hospitals, focus on women healthcare with encouragement of cervical cancer vaccination for young girls, maternal and childcare related schemes for improved nutrition delivery, early childhood care and development etc. The focus on research and innovation was given a further boost by announcing a one lakh crore corpus for providing interest free loan for a long duration for research and innovation for private sector.  Also the cover under Ayushman Bharat Scheme has been extended to cover ASHA workers, Anganwadi workers and helpers. 

On the tax front, the expectation of extension of concessional tax regime of 15% for manufacturing facilities beyond 31 March 2024 remained unmet.

While we will look at the full budget in July for more details, what is also positive is that there is increase in outlay on Health for FY 2024-25 versus the revised estimates for FY 2023-24.  So overall the budget continues the path for growth of healthcare and access in India.

Government Commits to 'Net Zero by 2070' with Focus on Green Energy and E-Mobility

Policy proposals from today’s budget reinforces the Government’s commitment to its ambitious target of being ‘net zero’ by 2070. Clear focus on green energy can be gauged from measures such as viability gap funding for harnessing offshore wind energy potential, rooftop solarization for 1 Cr. households.

Further, call to strengthen e-vehicle ecosystem by supporting manufacturing and charging infrastructure and greater adoption of e-buses for public transport networks through payment security mechanism is also a welcome move. CBG units may also benefit from policy proposals such as financial assistance for aggregation in procurement of biomass and mandatory phased blending of CBG in CNG for transport and PNG for domestic purposes. While it will be unfair to pass judgement on unfinished agenda given the limitations of interim budget, especially in terms of policy announcements around FAME III and Green Hydrogen, which were highly anticipated, the Government has done well to augment its agenda towards energy transition.

The significant increase in budget allocation for PLI schemes isn't just a number – it's a concrete indicator of their success! Witnessing actual investments materialize on the ground underscores the schemes' effectiveness. This, in the mid to long term, is a game-changer for India's self-reliance journey (Aatmanirbhar Bharat). By fostering domestic manufacturing prowess, PLI schemes are laying the solid foundation for a flourishing future.

Vote on Account budget resisting temptations to propose any populist tax concessions. It takes courage to stay firm on the path of fiscal prudence. Very impressive to see focus on poor, women, youth and farmers for inclusive growth as India continues to aim for higher GDP as also Governance, Development and Performance. Welcome initiative to withdraw 50+ years petty and unverified tax demands benefiting small taxpayers. Kudos to the FM for a job well done.

Strategic focus on consumption to drive economic expansion

In examining the implications of the Interim Budget 2024, it is evident that a deliberate focus on stimulating consumption has been strategically embedded in the fiscal framework. The proposed measures, ranging from the promotion of spiritual tourism to the incentivization of rooftop solar and housing initiatives, are designed to provide a sustained impetus to overall consumption. The commitment to maintaining a fiscal deficit of 5.1% underscores a prudent approach, ensuring fiscal discipline while supporting economic growth. This targeted strategy reflects a nuanced understanding of the pivotal role that consumption plays in driving economic expansion.

In a positive for the real estate sector, 2 crore more houses will be built under the PM Awas Yojana scheme in the next five years and new scheme for enabling  middle class who are currently living in rented premise to build or buy their own houses will be implemented. This should also provide an impetus to the ancillary sectors such as cement, steel etc. The extension of the Sovereign and Pension Fund exemption  till March 31, 2025 could lead to more investments in the warehousing and data centre segments.

Despite being a budget with minimal amendments (in keeping with the tradition for Vote on Account budgets), the extension of time-limits from 31 March 2024 to 31 March 2025 for the date of incorporation for eligible start-ups to claim a profit linked tax holiday provides a welcome relief to the start-up sector, indicating the government’s continued support and faith. These measures are certainly going to incentivize the start-up eco-system by providing ease of doing business and increasing free cashflows available for their growth and expansion.

As expected, since this was a vote on account Budget, no changes have been made on personal, direct and indirect taxes. The allocation of corpus for financing research and innovation in sunrise domains is a catalyst to support the technology companies in the private sector. A separate scheme for deep tech technology to support the defence industry is a welcome move and details of this scheme will be keenly awaited by technology companies and start-ups.

While increase in allocation of funds for production linked incentives and certain digital India program is a positive development, non-extension of timelines for availing concessional corporate tax rate for manufacturing seems to be a miss, especially for the IT hardware/electronic manufacturing industry.

Government hints at potential spectrum sale

The government anticipates a nearly 30% increase in revenue from the telecoms sector in FY25, reaching approximately 1.2 lakh crore, compared to the revised budgeted revenue estimation of 93.5 thousand crore for FY24. With the sector’s revenue growing in early teens, the budgeted estimations suggesting that the government may be considering another spectrum sale.

Urban development paving the path of Viksit Bharat

The Budget Session 2024 stands as a pivotal moment, steering the economic course of the nation. Capital expenditure planned in the interim budget uncovers a tapestry of infrastructure development that can shape the trajectory of India's economic landscape.

One of the major highlights of the budget is the noteworthy increase in funding in the road sector as the Union Budget has allotted approximately Rs 2.78 lakh crore for 2024-25, representing a 2.8 percent rise from the previous year. MoRTH now is the ministry with the 2nd highest budget- just after defence. This increase in budgetary allocations is crucial as interest expenses continue to rise and the costs of acquiring land escalate. By injecting these funds, the government demonstrates their dedication to improving infrastructure and promoting sustainable growth within the transportation industry.

Three economic railway corridors under the PM Gati Shakti Scheme are poised to revolutionize multi-modal connectivity. The corridors, designed to optimize logistics efficiency and reduce costs, include energy, mineral, and cement corridors, port connectivity corridors, and high traffic density corridors. The joint impact of railway corridor programmes and the enhancement of the Vande Bharat carriages is set to transform India's transportation landscape, with profound effects on economic progress, logistical efficiency, and passenger satisfaction. To meet the growing enthusiasm for domestic tourism, Interim Budget embarks on initiatives to enhance port connectivity, develop tourism infrastructure, and improve amenities across our islands, including the Lakshadweep. 

In nutshell, this interim is designed to pave the path for a Viksit Bharat by 2047.