Opinion
Budget 2024: Big vision and a steady hand
Summary
The government is playing a very constructive role as a facilitator. That should make us all very optimistic about the future.
The hallmarks of finance minister Nirmala Sitharaman’s six budget speeches are the consistency in vision, stress on sound economic management, focus on the welfare of the people and a responsiveness to the wider economic context.
This interim budget was no different other than respecting the fact that a full budget will be presented in July after the general elections. It presented with great clarity the framework which has enabled India to grow at an impressive 7% plus per annum. According to the FM, average real income for Indians has increased by 50% and 250 million people have been pulled out of poverty in the government’s tenure.
The Indian economy is in a sweet spot. And the credit for it goes to the current regime. Despite geopolitical risks, India has emerged with strong growth, moderate inflation and a sound external account. When you look around at the state of the world, be it advanced countries or emerging economies, which are battling low growth and high inflation, this is a remarkable achievement.
The government has been responsible with its finances. And it has spent on the right things. This interim budget committed the government to an 11% increase in capital expenditure on infrastructure which has already been tripled over the course of the last five years. This has been a major driver of growth with its multiplier effects.
At the same time, the government has been able to maintain its path to lowering the fiscal deficit. For this year, it will be 5.8%, lower than the estimated 5.9% going down further to 5.1% next year. As the FM said, this consolidation and lowering of government borrowing will help free up capital at a lower cost for private investment. The FM has always been encouraging of private investment and the time is ripe for a take-off.
The reason the government can spend more on productive investment while reducing the overall deficit is because its efforts at reforming and simplifying the tax system are yielding dividends with record collections and a historically high tax-GDP ratio. The interim budget followed convention by not making any changes in tax rates. However, the government continued its effort to reform tax administration with an announcement to wind up tax demands of up to ₹25,000, some of which have been pending for five decades.
Prime Minister Narendra Modi has a vision of a Viksit Bharat by 2047 and the FM has promised a detailed roadmap in July. There were some encouraging indications in the interim budget. This government realizes the importance of innovation and the ability of India’s youth to harness innovation to build a better future. In this context, it was good to see the seeding of a ₹1 trillion fund which will give our tech savvy youth financing and refinancing for projects in sunrise sectors at zero or nominal interest rates over long tenors.
There was further emphasis on sunrise sectors when the FM announced viability gap funding for offshore wind power and government support for charging infrastructure for electric vehicles. In keeping with a pro-people approach, the scheme to install rooftop solar in 10 million homes will bring 300 units of free electricity and savings of ₹15,000- ₹18,000 to low-income families.
The FM’s focus on the potential of tourism as a fountain of entrepreneurship and jobs can make it a sunrise sector for jobs. The G-20 meetings which were hosted in over 60 places have opened the possibility of business and conference tourism. The decision to develop connectivity and infrastructure to our beautiful islands will be a gamechanger. And a decentralized approach where the central government will encourage states to develop iconic centres while creating a single rating framework will yield results. Any collaboration between the state and the private sector can work wonders.
The empowerment of women has been a consistent theme in FM’s budgets. The extension of the Ayushman Bharat health insurance scheme to all Anganwadi workers and ASHA didis is timely. And the ambition to increase the target of Lakhpati Didis from 20 million to 30 million via skill development and self-help groups is welcome.
This a time of immense opportunity in India. The government is playing a very constructive role as a facilitator. That should make us all very optimistic about the future.
Anil Agarwal is the chairman, Vedanta Group
