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What do experts expect from Modi 3.0 budget?
Finance Minister Nirmala Sitharaman set to present record-breaking 7th budget on Tuesday
Workers fasten iron rods together at the construction site of a residential building of Pradhan Mantri Awas Yojana in Ahmedabad. — Reuters
The Indian federal budget for the fiscal year 2024-25 is one of the most anticipated events for the world’s fifth largest economy as the Modi 3.0 government, which came to power for the third time in a row with a reduced majority, seeks to reinforce its development/reform agenda to refurbish its clout.
The record-breaking 7th budget presentation by Finance Minister Nirmala Sitharaman on Tuesday assumes added significance as it is widely anticipated to set the tone for the fastest growing major global economy that has set sights on becoming the world’s third largest economic powerhouse in a matter of years.
Most analysts believe that the proposals will largely focus on key areas such as taxes, welfare measures, economic growth, development, infrastructure, digital, and IT sectors. Other key areas expected to get increased attention include green energy, defence, railways, housing and manufacturing.
The budget 2024-25 is set to be presented on July 23, during the monsoon session of Parliament, which begins on July 22 and concludes on August 12.
Economists and analysts expect tax relief for the middle class of the world’s largest populous nation to boost consumption as speculation is rife about whether personal taxes will be reduced or if the NDA coalition government will increase spending on consumer-focused sectors. Industries like consumer goods, real estate, housing finance, infrastructure, and automobiles are anticipated to benefit from a boost in consumption, according to brokerage firms.
HSBC expects the continuation of production-linked incentive schemes designed to stimulate local manufacturing and job creation. D.K. Joshi, chief economist at CRISIL, said the government is likely to focus on rationalizing the tax structure and reducing the compliance burden on taxpayers. “The government may simplify the tax code and reduce the number of tax slabs. Additionally, the government may also consider reducing taxes on certain goods and services to boost consumption and stimulate demand,” he says.
Like the previous two terms, the government led by Prime Minister Narendra Modi remains committed to the welfare of the people, and the budget promises to continue this trend, economists said. Madan Sabnavis, chief economist at Care Ratings, believes that the government may consider measures to provide relief to the poor and vulnerable sections of society, such as farmers, migrant workers, and small businesses. “This could include increased allocations for flagship schemes such as the National Health Mission and the Pradhan Mantri Awas Yojana.”
The Modi 3.0 government has set ambitious targets for economic growth, and the new budget is expected to focus on achieving those targets. Dr. Soumya Kanti Ghosh, group chief economic adviser at State Bank of India, said, “The government may consider measures to boost investments and create employment opportunities. Additionally, the government may also consider measures to promote exports and reduce imports to improve the balance of trade.”
The coalition government is expected to continue its focus on boosting development and improving infrastructure. Dr. Pronab Sen, former chief statistician of India, said the government may increase spending on infrastructure projects such as roads, railways, airports, and ports. “The government may also consider measures to promote private sector investment in infrastructure projects and to create a favorable investment climate.”
The infrastructure sector is expected to receive a significant boost in the upcoming budget, with the government expected to increase spending on infrastructure projects. According to Dr. N.R. Bhanumurthy, professor at National Institute of Public Finance and Policy, “The government may create a National Infrastructure Pipeline to fund projects in sectors such as roads, railways, airports, and ports. Additionally, the government may also announce measures to promote investment in emerging sectors such as electric vehicles and renewable energy.”
The Modi 3.0 government has been committed to promoting digital adoption and innovation, and the upcoming budget is expected to continue this trend. “The government may promote the adoption of digital payments, e-commerce, and telemedicine. Additionally, the government may consider measures to promote investment in emerging technologies such as artificial intelligence, machine learning, and blockchain,” says Dr. Arvind Virmani, former chief economic adviser to the Government of India.
The budget, which is going to be a litmus test for Modi 3.0, is expected to leave no stones unturned to shore up its image as a welfare and reform-oriented regime. It will, therefore, not overlook key areas such as taxes, welfare measures, economic growth, development, infrastructure, digital, and IT sectors. The budget is expected to rationalize the tax structure, provide relief to the poor and vulnerable, and boost investments and create employment opportunities.
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