Insights into Interim Budget 2024: Fiscal Deficit, Government Schemes, and Economic Signals

Introduction:
• Finance Minister Nirmala Sitharaman recently presented the Interim Budget for 2024, a significant event considering the impending end of the current government’s term. In her speech, she highlighted key aspects, including the fiscal deficit, government schemes, and signals for the economic trajectory.
Fiscal Deficit and Economic Outlook:
• Sitharaman commenced her speech by referencing the Union government’s social sector schemes, emphasizing the four castes – the poor, youth, women, and farmers. Notably, she revealed that over the last decade, 25 crore people emerged from multi-dimensional poverty. The fiscal deficit for 2023-24 came in at 5.8%, slightly lower than the targeted 5.9%, signaling prudent financial management. The projected fiscal deficit target for FY25 is set at 5.1%.
Government Borrowings and Private Sector Impact:
• Gross and net borrowings for 2024-25 are anticipated to be lower than the current financial year, creating more significant credit availability for the private sector. This move aligns with the expectation of increased private sector investments on a larger scale.
Taxation and Borrowing Policies:
• Unlike the 2019-20 interim Budget, no changes in direct or indirect tax rates were announced. The estimated lower borrowings for 2024-25, at Rs 14.13 lakh crore for gross borrowing and Rs 11.75 lakh crore for net borrowings, indicate the government’s strategic approach to fiscal management.
Key Government Initiatives:
• Sitharaman highlighted achievements such as pulling 25 crore people out of poverty, preventing leakages through direct benefit transfers, and integrating 1,361 mandis under the electronic National Agriculture Market (e-NaM). The Finance Minister also discussed the government’s adherence to Panchamrit climate goals and the promotion of rooftop solar power generation.
Economic Growth and Reforms:
• The speech outlined the government’s commitment to fostering economic growth through next-generation reforms and building consensus with states. Projections suggest India’s economy is poised to grow over 7% in the coming years, aiming to become the third-largest economy globally.
Digital Public Infrastructure and Economic Formalization:
• Sitharaman emphasized the role of Digital Public Infrastructure (DPI), including Aadhaar and UPI, as a new factor of production contributing to the formalization of the economy. This aligns with the government’s push for ‘sovereign AI.’
Conclusion:
• The Interim Budget 2024 serves as a vision statement for the government’s potential third term. With a focus on fiscal prudence, targeted poverty alleviation, and economic formalization, the government aims to position India for robust growth. The absence of new welfare schemes reflects confidence in existing policies, and the budget sets the stage for the upcoming general elections.