A government budget or a budget is a projection of the government’s revenues and expenditure for a particular period of time often referred to as a financial or fiscal year, which may or may not correspond with the calendar year.
- Fiscal Year: Runs from April 1 to March 31.
- Historical Context:
- First Budget in pre-independent India: Presented in 1860 by James Wilson of the British Indian Government.
- First Budget in independent India: Presented in 1947 by Finance Minister RK Shanmukham Chetty.
- Budget Preparation:
- The Department of Economic Affairs, Ministry of Finance, is responsible for preparing the Budget document.
- Budget Classification:
- Revenue Budget: Includes the government’s expected income for the year, primarily from taxes.
- Capital Budget: Focuses on government assets and liabilities, including significant expenditures like infrastructure development.
Budget Parts
- Part A:
- Macroeconomic section announcing government schemes and priorities.
- Part B:
- Involves the Finance Bill, containing taxation proposals such as income tax revisions.
- A Finance Bill is a Money Bill as defined in Article 110 of the Constitution.
- The Speaker has the final authority to determine whether a bill is a Money Bill.
Constitutional Provisions
- Article 112:
- Defines the Union Budget as a statement of the government’s estimated receipts and expenditures.
- Known as the Annual Financial Statement, although the term “budget” is not mentioned in the Constitution.
Key Budget Documents
- Budget Speech
- Annual Financial Statement (Article 112)
- Demands for Grants (Article 113)
- Finance Bill (Article 110)
- Fiscal Policy Statements mandated under the FRBM Act, 2003, including:
- The Macro-Economic Framework Statement
- The Medium-Term Fiscal Policy cum Fiscal Policy Strategy Statement.
Additional Documents
- Expenditure & Receipt of Budget
- Expenditure Profile
- Budget at a Glance
- Memorandum Explaining the Provisions in the Finance Bill
- Output Outcome Monitoring Framework
- Key Features of Upcoming Financial Year Budget
- Implementation of Budget Announcements for the Closing Financial Year
Budget 2024 – 25 Overview
The four main focus points of the budget includes: ‘Garib’ (Poor), ‘Yuva’ (Youth), ‘Annadata’ (Farmer) and ‘Nari’ (Women).
Budget – Part A
In her 7th Union Budget speech, finance minister highlighted that this year’s Budget envisages sustained efforts on nine priorities:
- Productivity & resilience in Agriculture,
- Employment & Skilling
- Inclusive human resource development & social justice,
- Manufacturing & services,
- Urban development,
- Energy securities,
- Infrastructure,
- Innovation, R&D
- Next gen reforms.
Productivity and Resilience in Agriculture
- Natural Farming:
- Initiate 1 crore farmers into natural farming with support for certification and branding within 2 years.
- Establish 10,000 bio-input resource centres.
Employment & Skilling
- PM’s Three Schemes for Employment and Skilling: Targeting 4.1 crore youth over 5 years.
- New Centrally Sponsored Scheme for Skilling:
- Skill 20 lakh youth over 5 years.
- Upgrade 1,000 Industrial Training Institutes in hub and spoke arrangements.
- Align course content and design with industry skill needs.
- Internship Opportunities: Provide internships in 500 top companies for 1 crore youth over 5 years, with a monthly allowance of ₹5,000 and one-time assistance of ₹6,000 through CSR funds.
- Educational Loans:
- Loans up to ₹7.5 lakh with government guarantee to help 25,000 students annually.
- Financial support for loans up to ₹10 lakh for higher education in domestic institutions with direct e-vouchers and 3% annual interest subvention for 1 lakh students each year.
Inclusive Human Resource Development and Social Justice
- Purvodaya Initiative: Economic development plan for Bihar, Jharkhand, West Bengal, Odisha, and Andhra Pradesh.
- Development of Amritsar-Kolkata Industrial Corridor with an industrial node at Gaya.
- Pradhan Mantri Janjatiya Unnat Gram Abhiyan: Improve socio-economic conditions of tribal communities, covering 63,000 villages and benefiting 5 crore tribal people.
- Women and Girls Schemes: Allocation of over ₹3 lakh crore.
- North East Region: Establish more than 100 branches of India Post Payment Bank.
- Andhra Pradesh Reorganization Act:
- Arrange ₹15,000 crores financial support in FY 24-25.
- Complete Polavaram Irrigation Project .
- Develop infrastructure like water, power, railways, and roads in Kopparthy and Orvakal nodes.
Manufacturing & Services
- Credit Guarantee Scheme for MSMEs : Provide credit support during stress periods.
- Enhanced Onboarding in TReDS: Expand mandatory onboarding scope.
- TReDS is an online platform that facilitates the financing of trade receivables of MSMEs from various buyers, including government departments and PSUs, through multiple financiers.
- TReDS was launched in 2014 by the RBI, to ease the cash flow problems of MSMEs and enhance their access to credit.
- New MSME Credit Assessment Model.
- Mudra Loans: Increase the limit to ₹20 lakh under the ‘Tarun’ category.
- MSME Units: Focus on food irradiation , quality, and safety testing.
- National Industrial Corridor Development Programme: Establish 12 industrial parks.
- Rental Housing for Industrial Workers: Develop dormitory-type accommodation with Viability Gap Funding (VGF) support in PPP mode.
- Critical Minerals Mission : Promote domestic production, recycling, and overseas acquisition.
- Insolvency Tribunals: Strengthen and establish additional tribunals for faster resolution.
Urban Development
- Stamp Duty: Encourage states to lower stamp duties for properties purchased by women.
- Street Markets: Develop 100 weekly ‘haats’ or street food hubs in select cities.
- Transit Oriented Development: Implement plans in 14 large cities with populations above 30 lakh.
- Water Management: Promote water supply, sewage treatment, and solid waste management projects in 100 large cities.
- PM Awas Yojana Urban 2.0 :
- Address the needs of 1 crore urban poor and middle-class families with a ₹10 lakh crore investment.
- Establish enabling policies and regulations for efficient and transparent rental housing markets.
Energy Security
- Nuclear Energy Initiatives:
- Set up Bharat Small Reactors.
- Conduct R&D for Bharat Small Modular Reactors and new nuclear energy technologies.
- Bharat Small Reactors (BSRs) are a type of Small Modular Reactor (SMR) designed for India’s energy needs. These reactors are compact, factory-built nuclear reactors with a power capacity of up to 300 MW.
- Pumped Storage Policy: Facilitate electricity storage and renewable energy integration.
- AUSC Thermal Power Plants: Joint venture between NTPC and BHEL to set up an 800 MW commercial plant.
- Energy Audit:
- Support for shifting micro and small industries to cleaner energy forms.
- Expand investment-grade energy audits to 100 clusters.
- PM Surya Ghar Muft Bijli Yojana : Provide free electricity up to 300 units monthly to 1 crore households.
- Roadmap for ‘hard to abate’ industries:
- A strategy for transitioning the ‘hard to abate’ industries from ‘energy efficiency’ to ’emission objectives’ will be developed.
Infrastructure
- Budget Provision: Allocate ₹11,11,111 crore (3.4% of GDP).
- State Loans: Provide ₹1.5 lakh crore as long-term interest-free loans.
- Pradhan Mantri Gram Sadak Yojana (PMGSY) Phase IV:
- Launch to provide all-weather connectivity to 25,000 rural habitations.
- It is a nationwide initiative in India aimed at ensuring reliable, all-weather road connectivity to villages that previously lacked it.
- This Centrally Sponsored Scheme, launched in 2000, falls under the jurisdiction of the Ministry of Rural Development.
- Irrigation and Flood Mitigation:
- Financial support for projects costing ₹11,500 crore.
- Assistance for flood management in Assam, Sikkim, and Uttarakhand.
- Reconstruction and rehabilitation support in Himachal Pradesh.
Tourism
- Temple Corridor Development: Develop Vishnupad Temple Corridor and Mahabodhi Temple Corridor similar to Kashi Vishwanath Temple Corridor.
- Rajgir Development : Comprehensive initiative for the religiously and historically significant site.
- Nalanda Development: Promote as a tourist center and revive Nalanda University
- Odisha Tourism: Enhance scenic beauty, temples, monuments, craftsmanship, wildlife sanctuaries, landscapes, and beaches.
Innovation, Research & Development
- Anusandhan National Research Fund:
- Operationalize for basic research and prototype development.
- The Anusandhan National Research Foundation Act of 2023 provides for the establishment of the Anusandhan National Research Foundation (NRF).
- NRF, as an apex body, aims to provide “high-level strategic direction for research, innovation and entrepreneurship”, and enhance “India’s national research infrastructure, knowledge enterprise, and innovation potential, for scientific pursuit”.
- Private Sector Innovation: Create a ₹1 lakh crore financing pool for research and innovation at commercial scale.
- Space Economy: Establish a venture capital fund of ₹1,000 crore.
Next Generation Reforms
- Land-related Actions:
- Implement Unique Land Parcel Identification Number (Bhu-Aadhaar).
- A unique alphanumeric code assigned to each individual land parcel to provide a standardized and unambiguous identification system.
- Digitize land records in urban areas with GIS mapping.
- Survey map subdivisions as per current ownership and link to farmers’ registries.
- Digitize cadastral maps and establish a land registry.
- Implement Unique Land Parcel Identification Number (Bhu-Aadhaar).
- Climate Finance Taxonomy: Enhance capital availability for climate adaptation and mitigation investments.
- FDI and Overseas Investments: Simplify processes to facilitate FDIs and promote the Indian Rupee for overseas investments.
- NPS Vatsalya : Introduce a plan for contributions by parents and guardians for minors.
- Data Governance: Improve collection, processing, and management of data and statistics.
- New Pension Scheme (NPS) : Develop a solution that addresses issues, protects citizens, and maintains fiscal prudence.
PART B
Tax Related Proposals
In the new tax regime, the tax rate structure is proposed to be revised, as follows:
Comprehensive Review of Income Tax Act, 1961
- Finance Minister Nirmala Sitharaman announced a thorough review of the Income Tax Act, 1961. The goal is to streamline the Act, making it shorter, clearer, and more understandable. This will help reduce disputes and litigation, providing greater tax certainty for taxpayers. The review is expected to be completed within six months.
- Initial steps in the Finance Bill include simplifying the tax regime for charities, the TDS rate structure, reassessment and search provisions, and capital gains taxation.
Angel Tax Abolished
- Finance Minister Nirmala Sitharaman announced the elimination of the angel tax on investors in India to support startups.
- The angel tax, introduced in 2012 to prevent the use of unaccounted money through the overvaluation of shares in closely held companies, was expanded to include non-resident investors from April 1, 2024. This expansion faced strong opposition from startups during the last Union Budget.
Litigation and Appeals
- To address the backlog of first appeals, the Government plans to assign more officers to handle and decide these appeals, particularly those involving significant tax amounts.
- The government proposed the Vivad Se Vishwas Scheme, 2024 , to resolve certain income tax disputes pending in appeal.
- To reduce litigation and provide clarity in international taxation, the Government will broaden the scope of safe harbour rules and make them more attractive.
Deepening the Tax Base
- To expand the tax base, the Security Transactions Tax on futures and options of securities will be increased to 0.02 percent and 0.1 percent, respectively.
- Securities transaction tax (STT) is a direct tax levied at the time of purchase and sale of securities listed on stock exchanges in India.
Other Major Proposals
- Withdrawal of the 2 percent equalization levy .
- Expansion of tax benefits to specific funds and entities in International Financial Services Centres (IFSCs).
- Granting immunity from penalty and prosecution to benamidar upon full and true disclosure, aiming to improve convictions under the Benami Transactions (Prohibition) Act, 1988.
- Changes in customs duty.
- Simplification and rationalization of capital gains taxation .
Other Facts
- India grew at 8.2 per cent in FY 2024.
- The real GDP (in lakh crore rupees) has been increasing over the years, with a significant jump in FY 2022-23.
- The real GDP growth rate (RHS) has fluctuated, with a sharp decline in FY 2020-21 followed by a strong recovery in the subsequent years.
- Fluctuating Current Account Deficit (CAD): The CAD has exhibited fluctuations over the years. It has swung between positive and negative territories, indicating periods of surplus and deficit.
- Significant Improvement: Notably, there has been a substantial improvement in the CAD in FY24 compared to the previous year. It has moved from a deficit territory to a positive one.
- There has been a significant decrease in the fiscal deficit as a percentage of GDP from FY21 to FY24.
- Steady Decline: The fiscal deficit has shown a steady decline in each fiscal year.
- Inflation Peak: Inflation reached its peak in 2022 at 6.7%.
- Decreasing Trend: There’s a general decreasing trend in inflation from 2020 to 2023.
- Decline in Gross NPAs of SCBs (Scheduled Commercial Banks)
References