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India’s Union Budget FY25: Insights into Sectoral Changes and Economic Strategies

Created on 29 Jun 2024

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Union Budget FY25: What to Expect from Modi 3.0 Government

National Democratic Alliance (NDA) won the fierce election battle with 292 seats, bringing the Modi 3.0 government back in full force. Now it’s time for the event of the year that people of all statuses look forward to: The Union Budget Presentation.

Reappointed as the Finance Minister of India, Nirmala Sitharaman is prepping the red briefcase as we speak. Like a pandora’s box, the Union Budget could contain changes for multiple sectors and tax slabs. The union budget is scheduled for presentation by the third week of July, although a date hasn’t been finalised yet. 

So, what could be the target of the Finance Ministry for FY25?  

Let’s unravel certain possibilities based on the government's hints, ministers’ speculations, news platforms’ predictions and citizens’ expectations.

Nirmala Sitharaman is set to become the first finance minister in the country to present seven consecutive Union Budgets, surpassing the previous record of six held by former minister Morarji Desai.

Predictions & Expectations

2024 already saw the presentation of an Interim Budget early in February. As FinMin Sitharaman warned, not much of the agenda was discussed and modified in the interim budget, seeing as it was the last budget of the term. But even then, the Modi government was pretty confident of reforming the house for the third time.

Now that assurance came true, albeit a bit surprisingly, if you take the tough competition the INDIA bloc presented NDA with. Regardless, the first budget for the new term will be presented in a short month and is likely to have multiple announcements. After all, this budget is expected to set the tone for India's economic trajectory in the coming year.

It won't be too far-fetched to say that the union budget for FY25 is going to be a critical document shaping Prime Minister Narendra Modi's new term along with the nation’s fiscal roadmap.

Reports suggest that the upcoming budget will incorporate elements from Modi's 100-day plan, reflecting his administration's immediate priorities. Additionally, an expansion of Production-Linked Incentive (PLI) schemes is anticipated, aimed at sectors that drive significant employment, such as the leather industry.

The agenda is ambitious, focusing on crucial sectors like agriculture, job creation, sustaining capital expenditure (capex) momentum, and boosting revenue growth while maintaining fiscal discipline. Streamlining GST and easing tax compliances are also likely high on the agenda.

Along with this, here are some expectations and predictions we may see in this Union Budget presentation:

a. Financial Outlay and Sectoral Allocations

In the interim budget 2024-25, the government had estimated dividends from non-financial Central Public Sector Enterprises (CPSEs) at ₹48,000 crore for the current fiscal year.

Financial projections indicate a potential increase in Central Public Sector Enterprises (CPSE) dividend estimates by ₹5,000 crore to around ₹53,000 crore for the current fiscal year. This adjustment reflects updated data since the interim budget, underscoring the government's revenue expectations from public sector enterprises.

b. Industry Perspectives and Capex Boost

Industry bodies like the Confederation of Indian Industry (CII) are advocating for substantial hikes in planned capex spending. This would help in further fueling economic growth. This push aligns with India's aspirations to become the world's third-largest economy by 2030. The call is to increase capex targets significantly, building on the momentum set in previous budgets.

Continued focus on infrastructure development with increased capex spending. Expectations are for significant allocations towards roads, railways, airports, and urban infrastructure to bolster economic growth and connectivity.

c. Tribal Welfare

Union Minister for Tribal Affairs Jual Oram highlighted a substantial allocation exceeding ₹5 trillion for tribal welfare projects in the upcoming budget. This commitment includes initiatives like expanding Eklavya Model Schools and enhancing income through the National Rural Livelihoods Mission.

d. Potential Tax Reforms

Looking at tax reforms, there are considerations to increase the standard deduction threshold (currently at ₹50,000), particularly under the new tax regime. This move could provide relief to salaried individuals, reflecting ongoing efforts to support the middle class while maintaining fiscal prudence.

Which Sectors Are Likely to Get Updates in the Union Budget?

The upcoming Union Budget in India is expected to bring forth changes and allocations across several key sectors and areas, reflecting the government's policy priorities and economic goals. Here's the present Budget Profile for FY23-24.

Budget Profile

Here's a breakdown of sectors likely to see announcements and reforms:

1. Agriculture Sector:

Given the ongoing challenges in the agriculture sector, the budget may introduce measures to alleviate farmer distress, enhance rural infrastructure, and improve agricultural productivity.

  • Alleviate Farmer Distress: This could include loan waivers, price support mechanisms, and direct income transfers.
  • Enhance Rural Infrastructure: Investments in irrigation projects, warehousing facilities, and cold chains could improve farm productivity and post-harvest management.    
  • Improve Agricultural Productivity: The budget might allocate funds for research and development of new technologies, promotion of organic farming practices, and improved access to quality seeds and fertilisers.

2. Job Creation and Skill Development:

Policies aimed at boosting job creation, particularly in sectors like manufacturing, services, and new-age industries. This may include incentives for businesses to expand hiring and training programs to enhance skill development.

Focus on providing vocational training and skill development programs aligned with industry needs to bridge the skill gap and improve employability.

3. Manufacturing and Industry:

The expansion of the PLI scheme will include more sectors, potentially focusing on those that are labour-intensive and crucial for export growth. This could drive investment and employment in manufacturing.

4. Tax Reforms:

Tax reform has been in discussion for quite some time now since the last reformation took place in 2020.

  • GST Rationalisation: Efforts to rationalise and simplify the Goods and Services Tax (GST) structure to reduce compliance burden and boost revenue collection.
  • Direct Tax Reforms: Potential changes in income tax slabs, deductions, and exemptions to provide relief to taxpayers and stimulate consumption.

6. Financial Sector:

Measures to deepen the financial markets, improve liquidity, and enhance investor confidence. This could involve reforms in capital gains tax, securities transaction tax, and other regulatory adjustments.

7. Healthcare and Education:

Increased allocations towards healthcare, infrastructure, vaccine development, and strengthening healthcare delivery systems in the wake of the COVID-19 pandemic.

Enhancements in education infrastructure, digital education initiatives, and skill development programs to equip the workforce for future challenges.

8. Environment and Renewable Energy:

Incentives and policies to promote renewable energy adoption, sustainable practices, and environmental conservation. Expectations include funding for clean energy projects and initiatives to combat climate change.

9. Tribal Welfare and Social Sector:

Continued support for tribal welfare through increased funding for schemes like the Eklavya Model Schools and initiatives under the National Rural Livelihoods Mission.

10. Digital Economy and Innovation:

Investments in digital infrastructure, broadband connectivity, and digital literacy programs to facilitate inclusive growth and digital transformation across sectors.

The Bottom Line

As anticipation builds around the Union Budget 2024, it becomes evident that the government's priorities are aligned with accelerating economic recovery and addressing sector-specific challenges.

The budget's unveiling will not only set fiscal targets but also signal policy directions crucial for navigating India's economic trajectory under Modi 3.0. Stay tuned as the details unfold next month in Parliament.

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A book-lover who adores everything fictional, Preeti has undertaken the life mission of tasting every flavour available in the pantry. A science student with a Master's in Mass Communication, she now wishes to conquer the Finance world as a writer. With the power invested by the randomly chosen music, she is here to make Finance fun for you.

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