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Friday, July 12, 2024

Budget 2024: FM’s Seventh Budget Highlights Continuity

One day in the middle of next month — we will soon be able to tell you the day — Finance Minister Nirmala Sitharaman will rise to present her seventh consecutive Union Budget, including the Interim one in February this year. That is more than anyone else has done.

This is indeed continuity. But there is continuity in more ways than one.

First, like every other Budget, Business Standard will bring you coverage that will keep you informed and riveted. This is what we do. Budget Watch is a special series we are starting today to enhance that experience for you.

Secondly, as in many past Budgets, the FM will have to perform the old balancing act in the forthcoming Budget, too, because the battle between the compulsions of welfare and fiscal consolidation continues unabated.

According to officials involved in the initial discussions, the full Budget will likely stick to the fiscal consolidation path set in the Interim Budget and keep the fiscal deficit target for the current financial year at 5.1 per cent of gross domestic product (GDP).

Coming to the aid of the finance minister will be the robust GDP. It surpassed expectations by growing at 7.8 per cent in the January-March quarter. For the entire 2023-24 financial year, GDP growth has been revised upwards to 8.2 per cent. A week ago, the World Bank said India would remain the fastest-growing major economy.

The other shot in the arm is the record dividend from the Reserve Bank of India, which provides a fiscal cushion and greater elbow room for expenditure management — Rs 2.1 trillion is no mean cushion.

There is also the buzz that the finance minister could consider tax breaks for the salaried class, especially those at the bottom rung. To many, tax breaks are a more effective measure than welfare schemes for increasing consumption by putting more disposable income in the hands of people.

The National Democratic Alliance has assumed power at the Centre for a third consecutive term but with a reduced majority in the Lok Sabha. After a gap of 10 years, we have a coalition government in place. In a coalition, concerns and considerations of allies assume greater thrust. But there is also the fact that the main opposition alliance, which made immense gains in this year’s elections, promised a lot of welfare to the electorate.

Apart from that, the NDA government has been emphasising government-led capital expenditure anyway.

How much will that be, we do not know yet. What we do know is that the Budget-making exercise has started in earnest. The finance minister will hold a pre-budget consultation with industry representatives on June 20.

While all eyes are on the Budget, remember that economic policymaking is not confined to this annual exercise. On June 22, the Goods and Services Tax Council, the all-powerful body in the matter headed by the FM, will meet to discuss critical issues, such as taxing foreign airlines, which has elicited an open threat by IATA to reduce services connecting India.

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