While the consolidated Union Budget 2024–25 will be announced once the new government is voted to power in the upcoming general elections, Union Finance Minister Nirmala Sitharaman presented the interim Budget 2024–25 in the Lok Sabha on 1 February. Watch this space for PwC's insights on expectations and analysis ahead of Budget Day.
Surging ahead: Interim Budget 2024-25
The Budget has laid the foundation for a prosperous and advanced India that will enable an overall comprehensive development equipped with modern infrastructure. Explore our analysis and understand the implications on your business.
Webcast: Interim Budget 24-25
Watch our panellists share their perspectives on the key highlights of the Interim Budget and decode its implications for businesses.
Interim Budget 2024 webcast
Interim Budget 2024 analysis webcast
This being the year of a general election, which is likely to take place in April/May of 2024, the finance minister shall present a vote on accounts to cover for the period until the new government presents a full budget in July 2024. A roadmap for a long-term plan linked to Vision 2047 is likely to be set in the budget. This will help in ensuring a smooth transition of financial responsibilities until the next government assumes office. The budget will also present the revised estimates for FY 2023-24, indicating the progress made on the fiscal consolidation roadmap towards attaining a fiscal deficit of 4.5% by FY26. There are expectations that the finance minister will make certain key tax announcements, and it will be interesting to see if the budget includes any major tax proposals.
Join our webcast to watch our subject matter experts share their perspectives on the key highlights of the budget and decode its implications for businesses.
Budget highlights
Over the last 10 years, India has become the third largest domestic aviation market in the world with more than 4 lakh Indians flying domestically in 2023 everyday. Some of the benefits of this growth in the aviation sector are:
- Enhanced air connectivity in non-metro areas of the country
- Number of airports doubled to 149 in last 10 years
- UDAN connectivity to Tier 2 and Tier 3 cities improved with 517 new routes carrying 1.3 crore passengers
- Indian carriers placed orders of over 1,000 new aircrafts
- Ease in international trade
- Enhanced air cargo facilities due to which the import release time declined by 28% to 44 hours in the last 4 years
Focus areas
- UDAN Scheme: INR 502 crore will be spent to revive 22 airports, start 124 new air routes and finance viability gap funding for north-east connectivity.
- The budget also proposed to revive 50 additional airports, helicopters, water aerodromes and advanced landing grounds for improving regional connectivity – INR 1000 crore has been sanctioned for the same.
- Lakshadweep takes centre stage: Development of the dual-purpose Minicoy airport for both military and commercial aircrafts which will serve as a surveillance and tourism spot for India.
Fiscal and growth forecasts
By Ranen Banerjee, Partner and Leader Economic Advisory, PwC India
Ahead of the general elections, the finance minister is set to present the interim budget on 1 February 2024. As per norm, the interim budget outlines allocations to ongoing programmes for the first three months of the fiscal year until the full budget is drafted and presented by the new government.
The interim budget is likely to announce a 5–10% increase in line item allocations. If history is any indication, fiscal largesse does not necessarily impact the outcomes of an election. Therefore, the Government could remain fiscally prudent and avoid making any major announcements.
Additionally, it is important for the Government to emphasise that the fiscal deficit targets set in the budget estimate would be met comfortably and on priority. Despite the reduction in the fiscal deficit headroom of around INR 300 billion – due to the first advance estimate of gross domestic product (GDP) being lower than the projected GDP for FY24 by approximately INR 5 trillion – there should not be any significant challenges in keeping the deficit at 5.9%. This reduction in headroom will be met by higher tax collections and savings in food and fertiliser subsidies.
However, the Government can work towards reducing the fiscal deficit to 5.2% of the GDP in the interim budget, which can be further reduced to 5% in the full budget – considering there will be reduced pressure to implement populist measures in the first year of its term.
On the other hand, we expect about 10% increased allocation for capex to INR 11 trillion in the interim budget, and further increase to INR 12 trillion in the full budget. Moreover, divestment targets are likely to remain modest in the interim budget. However, these may be significantly enhanced in the full budget, considering that financial markets will be stronger in the second half of FY25. This would be possible as policy rate cuts will commence in major economies and it’ll be the first year for the new government.
For India, given the geopolitical risks, global slowdown and El Niño effects which are likely to fade but could continue to have some effect over the next monsoon as well, the private consumption rate is unlikely to see significant growth.
On a more optimistic front, the Indian economy could benefit from lower oil prices given the recent setbacks in the Organisation of the Petroleum Exporting Companies (OPEC)’s efforts to manage supply and pricing. This shall help with the benign inflation expected in the next fiscal, which will in turn help in reducing the current account deficits. This is likely to reduce the strain on disposable household incomes.
Additionally, it could allow policy rate cuts to begin between March–June 2024, which may support some of the rate sensitive sectors like real estate. Considering these shifts, we can expect GDP growth rate to be around 6.3–6.5% in FY 2024–25. However, these estimates may not hold in the face of geopolitical risks, and any escalation of these risks would have far-reaching consequences on the global economy.
