Nirmala Sitharaman to present first Budget of Modi 3.0 govt today

New Delhi: Union Finance Minister Nirmala Sitharaman is set to present the first Budget of the third consecutive NDA government under the leadership of Prime Minister Narendra Modi today. The Union Budget 2024 will be the first major economic document of the Modi 3.0 government, which, among other things, is expected to lay the roadmap for transforming India into ‘Viksit Bharat’ by 2047.

On Monday, the pre-Budget Economic Survey, which was tabled by Sitharaman in Lok Sabha, set a conservative growth forecast of 6.5 to 7 per cent for the current fiscal. It flagged the need to create more jobs in the economy and pitched for more Chinese direct investments to boost exports. The adverse trade environment last year, that resulted in a 5 per cent decline in India’s merchandise exports in FY24, is expected to ease this year and the subsequent year, said the survey, however adding that geopolitical tensions and policy uncertainty could limit the scope of trade recovery.

One gets indications from the government that it is in favour of rationalising the existing income tax structure. The Budget is likely to introduce tax rate cuts for those earning less to enhance disposable income, resulting in higher consumption, government officials had said.

Chief Economic Advisor V Anantha Nageswaran said that the growth rate of 7 per cent was achievable for FY 2025, but would also depend on how the monsoon progresses. While addressing a press conference, Nageswaran pointed out that the erratic monsoon had resulted in a slight decline in food grain production in 2024. The CEA further said that they wanted to be “prudent”, which is why the growth rate was projected at 6.5 to 7 per cent.

Further,food inflation remains a concern, with variations across states. The survey emphasizes the need for targeted interventions to manage food prices effectively, and makes a case for changing the inflation targeting framework of the central bank by excluding food inflation.

The survey says: “The outlook for India’s financial sector appears bright… India’s financial sector needs to support capital formation and promote trade, business, and investments in MSMEs, enabling them to scale It also needs to provide insurance protection and retirement security to all citizens.”

It adds: “The Indian financial sector is at a turnpike moment. The dominance of banking support to credit is being reduced, and the role of capital markets is rising. For a country that aspires to be a developed nation by 2047, this is a long-awaited and welcome development. Being reliant on and exposed to the capital market, however, comes with its challenges and trade-offs. As India’s financial sector undergoes this critical transformation, it must also brace for likely vulnerabilities and prepare itself with regulatory and government policy levers to intervene and hedge, as required.”

Major schemes need requisite budgetary support in order to improve agricultural incomes and alleviate prevailing rural distress in the country. A contraction in state support to agriculture and rural development at this juncture can worsen the precarious situation of millions and erode the negotiating power of our rural households.

The survey discusses how geopolitical changes and global trade dynamics are affecting India’s trade strategies and emphasises the need for diversification of trade partners. With Indian exporters facing challenges related to tariff and non-tariff barriers, the survey calls for enhancing competitiveness.

India’s trade has stood tall amidst global turmoil, with a favorable current account balance, according to the survey. It indicates a reduction in the trade deficit compared to previous years.