Conservatism. Continuity. Confidence. These three words sum up Finance Minister Nirmala Sitharaman’s interim Budget for 2024-25. The Finance Minister’s sixth budget speech was notable not just for its brevity (57 minutes) but also for the cool confidence that it conveyed on the return to power of her party in the upcoming general elections.

There were no election-eve handouts, nothing to please the all-important constituencies of farmers and voters from the poorer sections, but there were several promises made for the future. The political messaging was clear: the focus would be on the four segments, or “castes,” if you will, of garib (poor), mahila (women), yuva (youth), and annadata (farmers), which form the core voter base. And Sitharaman had a promise for them: “In the full budget in July, our government will present a detailed roadmap for our pursuit of Viksit Bharat.”

No I-T Concessions

Much to the dismay of the middle class, there were no income-tax concessions, with the Finance Minister making the point that she was not proposing any changes in keeping with convention. Never mind that on Wednesday, on the eve of the interim budget, the government cut import duty on some mobile components by 5 percentage points!

In what has become a characteristic trait of this government’s budgets in the last few years, the assumptions underlying the numbers are conservative and believable. Last year, Sitharaman promised that she will rein in the fiscal deficit to 5.9 per cent of GDP in 2023-24; the revised estimate now stands at 5.8 per cent. That makes the 5.1 per cent target for 2024-25 believable, even if it appears ambitious. The Finance Minister made it a point to underline the government’s commitment to the fiscal deficit glide path that will take the number to 4.5 per cent of GDP by 2025-26.

Of course, the deficit target has been set with some sacrifice on expenditure, especially subsidies. Total expenditure is up by just 5.83 per cent to ₹47.65-lakh crore, while allocations for food and fertilizer subsidies are down rather sharply in comparison with both last year’s estimates and the revised one. With food prices set to rise following the bad monsoon in 2023, the subsidy numbers will bear watching.

Quality expenditure

The Finance Minister did not disappoint economists and analysts on the capital expenditure front. Though total expenditure is projected to fall, the outlay on capex (₹11,11,111 crore) is up by an impressive 17 per cent in comparison with the revised estimate for 2023-24, and by 11.1 per cent compared to the budget estimate of last year. This translates to a doubling of capex in just three years, which is great going and speaks about the government’s commitment to quality of expenditure.

The revenue estimates appear realistic, with a tax buoyancy of 1.1 and tax revenue growth at 11.62 per cent. The nominal GDP growth estimate of 10.5 per cent does appear conservative given that real growth for 2024-25 was projected at 7 per cent by the Chief Economic Advisor just the other day. Obviously, a buffer has been built into the revenue estimates to cushion a possible overrun on expenditure, which is again a noticeable feature of recent budgets. This is smart budgeting, alright.

No give-aways

There isn’t much to fault this budget on the macroeconomic assumptions and numbers. It continues the trend of fiscal consolidation, which has been a feature of this government’s tenure. That there are no giveaways or populist measures — remember, it was a Modi government that announced PM Kisan Samman in the interim budget of 2019, just ahead of elections – conveys a smugness or confidence, depending on one’s interpretation, about the inevitability of the outcome in the general elections three months from now. The burden of ensuring victory has moved from revdis to Ram!

Political undertones

Sitharaman’s speech had unmistakeable political undertones, whether it was in the statement that “social justice” is not a slogan but a governance model for her government or in the newest interpretation of GDP — governance, development and performance. At one level, it was a summary of the accomplishments of the two Modi governments and a listing of the reforms and growth markers.

That said, for an interim budget, there are some notable proposals that hopefully be taken forward by the main budget late this year. There’s a serious push to the roof-top solar scheme that Prime Minister Modi unveiled on his return from the Ayodhya consecration ceremony. Sitharaman has allocated ₹10,000 crore to the scheme, which is a smart way to put an end to free power and create value and jobs in the economy. Second, the creation of a corpus of ₹1-lakh crore to promote R&D. The contours of the scheme are not known fully yet but this is a good idea for the next government to pursue. Third, the proposal to create three railway corridors for freight movement that will reduce time and costs. And then the intent to develop tourist centres in coordination with the states and the proposal to promote bio-manufacturing to promote environment-friendly alternatives to plastics.

These are proposals that will be watched for progress in the main budget if the Finance Minister’s confidence on returning to power comes true.