Finance Minister Nirmala Sitharaman presented a remarkably workmanlike, fiscally responsible Budget for a government that will go to polls in a year. The Budget sticks to the path of its forbears, maintaining a studied focus on raising the share of capital expenditure vis-a-vis revenue expenditure, while accentuating its logistics push. For the rural masses, there are surprisingly no freebies really on offer. In fact, the food subsidy, as expected, has been pared by nearly ₹1-lakh crore and the fertiliser subsidy by ₹50,000 crore. If there is any section that has overtly been reached out to, it is the middle class, and the senior citizens in particular — through tax sops and savings incentives. The focus on rural development has shifted from schemes such as MGNREGA to PM Awas Yojana and Jal Jeevan Mission, which could be seen as a move away from a kind of distress dole to social asset creation — on the assumption that the pandemic’s effects have been fully overcome. On the revenue side, Sitharaman has sweetened the new tax scheme, sans exemptions, by tweaking the slabs in order to nudge a shift away from the current system.

The Budget’s architecture is fairly credible, with its accent on fiscal consolidation. Total net revenue receipts of the Centre, pegged at ₹26.3-lakh crore in FY24, are 10.6 per cent up from this year’s revised estimates. Total expenditure is expected to rise 7.6 per cent to ₹45 lakh crore. The fiscal deficit, at ₹17.9 lakh crore or 5.9 per cent of the GDP, is nearly the same in absolute terms as the revised estimate for FY23 (₹17.6 lakh crore), which should come as a relief to the Reserve Bank of India, the markets and other real economy investors. If this sort of fiscal discipline is managed at a time of climbing yields, coinciding with rising rates worldwide last calendar year, it could add to the green shoots in private investment. As for the Centre’s finances, fiscal prudence becomes vital, given that interest payments in FY24 are expected to rise by ₹1,40,000 crore to ₹10.8 lakh crore, a rise of 14 per cent.

The Budget’s revenue estimates are based on a tax buoyancy of one with respect to direct taxes and about 1.2 with respect to GST, which is in line with the trend. Therefore, income tax (₹9-lakh crore budgeted for FY24) and corporation tax collections (₹9.2-lakh crore for FY24) are expected to rise 10.5 per cent apiece, while GST revenues (₹9.6-lakh crore for FY24) are slated to grow 12 per cent. A disinvestment target of ₹51,000 crore is not that unrealistic. Interestingly, the revised estimates for this year for expenditure exceeded the Budgetary target of ₹39.4 lakh crore by ₹2.4 lakh crore, essentially owing to the rising spends on PM Garib Kalyan Yojana (a Covid step, now discontinued) and fertiliser subsidies that spiralled as a fallout of the Ukraine war. This leaves room for cutting flab.

As in the FY23 Budget, a remarkable feature on the expenditure side is the 37.5 per cent rise rise in capex outlays by the Centre alone to ₹10 lakh crore (over the revised estimates of ₹7.3-lakh crore). As a share of the gross budgetary support, ₹10-lakh crore amounts to 22 per cent; this is 10 percentage points higher than the figure six or seven years back, marking a structural shift in budget making. A near quarter or ₹2.4-lakh crore will be invested in Railways, marking a ₹1 lakh crore crore incremental support to the Railways over FY23. Railways’ borrowings are down sharply to ₹17,000 crore or so. The uptick in interest rates the world over cannot be allowed to derail India’s logistics push. A similar leap in outlays is evidenced in roads and bridges, of 24 per cent from the revised estimates for FY23 to ₹2.44 lakh crore.

The personal income tax package has been a highlight of the Budget. Besides rationalising slabs to reduce tax incidence to engender a shift away from the ‘old’, standard deduction has been thrown in as an additional benefit for the salaried class and pensioners. Senior citizens can also invest ₹30 lakh (₹15 lakh at present) in Senior Citizen Savings Scheme, with the limit similarly being raised for the post-office monthly income scheme. For cooperatives, there are a slew of tax incentives on offer. The tax rate of 15 per cent for new manufacturing companies will apply to them. In a salutary move to aid MSMEs, plagued by delayed payments, suppliers can avail of a deduction only when the payment is actually made. The threshold for businesses under presumptive taxation has been raised. Customs duties for the green economy have been lowered. Overall, if capex is going to be the theme song of future Budgets, it goes without saying that the proposals should be biased towards savings more than consumption. A rising savings-investment gap will place limits on growth.

The Budget, however, gives health and education a miss in terms of its outlays. Capex cannot be about physical infrastructure alone, if India is to reap its demographic dividend.