Union Budget 2024: Here Are 7 Key Expectations From FM Nirmala Sitharaman In July

Optimism over the upcoming Union Budget which is scheduled in July, has heightened so much that the Indian stock market has rallied to record high levels with Sensex and Nifty 50 crossing over the 79,200 and 24,000 mark for the first time. This full-fledged Budget will be announced after the Lok Sabha Election 2024 where PM Modi and his party secured a big win for the third time in a row. Finance Minister Nirmala Sitharaman will be presenting the overall Budget 2024.

In a joint gathering of Parliament on Thursday, President Droupadi Murmu hinted that the newly formed National Democratic Alliance (NDA) government led by PM Modi will announce key economic and social decisions alongside historical steps. She further said that this budget will focus on far-reaching policies and futuristic vision.

Here are 7 key expectations from FM in Union Budget 2024:

1. Fiscal Consolidation:

As per BOB Capital Markets, domestic macro fundamentals continue to post steady recovery. However, inflation is still worrisome with major upward momentum visible in vegetables, pulses and cereals. Unless these segments witness some correction, 4% headline number does not seem feasible in the near term. Major event in the coming days is likely to be the final Budget where there is anticipation of a change in spending pattern. Revenue spending is likely to gain prominence to spur consumption demand. Fiscal prudence would be at the core.

BOB Caps expects the government to keep the fiscal deficit target unchanged from the interim budget at 5.1% for FY25.

2. Tapping Consumptions:

The Confederation of Indian Industry (CII) has outlined key measures that could boost consumption in the country. In the budget 2024, CII suggested tax cuts for individuals under the lower income tax bracket to enhance disposable income and boost consumption.

Higher wages under the rural job guarantee scheme, coupled with an increase of cash handouts to farmers are some of the recommendations by CII.

India's economic growth came in robust at 8.2% in FY24, however, the consumption witnessed growth a half of this rate.

3. Enhancement Of Production-Linked Incentive (PLI):

Anand K Rathi, co-founder of Mira Money said, the schemes are commendable, and the government might focus on enhancing them further. Corporates have a few complaints, mostly from the operational side.

4. Boosting Labour-Intensive Sectors:

Vinod Nair, Head of Research, at Geojit Financial Services, said that labour-intensive sectors such as agriculture, cattle, textiles, leather, marine products, and construction can anticipate supportive schemes. Initiatives to promote affordable housing will benefit sectors including cement, construction-related industries, banks, and housing finance NBFCs. Tourism will see further impetus to increase job opportunities. Hotels and leisure industries can do well. Policy continuity is expected in manufacturing, capital goods, and renewable energy sectors. Additionally, affordable healthcare is likely to remain a priority.

Nair further added, that to support private investment, it is expected that PLI schemes will be expanded and include additional sectors, particularly those that are labour-intensive. With youth employment being a critical need, significant government capex and increased funding for MSMEs and startups are anticipated.

5. Schemes For Farmers, And Scrapping Of Export Restrictions:

Agriculture sector economists have broadly urged the government to give scrap restrictions on exports of farming products such as rice, wheat, sugar, and onions among others. The restrictions are put in place to keep consumer prices in check, however, they are impacting rural incomes.

Also, Nair said, Better schemes for small farmers and the creation of jobs are likely to be upright for the rural economy. Increasing the MSP or providing price guarantees, along with removing export bans on agricultural products such as onions, wheat, and sugar, will be advantageous. In the near term, agricultural productivity may decline due to the heat wave in the north, necessitating government support. However, an uplift in monsoons & heatwaves is forecast in FY25 compared to below normal in FY24, which will lead to a reversal in fortunes.

6. Job Creation:

According to Nair, a key area of focus will be to generate jobs, especially in the rural economy. Consequently, the final budget is anticipated to feature increased government expenditure in areas such as MGNREGA, housing, water, and agriculture. Simultaneously, the government will maintain its pro-industrial policy to encourage private investments.

Meanwhile, CII proposes that the government introduce an incentive payout scheme for private companies that generate jobs in labor-intensive sectors namely tourism and textiles.

7. Measures To Drive Startups

Anand Sri Ganesh, CEO of NSRCEL IIMB said that the budget has traditionally looked at a combination of grants, SPVs and tax breaks to support startups. Where we may have attempted to create capacity, we may have erred in not enabling an ecosystem that facilitates economic and societal outcomes through innovation. We'd like to see the budget create incentives that allow innovation ecosystem players - science & technology institutions, incubators, corporates and institutional investors - to come together and create multiplier effects for innovators."

As per Ganesh, a voucher system that can be "redeemed" by startups with labs & research institutions and corporates will allow for collaboration in product development and rapid prototyping. Policy sandboxes can enable testing, validation and inter-operability in areas like inclusive finance, affordable healthcare and pervasive insurance. Fiscal incentives for institutions and corporations to proactively create an open-innovation environment create a win-win for all players.

He lastly said, "India is the third-largest startup ecosystem in the fastest-growing major economy, yet economic contribution by startups is still in single digits. There is an opportunity now to dramatically alter this."