Interim Budget 2024: Six key takeaways

Interim Budget 2024: Six key takeaways

News: From the govt\'s fiscal deficit to allocations for health and education to GDP growth, here\'s what the Interim Budget 2024 reveals.

What is an Interim Budget?
• An Interim Budget is technically just like the full budget, but only for a temporary period. Like the Union budget, it contains a complete set of accounts, including expenditure and receipts. The estimates are presented for the whole year.
• Purpose: It is presented when the current government’s term is about to end and a new government is due to take over. This ensures that there is no halt in the government’s functioning.
• The Interim Budget is also known as a ‘Vote on Account’ as it is essentially a vote in Parliament to withdraw funds from the Consolidated Fund of India to meet the expenditure during the transition period until the new government presents the full budget.

6 key Takeaways:

Muted expectations from nominal GDP growth
• Nominal GDP is the fundamental variable in any Budget. The real GDP growth that is commonly talked about is derived from nominal GDP growth after removing the effect of inflation. So, if nominal GDP growth in a particular year is 12% and inflation is 4%, then the real GDP growth will be 8%.
• For the coming financial year (2024-25), the government expects the nominal GDP to grow by 10.5%.

Significant reduction in Fiscal Deficit
• Fiscal deficit essentially shows the amount of money that the government borrows from the market. It does so to bridge the gap between its expenses and income. Fiscal Deficit is the most watched variable because if a government borrows more, it leaves a smaller pool of money for the private sector to borrow from. That, in turn, leads to higher interest rates, which, further drags down economic activity.
• The FM said that the fiscal deficit has been brought down to 5.8% level.
• Further, the FM announced similarly ambitious targets for the FY25 — at 5.1% of GDP— and FY26 — at 4.5% of GDP.

Capital expenditure target not met
• The government received a lot of praise for raising capex target to Rs 10 lakh crore (Last year’s budget). But the data for Revised Estimates shows that the capex was not met; it stands at Rs 9.5 lakh crore. This explains some part of the reduction in fiscal deficit.

Cuts in health and education spending
• The government was supposed to spend Rs 1,16,417 crore on education but ended up spending Rs 1,08,878.
• Similarly, on health, it budgeted an expenditure for Rs 88,956 cr but actually spent only Rs 79,221 crore.

Cuts in core schemes for the marginalised sections
• Similar cuts can be seen in the allocation for the core schemes for marginalised sections such as SCs, STs, and minorities.

Income tax now the biggest income generator for the government
• Most government financial resources come from borrowings. But the second biggest contributor — or the top income generator — is the revenues from income tax.
•  The Budget documents suggest that income tax revenues will account for 19% of all government resources in FY25. Corporate tax will account for 17%, GST for 18% and borrowings for 28%.