Upcoming Budget and Economic Projections
The upcoming budget coming at a time of weak consumer demand, stagnant private capital expenditure, and geopolitical threats affecting exports must address some pressing requirements.
Economic Forecasts and Fiscal Deficit
- Economic Survey 2023-24: Projected India's growth at 6.5-7%. The year-end estimate is around 6.5%.
- Fiscal Deficit: Expected to end at 4.9%, maintaining a glide path to 4.5% next year.
- Capital Gains and Taxation: Decline in equity markets affecting capital gains tax revenues. One-third of the previous year's tax-to-GDP ratio increase was from equity market gains.
- Expenditure and Capex: Subdued expenditure growth (3% y-o-y up to November) and a 12% drop in Capex (Capital Expenditure) against budgeted increases.
Government Initiatives
- Government Infrastructure Investment: Vital for sustaining growth with ₹11.11 lakh crore capital outlay in Budget 2024.
- FICCI Suggested a 15% increase in capex for FY26 over FY25.
Tax Reforms
Reducing taxes can drive demand. The government has simplified tax by reducing TDS rates on certain payments from 5% to 2%.
- Further Simplification: Propose a 2- or 3-tier TDS/TCS structure to reduce disputes.
- Independent Forum: Suggested for resolving tax disputes to encourage taxpayers to address issues outside litigation.
Export Push and Balance of Payments
- With FDI inflows recovering slowly and sluggish portfolio inflows, it's predicted that BoP surplus might reduce from $50 billion to the 10-year average of $25 billion.
- Focus on Exports: Sustained efforts on exports and reducing import dependencies are recommended.
Sustainability and Climate Goals
India aims for 'net zero' by 2070, necessitating a national vision document with clear strategies to promote circular economy practices.
- Priority Sector Lending (PSL): Review to include climate adaptation and risk mitigation activities.
- Budget Allocations: Significant funding for Swachh Bharat Mission (rural ₹7k cr, urban ₹5k cr) addressing sanitation.
- Climate-Resilient Infrastructure: Dedicated budget recommended for adaptive infrastructure and management.
Public Health and Healthcare Expenditure
Public health spending was 2.1% of GDP in FY23, below OECD and BRICS averages. Key areas of focus include:
- Infrastructure and Access: Strengthening healthcare infrastructure and moving towards universal coverage.
- Import Duties and Depreciation: Proposals to reduce import duties on life-saving equipment and increase depreciation rates.
- Preventive Healthcare: Tax incentives for medical checkups and health insurance to promote early treatment.
Support for Working Women
Challenges like commuting in the manufacturing sector could be addressed by allowing CSR funds for women’s dormitories and daycare centres.
Job Creation and Skills Development
Encouraging job creation through skilling and extending employment-linked benefits is crucial for tackling unemployment and capitalizing on the demographic dividend.