Union Budget 2024: 5 themes that may emerge prominently this time 

Nomura India in its Union Budget 2024 preview note said the first budget of Modi 3.0 would be an important platform for the NDA government to signal its intent on fiscal consolidation, showcase how it plans to manage allies’ new financial demands, and also establish its vision and reform agenda for the next five years. The brokerage expects the budget to signal policy continuity and an uncompromising focus on fiscal consolidation, despite the weaker political mandate.

Nomura India said the BJP lost its majority and is now reliant on state-level coalition partners, notably the Telugu Desam Party (TDP) from Andhra Pradesh and the Janata Dal (United) (JD(U)) from Bihar. Still, it expects the government to lower its FY25 fiscal deficit target to 5 per cent of GDP from 5.1 per cent set in the interim budget. Incorporating the financial demands of the two allies, it expects a 0.2 per cent of GDP rise in total expenditure, as compared to the interim budget target. It expects the government to stick to the tax revenue growth projections made during the interim budget, albeit on the provisional FY24 data.

It identified five potential themes that may emerge prominently in the FY25 budget. They are:

Consumption lift
Nomura citing media reports said the government may look to boost consumer demand by raising the standard deduction limit for taxpayers under the ‘new’ tax regime (alternate regime introduced with no exemptions but lower tax rates) and possibly increase the exemption on income from bank interest.

Other measures may include lowering the personal income tax rate for those in the Rs 5-15 lakh tax slab, costing the exchequer Rs 25,000 crore (0.08 per cent of GDP), and a similar amount could be spent by increasing the annual cash handout to farmers from the current Rs 6,000 to Rs 8,000.

Social sector focus
The government is likely to increase the outlay on rural sector schemes, with subsidies for housing to be increased by Rs 23,000 crore (0.07 per centr of GDP) as well as increased outlays for rural roads and employment. There are also reports of an expansion of the public health insurance programme by Rs 12,100 crore (0.04 per cent of GDP and a renewal of the economic empowerment programme for women(Lakhpati Didi), it said.

Manufacturing boost 
Nomura India expects the government to maintain its focus on promoting domestic manufacturing. The budget could announce an increase in the minimum local content requirement for public procurement, revive the concessionalcorporate tax rate of 15 per cent for new manufacturing facilities (deadline was 31 March), overhaul the 2019 national policy around electronics global value chain integration, and extend the Production Linked Incentive (PLI) scheme to electronic components and to more labour-intensive sectors with linkages to MSMEs.

Infrastructure push
Nomura India believes that focus on public capex will remain a key tenet of the government’s economic strategy. Consequently, it expects the government to dial-up its total capex outlay to 3.5 per cent of GDP, from the 3.4 per cent of GDP presented in the interim Budget. Given states’ demands, the government could raise the unconditional amount transferred under the 50-year interest free loan for infrastructure spending.

Medium-term economic vision
Since this is the first budget after the elections, it will be an important platform for the government to establish its medium-term economic vision and the reform agenda. In particular, Nomura expects the government to present its vision for India to be a developed economy by 2047, and how that translates into specific goals over the next five years. Reports suggest the government could introduce reforms that do not require any legislative approval. Also, the government could provide more clarity on the medium-term fiscal glide path beyond the target of ‘lower than 4.5 per cent of GDP’ by FY26, Nomura India said.