The interim budget for 2024-25 is a placeholder and it was passed by vote on account. A full-year budget will be presented and passed by the next Parliament after the general elections. The interim budget reiterates the policy focus on infrastructure and makes a commitment to reducing the fiscal deficit.
The interim budget has left taxes and the policy emphasis unchanged. However, the post-election budget is likely to be much more detailed and may incorporate significant changes in taxation and other policies.
But the interim budget does make allocations for expenditure. For the infrastructure sector, the capital expenditure has been revised upwards and enhanced by a little over 11 per cent. The 2024-25 envisages a capex of Rs 11 trillion or approximately 3.4 per cent of GDP.
It envisages setting up three new railway corridors – for energy and minerals, port connectivity, and high traffic density. To be developed under the PM Gati Shakti initiative, these dedicated freight corridors will accelerate GDP growth and reduce logistics costs. Forty thousand normal rail bogies will also be converted to the Vande Bharat standards to enhance safety, convenience and comfort. As part of the interim budget, the government has committed to support more Metro and Namo Bharat projects across urban areas, as well as tourism infrastructure and associated amenities on islands such as Lakshadweep.
There are some other budget announcements that should impact infrastructure in a positive way. The PLI scheme is being enhanced, from Rs 46.45 billion earlier to Rs 62 billion. In addition, the programme for the Development of Semiconductors and Display Manufacturing Ecosystem will receive an allocation of Rs 69 billion; this is about 130 per cent more than the Rs 30 billion allocated in 2023-24. Both these allocations will significantly enhance employment, as well as increase the domestic capacity to manufacture high-end hardware critical to the implementation of schemes such as the Smart Cities Mission and the Digital India initiative.
There is a significant budgetary focus on green energy. Solar power for the grid has received an allocation of Rs 85 billion, a 71 per cent increase over the Rs 49.7 billion allocated last year. The National Green Hydrogen Mission has also received an increased allocation of Rs 6 billion, up from Rs 2.97 billion previously. In addition, there is a rooftop solar programme, which will supply 300 free units per month to 10 million households at an estimated investment of Rs 750 billion. This will be disbursed as direct benefit transfers with the subsidy for rooftop installations enhanced to 60 per cent from the earlier 40 per cent. Apart from generating savings for households enrolling for the scheme, this would enable them to sell surplus power to the grid.
In addition to the solar schemes, viability gap funding will be provided for harnessing offshore wind energy potential up to the initial capacity of 1 GW. In order to reduce the dependence on fuel imports, a target for coal gasification and liquefaction capacity of 100 mt by 2030 was set under the interim budget. This is expected to reduce imports of natural gas, methanol and ammonia. A scheme for the phased mandatory blending of compressed biogas (CBG) with compressed natural gas (CNG) for the transport sector, and piped natural gas (PNG) for domestic purposes was also mentioned. The government will provide financial assistance for the procurement of biomass aggregation machinery to support the collection of biomass.
While the budget does not give concrete details about support for infrastructure, the measures announced make it clear that the government intends to focus on building infrastructure capacity in view of the increase in allocations.
In addition, the commitment to reduce the central fiscal deficit and pull it back to within 5.1 per cent of GDP is notable. If government borrowing is reduced, there will be less crowding out. This would make it easier for the private sector to raise financing and invest at lower cost as well. In that case, the private sector could pick up the slack and exploit opportunities as they arise across sectors. Assuming the same party is re-elected, it would be reasonable to assume that the full-year budget would keep the same focus.
Devangshu Datta