India Gears Up for Union Budget 2024: Expectations and Insights

On July 23, all eyes will be on Union Finance Minister Nirmala Sitharaman as she prepares to present the Union Budget for the financial year 2025 (FY25). This will be Sitharaman’s seventh consecutive Budget presentation, a feat that puts her in the record books as the first Finance Minister in India to achieve this milestone.

Historical context paints an interesting picture: Morarji Desai previously held the record for the most consecutive Budget presentations, having done so six times. Not far behind, former Prime Minister Manmohan Singh presented budgets five times in a row from 1991 to 1995. Desai still holds the record for the most budgets presented in total, with ten to his name, while P Chidambaram has presented nine and Pranab Mukherjee has delivered eight, five of which were consecutive as well.

The monsoon session of Parliament, which commenced on July 22, featured the presentation of the Economic Survey for 2023-24. This year, the Lok Sabha‘s business advisory committee has set aside time for discussions on various key ministries including railways, education, health, micro, small and medium enterprises (MSME), and food processing, alongside the Union Budget itself. A total of 20 hours has been dedicated for debates surrounding the budget.

As the Budget date approaches, expectations are running high, especially regarding potential changes to the income tax structure. Many are hoping for measures that could significantly enhance the ease of doing business in India. Analysts will be closely monitoring the announcements, as they will likely be seen as indicators of the government’s strategic economic guidance moving forward.

Some tax relief measures aimed at increasing consumption among the middle class are anticipated. However, many economists express a more cautious approach, believing that the Budget will try to find a delicate balance between populist measures and robust economic growth strategies. Sitharaman is expected to prioritize several key areas, including income tax relief, infrastructure development, job creation, and improving farmers’ incomes. Though some populist measures may be included, fiscal discipline remains a priority, which could have significant implications for the economy and the lives of Indian citizens.

Investors in the stock market are hopeful for incremental changes, particularly regarding capital gains tax. Many are looking for the government to simplify the current complex tax structure. While major alterations to tax rates may not be on the table, potential rationalization measures could go a long way in boosting investor confidence. Changes like standardizing holding periods and potentially capping capital gains tax rates are being considered to ensure stability and attract new investments.

On July 22, as part of the ongoing budget process, Sitharaman presented the Economic Survey for the 2023-24 fiscal year in Parliament. This survey highlighted the resilience and stability of the Indian economy, even amid various geopolitical challenges. It talked about the economy being on a ‘strong wicket and stable footing,’ positioned for steady growth thanks to post-COVID recovery and robust fiscal and monetary policies.

The survey has estimated an impressive growth rate of 8.2% for FY24, indicating that the economy has surpassed the eight percent mark during three out of four quarters. Sitharaman has confidently projected that this momentum will carry forward into FY25, with growth expected to be between 6.5% and 7%.

Before officially presenting the Budget, Sitharaman will meet with secretaries at the Ministry of Finance headquartered at North Block. Following this meeting, she will visit the President’s residence to seek formal permission to present the Budget. A Cabinet meeting steered by the Prime Minister will also take place to brief ministers and to secure approval.

The preparation process for the Budget begins in September-October, when the Ministry of Finance sends out circulars to all ministries, Union territories, states, and autonomous entities, requesting their respective demands and recommendations. Typically, the Union Budget is presented on February 1. However, in years when General Elections are scheduled, an interim Budget is presented earlier, followed by a complete Budget after the new government has taken charge.

In the days leading up to the Budget presentation, a traditional ceremony known as the ‘halwa ceremony’ is conducted. This marks the commencement of the printing of Budget documents. This year, the halwa ceremony took place on July 16 in the basement of North Block. It also symbolizes the start of a lockdown at the Finance Ministry, ensuring confidentiality until the Budget is officially unveiled. The ceremony is attended by the Finance Minister and other top officials.

The basement of North Block, interestingly, was the go-to printing press for Budget documents for four decades, from 1980 to 2020. However, with the digital transformation of the Budget process, most distribution now occurs via mobile apps or dedicated websites. The shift to digital has further shortened the lock-in period for document confidentiality, reducing it from two weeks to just five days.