With the mantra of ‘Sabka Saath, Sabka Vikas, Sabka Vishwas’ and the whole-of-nation approach of ‘Sabka Prayas’, the Interim Union Budget 2024 was presented in Parliament on February 1, 2024. Social justice and inclusivity, which is precisely what “secularism in action” implies, was the highlight of this interim budget. The focus has been on the upliftment of four major castes, that is, garib (poor), mahilayen (women), yuva (youth) and annadata (farmer). The Modi government has assisted 25 crore people out of multi-dimensional poverty in the last 10 years.
Indira Gandhi’s ‘Garibi Hatao’ slogan was only a political tool to whip up popular sentiment. However, Prime Minister Narendra Modi has delivered when it mattered the most, despite two Black Swan events—the Covid pandemic and the Russia-Ukraine conflict. The said conflict sent global crude oil prices soaring through the roof. Since India imports over 83 per cent of its crude oil needs, the nation was faced with an uphill task to navigate geopolitical headwinds. But despite a challenging international scenario, PM Modi did not indulge in incrementalism. He went full throttle and carried out structural reforms that were unthinkable 10 years ago, be it the denationalisation of the coal sector, introducing GST, privatising Air India, or for that matter, doing away with the draconian retrospective taxation that was introduced by the erstwhile Congress regime in 2012.
Each Budget in the last 10 years has had the inimitable Modi stamp written all over it—growth, equity, welfarism, fiscal prudence, innovation and big-ticket spending on infrastructure have been the recurring themes.
Before delving deeper, it is important to note that the interim budget is presented by the outgoing government ahead of the Lok Sabha polls in the budget session. The comprehensive budget is then presented by the new government after winning the Lok Sabha elections. The interim budget mainly focuses on a breakdown of the government’s expected income and expenses until the formation of the new government. On the other hand, a comprehensive budget covers all aspects of government finances, including revenue, expenditure, allocations, and policy announcements. A full-year budget serves as a strategic roadmap, outlining the country’s economic path for the entire fiscal year. The interim budget offers financial information for the transitional period. In recent years, the interim budget has, however, become crucial as it allows the government to present its economic vision.
After the interim budget is presented, the Parliament passes a vote on account. This is a provision that allows the ruling government to obtain Parliamentary approval for essential government spending such as salaries and ongoing expenses. This is usually valid for up to two months but can be extended. According to Article 116 of the Constitution, a vote-on-account signifies an upfront allocation to the government from the ‘Consolidated Fund of India’, specifically designated for addressing immediate expenditure needs. The Consolidated Fund of India contains all revenue generated by the Central government, including taxes, interest on loans, and other such collections.
An interim budget is similar to a complete budget. One major difference is, it only includes projections for a limited period of time, rather than an entire financial year. A vote-on-account focuses on expenditure and can be approved by the Parliament without the need for a formal discussion.
Beyond technicalities, speaking of delivery, direct benefit transfer (DBT) of Rs 34 lakh crore using the PM-Jan Dhan accounts led to savings of Rs 2.7 lakh crore for the Modi government in the last 10 years. PM-SVANidhi has provided credit assistance to 78 lakh street vendors till date. 2.3 lakh have received credit for the third time. PM-JANMAN, with a budget of approximately Rs 24,000 crore, focuses on 11 critical interventions through nine ministries. It is aimed to improve the socio-economic conditions of the particularly vulnerable tribal groups (PVTGs) by saturating PVTG households and habitations with basic facilities such as safe housing, clean drinking water, improved sanitation, education, nutrition, road and telecommunications connectivity, as well as opportunities for sustainable livelihoods.
PM-JANMAN is a Modi government scheme that aims to bring tribal communities into the mainstream. The scheme (comprising central sector and centrally sponsored schemes) is being implemented by the Ministry of Tribal Affairs, in collaboration with the state governments and the PVTG communities. The plan also includes the establishment of Van Dhan Vikas Kendras for trading in forest produce, off-grid solar power systems for 1 lakh households, and solar street lights. The scheme is expected to enhance the quality of life and well-being of the PVTGs, by also addressing any form of discrimination and exclusion and by recognising and valuing their unique and valuable contribution to national and global development.
Then there is the PM-Vishwakarma Yojana which provides end-to-end support to artisans and crafts people engaged in 18 trades. As for farmers, PM-KISAN Yojana has provided financial assistance to 11.8 crore farmers to the tune of Rs 2.8 lakh crore till date, including over 3 lakh women farmers. Under PM Fasal BimaYojana, crop insurance was given to 4 crore farmers and till date, 35.23 crore insurance claims have been processed since the inception of the scheme in February 2016. Electronic National Agriculture Market (e-NAM) integrated 1361 mandis, providing services to 1.8 crore farmers with a trading volume of Rs 3 lakh crore till date.
Speaking of women, 30 crore Mudra Yojana loans have been given till date, out of the overall 43 crore Mudra loans to women entrepreneurs. Female enrollment in higher education is up by 28 per cent. In STEM courses, girls and women constitute 43 per cent of enrollment, one of the highest in the world. Over 70 per cent of the almost four crore houses under PM Awas Yojana have been given to women from rural areas. The target of three crore houses under PM Awas Yojana (Grameen) will be achieved soon.
On National Panchayati Raj Day in April 2023, the PM attended the ceremony to hand over keys of houses to four lakh beneficiaries at Rewa in Madhya Pradesh. He was also present at a similar event in Tripura for two lakh beneficiaries in December 2022 and 75,000 beneficiaries in Uttar Pradesh in 2021. Similarly, PM Modi was part of an event for 4.51 lakh beneficiaries of the Pradhan Mantri Awas Yojna (rural), in Satna in Madhya Pradesh via video conferencing in October 2022. In November 2022, he had inaugurated 3024 EWS flats at Kalkaji in Delhi, built for rehabilitating slum dwellers. What makes PM Modi stand out is his personal involvement in ensuring seamless delivery of his flawless welfare initiatives.
That 1 crore households will obtain 300 units of free electricity every month through rooftop solarisation is now the clarion call of PM Modi. With this, each household is expected to save between Rs 15,000 to Rs 18,000 annually. Healthcare cover under the Ayushman Bharat scheme will be extended to all ASHA workers, Anganwadi workers and helpers as per the interim budget announcement. Pradhan Mantri Kisan Sampada Yojana has benefitted 38 lakh farmers and generated employment for 10 lakh people. Pradhan Mantri Formalisation of Micro Food Processing Enterprises Yojana has assisted 2.4 lakh SHGs and 60,000 individuals with credit linkages.
Talking of SHGs, India boasts of some 12 million SHGs, of which 88 per cent are all-women. These groups usually consist of 20-25 members, mostly residents of villages. Almost nine crore women benefit from these 1.2 crore SHGs, which besides providing gainful livelihood, are ushering in a quiet but significant socio-economic transformation across rural and semi-urban India.
India’s young are its lifeblood. In that spirit, a corpus of Rs 1 lakh crore will be established with a 50-year interest-free loan to provide long-term financing or refinancing with long tenors and low or nil interest rates for the youth of India, as stated in the interim budget. A new scheme will also be launched for strengthening deep-tech technologies for defence purposes and expediting ‘atmanirbharta’. Capital expenditure outlay for infrastructure development and employment generation will be increased in FY25 by 11.1 per cent to Rs.11.11 lakh crore, which is 3.4 per cent of the GDP.
Three major economic railway corridor programmes identified under PM Gati Shakti will be implemented to improve logistics efficiency and reduce cost. 40,000 normal rail bogies will be converted to Vande Bharat standards. In effect, PM Modi’s infra push that has led to the government spending over Rs 23 lakh crore on this count in the last 3 years will continue with even greater vigour. The multiplier effect of government spending will in turn lead to a rise in jobs, incomes, demand and growth.
The number of airports in the country in the last 10 years has doubled to 149. Also, 517 new routes carry 1.3 crore passengers every month. Indian carriers have placed orders for over 1000 new aircraft. A coal gasification and liquefaction capacity of 100 MT will be set up by 2030. Phased mandatory blending of compressed biogas (CBG) in compressed natural gas (CNG) for transport and piped natural gas (PNG) for domestic purposes will be mandated.
States will be encouraged to take up comprehensive development of iconic tourist centres including their branding and marketing at a global scale, as stated in the interim budget. A framework for rating of the tourist centres based on the quality of facilities and services will be established. Long-term interest-free loans will be provided to states for financing such development on a matching basis.
Speaking of unleashing India’s tourist potential, let it be known that more than 1.6 crore devotees reached the Kashi temple in the months of Sawan alone. From January 2023 to December 2023, the temple saw 5.3 crore visitors. A record 12.92 crore people visited the Kashi Vishwanath Dham temple in Varanasi in the last two years, making it one of the top pilgrimage tourist spots in India. This is a classic example of how Modinomics has embraced India’s spiritual legacy.
A provision of Rs 75,000 crore as a 50-year interest-free loan is proposed to support milestone-linked reforms by the state governments, in the true spirit of cooperative federalism. Speaking of overseas capital, the FDI inflow during 2014-23 of $596 billion was twice the inflow during 2005-14. This again showcases how foreign capital finds India as a highly attractive destination thanks to Modi’s enabling, investment-friendly climate.
Talking of the government’s balance sheet, as per the Revised Estimate (RE) for FY24, the total receipts other than borrowings are Rs 27.56 lakh crore, of which the tax receipts are Rs 23.24 lakh crore. RE of the total expenditure is Rs 44.90 lakh crore. Revenue receipts at Rs 30.03 lakh crore are expected to be higher than the Budget Estimate (BE), reflecting strong growth momentum and formalisation in the economy. RE of the fiscal deficit is 5.8 per cent of GDP for 2023-24 (FY24) versus BE of 5.9 per cent. Total receipts other than borrowings and the total expenditure are estimated at Rs 30.80 lakh crore and Rs 47.66 lakh crore respectively for FY25.
Tax receipts are estimated at Rs 26.02 lakh crore. The fiscal deficit in 2024-25 (FY25) is estimated to be 5.1 per cent of GDP, which is excellent news as it shows the Modi government has not been profligate. Gross and net market borrowings through dated securities during FY25 are estimated at Rs 14.13 lakh crore and Rs 11.75 lakh crore respectively. Lower borrowings by the Central government will facilitate a larger availability of credit for the private sector, which is again a positive.
As they say, don’t fix something which is not broken. With the overall tax-to-GDP ratio at a healthy 11.7 per cent, the highest since 1999, and the direct tax-to-GDP ratio at 6.11 per cent, the highest ever since 2007-08 (FY08), it was not surprising to see the finance minister therefore proposing to retain the same tax rates for direct taxes in FY25. Direct tax collection has tripled and return filers increased by 2.4x in the last 10 years under the Modi government. The contribution of direct taxes – which majorly comprises corporate tax and personal income tax collections – has reached the pre-pandemic levels. In FY23, direct taxes made up 54.62 per cent of the government’s total tax revenues, up from 52.27 per cent in FY22 and 46.84 per cent in FY21.
Direct tax revenues have shown a sharp surge, with income tax seen overshooting the BE for FY24 by 13.5 per cent and Securities Transaction Tax (STT) revenue seen exceeding BE by 15.8 per cent. Tax buoyancy which was 2.52 in FY22 and 1.18 in FY23, rose to 1.4 in FY24, showing a stable trajectory in terms of tax efficiency within the tax apparatus. The projected gross tax revenue (GTR) mop-up growth in FY25 implies a tax buoyancy of 1.1 in the next financial year, assuming the 10.5 per cent nominal GDP growth estimate. The buoyancy in FY24 at 1.4 is in fact, the second-highest in the last seven financial years.
Despite a steep fall in tax rates, higher tax revenues show that tax leakages have been plugged and tax compliance has dramatically improved. In a bid to further rationalise taxpayer services, the Modi government has decided that outstanding direct tax demands up to Rs 25,000 pertaining to the period up to FY 2009-10, will be withdrawn as stated in the interim budget. Outstanding direct tax demands up to Rs 10,000 for financial years 2010-11 (FY11) to 2014-15 (FY15) will also be withdrawn. This will benefit 1 crore taxpayers, especially the lower-middle class. Tax benefits to startups and investments made by sovereign wealth funds or pension funds have been extended to March 31, 2025, to further enable the entrepreneurial ecosystem. Tax exemption on certain income of IFSC units has also been extended by a year to March 31, 2025, from March 31, 2024, which is good news.
Speaking of taxes, for an individual below 60 years of age, the basic exemption limit was raised by the Modi government over the years from Rs 2 lakh to Rs 2.5 lakh per annum. For senior citizens (aged 60 years and above but below 80 years), the basic income exemption limit is Rs 3 lakh. For super senior citizens (aged 80 years and above), the basic income exemption limit is Rs 5 lakh. The limit for deduction under Section 80C was increased to Rs 1.5 lakh from Rs 1 lakh annually, while the deduction limit for interest on home loans was increased to Rs 2 lakh from Rs 1.5 lakh annually. The transport allowance exemption was also increased from Rs 800 to Rs 1600 per month. An additional deduction of Rs 50,000 for contributions under the National Pension Scheme (NPS) under Section 80 CCD has also been allowed.
Under the Senior Citizen Savings Scheme (SCSS), the maximum deposit limit was hiked last year to Rs 30 lakh from Rs 15 lakh. The scheme provides 8 per cent interest per annum, paid on a quarterly basis. Under the Post Office Monthly Income Scheme (POMIS), the investment limit was increased last year to Rs 9 lakh, from Rs 4.5 lakh. In the case of joint accounts, the investment limit was increased to Rs 15 lakh from Rs 9 lakh. The investors in this case earn interest of 7.1 per cent per annum. Senior citizens who depend on only pension and interest income no longer have to file tax returns. In order to reduce tax harassment, the Modi government last year reduced the time frame for reopening of income-tax assessment cases to three years from six years. Assessment can be re-opened for up to 10 years in serious tax evasion cases only when there is evidence of concealment of income of Rs 50 lakh or more in a given financial year. Wealth tax stands abolished.
The limit of deduction on rent paid under Section 80GG was also raised from Rs 24,000 per year to Rs 60,000 per year. A 10 per cent income tax on dividends is now levied only on dividend income in excess of Rs 10 lakh annually, shielding therefore the middle class. The tax rate was reduced from 10 per cent to 5 per cent in the Rs 2.5-5 lakh per annum bracket. Deduction under 80D for health insurance was raised to anywhere between Rs 25,000 to 50,000 per annum depending on the age bracket. Deduction for interest income earned on deposits with banks and post offices was increased to Rs 50,000 from Rs 10,000 in the case of senior citizens, along with an exemption from the deduction for tax for interest income up to Rs 50,000, under Section 80 TTB. The standard deduction was also increased to Rs 50,000 from Rs 40,000 for the salaried class, opting for the old tax regime. Mahila Samman Savings Certificate offering an interest of 7.5 per cent p.a. was introduced last year as a one-time small savings scheme with a maturity period of two years, for women. A woman or guardian of a girl child can deposit a maximum amount of Rs 2 lakh under this scheme, offering an interest of 7.5 per cent p.a. on the deposited amount.
While all tax exemptions and concessions were further relaxed over the years under the benign Modi government, in a pathbreaking move, it introduced new tax slabs in 2020. The new tax regime was optional and the taxpayers were given the choice to either remain in the old regime with various exemptions and deductions as stated above or opt for the new reduced tax rates without those exemptions. Increasingly, the new tax slabs have become the default taxation option used by taxpayers.
Under the new tax slabs, there is zero tax for annual income up to Rs 2.5 lakh, 5 per cent tax for income between Rs 2.5 lakh and up to Rs 5 lakh, 10 per cent for annual income between Rs 5 lakh and up to Rs 7.5 lakh, 15 per cent tax for income between Rs 7.5 lakh and up to Rs 10 lakh per annum, 20 per cent for income between Rs 10 lakh and up to Rs 12.5 lakh, 25 per cent for annual income between Rs 12.5 lakh and up to Rs 15 lakh and 30 per cent for annual income above Rs 15 lakh.
The new tax slabs offer the most efficient and competitive tax structure, leaving far higher disposable income in the hands of the middle class. Also, dividends received from mutual funds and domestic companies are now taxed in the recipient’s hands. If the employer’s contribution exceeds Rs 7.5 lakh in a year towards NPS, superannuation fund, and EPF, it will be taxable in the hands of the employee. The draconian dividend distribution tax (DDT) dating back to 1997 stands abolished.
Other measures by the Modi government to ease tax compliance include pre-filled income tax returns (ITR) forms and exemption of dividend payment to REIT/InvIT from TDS, among others. In a significant move, in 2022, the tax deduction limit for State government employees’ contribution to NPS was raised to 14 per cent from 10 per cent. In 2023, there was an extension of rebate for annual income up to Rs 7 lakh, from the earlier Rs 5 lakh, for people under the new income tax regime. A standard deduction of Rs 50,000 was also introduced last year under the new income tax slab, which was a benefit that was earlier limited only to those opting for the old tax regime. To cut a long story short, the old tax regime offers a plethora of rebates and tax-deductible exemptions. Equally, since 2023, clearly, the new tax regime which also got the benefit of some tax rebates last year, has now become the preferred tax regime and it is highly middle class friendly. Speaking of TDS, when the TDS is being collected by any entity other than banks, the income must exceed a minimum limit of Rs 5000 for TDS to be collected; no TDS is levied till Rs 5000. This helps the lower middle class. In all the cases where the entity providing the interest is either a Bank, a cooperative society undertaking Banking activities, or a Post Office providing interest on deposits or schemes of the Central government, the threshold for levying TDS has been raised from Rs 10,000 to Rs 40,000 and for senior citizens, it is Rs 50,000. This is again a middle-class friendly move.
Similarly, the threshold for TDS on rent was also raised to Rs 2.4 lakh from FY23 onwards (the threshold limit was Rs 1.80 lakh until FY19). Hence this devious narrative that the Modi government has done very little for the middle class, is absolutely false. Look at the hard facts on this count – There is no tax liability for annual income up to Rs 7 lakh now, up from Rs 2.2 lakh in FY14. The presumptive taxation threshold for retail businesses stands increased to Rs 3 crore from Rs 2 crore, earlier. The presumptive taxation threshold for professionals stands increased to Rs 75 lakh from Rs 50 lakh.
Corporate income tax was decreased to 22 per cent from 30 per cent for existing domestic companies and from 25 per cent to 15 per cent for new manufacturing companies, in September 2019. Minimum Alternate Tax (MAT) was also reduced from 18 per cent to 15 per cent. The average processing time of tax returns today has reduced to 10 days from 93 days in FY14. Faceless Assessment and Appeal was introduced for greater efficiency and that is working well. Updated income tax returns, new form 26AS and pre-filled tax returns for simplified return filing, have made life so much easier for ordinary taxpayers. With regard to Customs duties, there has been a reduction by 47 per cent to 71 hours at Inland Container Depots, a reduction by 28 per cent to 44 hours at Air Cargo complexes and a reduction by 27 per cent to 85 hours at Sea Ports.
Moving away from direct taxes, the Finance Minister proposed to retain the same tax rates for indirect taxes and import duties too.GST, specifically speaking, has unified the highly fragmented indirect tax regime in India and despite fears of Modi naysayers, it has been one of the Modi government’s biggest successes. Average monthly gross GST collection doubled to Rs 1.66 lakh crore in this financial year. The GST tax base has doubled. State SGST revenue buoyancy (including compensation released to States) increased to 1.22 in the post-GST period (FY18 to FY23) from 0.72 in the pre-GST period (FY13 to FY16). 94 per cent of industry leaders view the transition to GST as largely positive. GST led to supply chain optimization, reduced the compliance burden on trade and industry, lowered logistical costs and thereby helped reduce prices of goods and services, benefiting the middle class in a big way. Notably, January 2024 saw the second-highest monthly collection in terms of GST revenue at Rs 1.72 lakh crore, up 10.4 per cent year on year (YoY). The highest monthly collection of GST at Rs 1.87 lakh crore was in April 2023. During the April 2023-January 2024 period, cumulative gross GST collection witnessed a robust 11.6 per cent YoY growth.
Looking back, in 2014 there was a responsibility to mend the economy and put governance systems in order. When PM Modi took charge in May 2014, the Indian economy was in shambles, driven to the precipice by successive Congress regimes of the Nehru-Gandhi dynasty who treated the public exchequer as their private fiefdom. The need of the hour was to attract investments, bring in the much-needed reforms, give hope to the people about India’s economic heft and weed out corruption that had been institutionalised by the highly incompetent, preceding Congress regimes. The Modi government in hindsight, has succeeded outstandingly with a strong belief in the ‘nation-first’ approach, aided additionally by the tried and tested formula of “minimum government, maximum governance”, which is also reflected in the fact that over 1500 outdated and archaic laws have been eradicated for good. “When the world is in crisis, we must pledge—a pledge which is bigger than the crisis itself. We must strive to make the 21st century India’s century. And the path to do that is self-reliance”—this extremely powerful quote by none other than Prime Minister Narendra Modi sums up the ethos of Modinomics in more ways than one. The Interim Budget has carried forward this ethos of self-reliance and inclusivity, amidst a fluid global scenario that continues to battle elevated bond yields, a volatile situation in the Middle East and rising protectionism from large parts of the world that are still struggling with the after-effects of the Covid pandemic.
India on the other hand, has been the stand-out country with a stellar performance, overtaking the UK to become the world’s 5th largest economy in terms of nominal GDP and overtaking the Hang Seng to become the world’s 4th largest stock market worldwide. India, since May 2014, has risen like the proverbial phoenix, with Modinomics taking the lead in showing how it is done.
Sanju Verma is an Economist, National Spokesperson of the BJP and the Bestselling Author of ‘The Modi Gambit’. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect News18’s views.
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