India eyes double-digit infrastructure spending boost

India’s interim budget, presented by Finance Minister Nirmala Sitharaman on Thursday, proposed to retain the same tax rates for the direct and indirect taxes including export duties and announced a double-digit boost to infrastructure spending while flagging the government's "golden moments" ahead.

Declaring that the Indian economy has witnessed a profound positive transformation in the last 10 years, Sitharaman said the government is working to make India a developed country by 2047. “Poor, women, youth and farmers are four castes for the government. For the government, social justice is an effective and necessary model. We focus on outcomes and not outlays.”

During her sixth consecutive budget presentation in the Lok Sabha, matching the record set by former Prime Minister Morarji Desai, Sitharaman pointed out that India, the world’s most populous nation, is the fastest-growing major economy in the world and in the coming years will become the world’s third-largest economy with a $5 trillion GDP. The Vote On Account, ahead of the general elections later this year, is expected to provide a path to that goal, she said.

The minister said 250 million people were freed from multi-dimensional poverty in the last 10 years. “Earlier approaches of tackling poverty through entitlement resulted in very modest outcomes,” she said while presenting the interim budget in the Lok Sabha. There is transparency and assurance that benefits are transferred to all eligible citizens, she said.

Focusing on youth and women empowerment, the budget stuck to fiscal prudence and proposed to lower down the financial year 2024-25 fiscal deficit target to 5.1 per cent of gross domestic product from 5.8 per cent earlier projected.

As per the proposal, capital expenditure will rise by 11.1 per cent to Rs11.11 trillion in fiscal year 2025, while tax revenue for the year is expected to rise by 11.4 per cent to Rs38.31 trillion. Expenditure on the revenue account has been estimated at about Rs36.55 trillion (11.2 per cent of GDP) which is 3.2 per cent over Rs35.40 trillion in the previous budget for 2023-24.

She proposed an 11 per cent increase in infrastructure capex in FY25 to Rs11.11 trillion, which is estimated to generate formal and informal jobs.

Among several announcements for youth, poor, women and farmers, the minister also highlighted that the healthcare cover under Ayushman Bharat will be extended to all ASHA and Anganwadi workers and helpers.

The minister, who had earlier made it clear that there would not be any “spectacular announcements" in this interim budget, said: "In keeping with convention, I do not propose to make any changes relating to taxation and propose to retain the same tax rates for direct and indirect taxes including import duties. However, certain tax benefits to start-ups and investments made by sovereign wealth or pension funds as also tax exemption on certain income of some IFSC units are expiring on March 31 2024; to provide continuity, I propose to extend the date to March 31 2025."

She said the roll out of Udan Scheme (regional airport development programme) has been very successful in providing increased air-connectivity. She proposed that 517 new routes would be launched under the Scheme. Sitharaman spoke extensively about developing India’s air connectivity, citing Indian carriers ordering more than 1,000 aircraft in the recent past, and emphasising that the “development of new airports will continue expeditiously.”

She also highlighted the potential of the India-Middle East-European Union corridor unveiled at G20 last year as a “game-changer.” The minister said that long-term interest free loans would be given to various states to develop tourist centres, while highlighting that spiritual tourism saw a boost last year.

The interim budget is seen as a stop-gap financial plan during an election year, aimed at meeting immediate financial needs before a new government is formed. The full union budget will be released only after the elections.

The budget proposed to extend tax break for start-ups to March 31, 2025, the minister said, adding that tax reforms have widened the tax base and increased tax collections.

The minister proposed to extend interest-free loans to states to promote tourism. Funds will be provided for development of tourism in Lakshadweep while a panel will be formed for tackling the challenges of higher population. Announcing a new housing plan for the middle class, she said the construction of 20 million houses under PM Awas Yojana (Grameen) will help in the construction sector.

The boost in religious and business tourism will lead to more employment in the hospitality sector while the for the tech-savvy youth, a corpus of Rs1 trillion will be established with a 50-year interest-free loan, Sitharaman said. “The corpus will provide long-term financing or refinancing with long tenors and low or nil interest rates. This will encourage the private sector to scale up research and innovation significantly in sunrise domains," the finance minister said.

Sitharaman also proposed a scheme that will allow people to buy or build their own homes, free electricity as part of a new rooftop solar programme and increased medical coverage for some government workers.

• Business