4 Key Concerns Before Interim Budget 2024
3 min read • Updated: January 23, 2024, 4:56 PM
Irrespective of whether the budget is for your house or the country, the concerns are similar: fight inflation, increase income and spend wisely.
No one expects the Interim Budget 2024 to feature groundbreaking, game-changing announcements. However, this doesn’t mean FM Nirmala Sitharaman is in for a smooth ride. There are several challenges-read: headaches-that the government must tackle while preparing the budget for the next few months. It's crucial to remember that an interim budget in an election year is often viewed as the incumbent government’s economic blueprint for the next five years, provided they return to power. Hence, the stakes couldn't be higher.
Here are the four key concerns that could shape the Interim Budget 2024:
Inflation is a significant problem not only for citizens but also for the government, especially in an election year. In its last monetary policy of 2023, the Reserve Bank of India (RBI) Monetary Policy Committee (MPC) projected CPI inflation at 5.4% in FY24, the same as before. While controlling inflation and bringing it down to the RBI's comfort zone of 4% is the central bank's responsibility, government policies also impact the prices of goods and services. The government can influence this through revisions in taxes, duties and subsidies. This is why fighting inflation could be one of the core focus areas in this Budget.
- Global economic slowdown
The decline that began in 2020 continues to haunt the global economy. The World Bank predicts a global growth slowdown for the third consecutive year, at 2.4% in 2024. Main factors dragging the global economy include the disruptions caused by the prolonged Russia-Ukraine war and the more recent Israel-Hamas conflict, along with inflation and lingering effects of the pandemic. While the Indian economy has largely remained unhurt by this gloom, there is no room for complacency. According to the first advance estimates by the National Statistical Office (NSO), India’s economic growth is expected to be 7.3% in FY24. Through the interim budget, the finance minister aims to ensure that India continues on track to become a $30 trillion economy by 2047, a target set by the incumbent government.
- Declining exports
The current global economic slowdown also poses a challenge to accelerate India’s declining exports. Between April-November 2023, India’s goods exports declined by 6.3% YoY to $278.79 billion. In fact, this has been a longstanding issue. From 2014-2023, India's goods and services export growth declined to 164% (CAGR-5.6%), compared to 520% (CAGR-17.9%) from 2004 to 2014, on a US dollar basis. Can FM Sitharaman come up with a solution in the budget? Only time will tell!
- Fiscal deficit
As mentioned above, the government faces an uphill task to keep the consumption and demand momentum going, as they are the growth drivers. One way to achieve this is by spending money and making it available to people through different schemes like road, highway and factory construction, etc. However, just like us, the government has more expenses than income. Economists call it the Fiscal Deficit and right now, it might be about 5.9% of the GDP (whereas the target is 4.5% of the GDP). This means that the government must spend its money wisely.
Therefore, irrespective of whether the budget is for your house or the country, the concerns are similar: fight inflation, increase income and spend wisely. So, track the union budget; who knows, you might stumble across a magic mantra for managing your money!