New Delhi: Union Finance Minister Nirmala Sitharaman speaks in Rajya Sabha during the Budget session of Parliament, in New Delhi, Friday, Feb. 2, 2024.
| Photo Credit: PTI

With an allocation of ₹22,137.95 crores in the interim budget 2024, the Micro, Small and Medium-Scale Enterprises (MSMEs) sector will see establishment of more clusters and new technology centres.

Union Finance Minister Nirmala Sitharaman said in her budget speech, “It is an important policy priority for our Government to ensure timely and adequate finances, relevant technologies and appropriate training for the Micro, Small and Medium Enterprises (MSME) to grow and also compete globally.”

While the allocation for the Emergency Credit Line Guarantee Scheme, which was launched in 2020 during the COVID pandemic, has reduced to ₹ 10,162.92 crores from ₹14,000 crores last financial year, establishment of new technology centres has allocation of ₹450 crores, Micro and Small Cluster Development Programme has ₹400 crores and the PM Vishwakarma scheme has got ₹4,824 crores. Allocation for the coir sector is also up marginally to ₹103.10 crores.

According to the Federation of Indian Micro and Small & Medium Enterprises (FISME), the Budget “lays a strategic direction to address a few critical needs” of the MSME sector. The current financial architecture needs a revamp to serve green field manufacturing projects and fast growing MSMEs. In technology, the focus on resource efficient technologies and green technologies is another direction the government is alluding to.

Union Finance Minister Nirmala Sitharaman presents the Interim Union Budget 2024 at the Lok Sabha of the Parliament House in New Delhi.
| Photo Credit: ANI

Union Finance Minister Nirmala Sitharaman on February 2 presented the interim budget for 2024, ahead of the upcoming general elections.

With no dramatic pre-poll sops the Ms. Sitharaman stuck to fiscal deficit targets; announced new urban housing scheme, more rural homes, rooftop solar solutions; and turned the focus to eastern States.

Here are a series of videos by The Hindu detailing the same.

See all 11 stories

Union Finance Minister Nirmala Sitharaman addressing the media on Union Interim Budget at National Media Centre, in New Delhi.
| Photo Credit: Sushil Kumar Verma

In Finance Minister Nirmala Sitharaman’s Interim Budget speech months before the country goes to the Lok Sabha election, the Narendra Modi-led government’s social justice plank is clearly spelt out with the government looking to cover the development of all castes and their administrative focus on ensuring “resources are distributed fairly regardless of social standing”.

This is manifested in the way the government has chosen to measure its progress on social justice in terms of policy impacts on “four major castes — poor, women, youth, and farmers” as posited by Prime Minister Narendra Modi last year and presented by Ms. Sitharaman in Thursday’s speech.

Use of ‘caste’

In the section on social justice, Ms. Sitharaman’s speech mentions “caste” just twice with reference to the above-mentioned points and not once mentioning marginalised groups like the Scheduled Castes, Scheduled Tribes, Other Backward Classes specifically.

Also Read: Puffed-up and poll-ready: Nirmala Sitharaman’s first Interim Budget

“Our government is working with an approach to development that is all-round, all-pervasive and all-inclusive. It covers all castes and people at all levels,” Ms. Sitharaman said, adding, “Previously, social justice was mostly a political slogan. For our government, social justice is an effective and necessary governance model. The saturation approach of covering all eligible people is the true and comprehensive achievement of social justice. This is secularism in action, reduces corruption, and prevents nepotism.”

“The resources are distributed fairly. All, regardless of their social standing, get access to opportunities. We are addressing systemic inequalities that had plagued our society,” the Finance Minister said.

In speaking about the progress achieved on the social justice front under the leadership of Prime Minister Narendra Modi, the Finance Minister thus ensured that policy impact on the “four major castes” — poor, women, youth, and farmers — were in the spotlight such as the coverage under projects like PM-Svanidhi for street vendors, PM-Jan Dhan account penetration, PM-KISAN SAMMAN coverage, the Skill India Mission, PM Mudra Yojana for start-up loans, etc.

For marginalised groups

The only mention of specific policy targeted towards marginalised groups in Ms. Sitharaman’s speech was the PM-JANMAN programme for Particularly Vulnerable Tribal Groups (PVTGs) except for a mention of enmasse development schemes for Divyangjan (persons with disabilities) and transpersons.

While Ms. Sitharaman’s speech touched upon the women’s reservation law passed by Parliament last year and the abolition of triple talaq, there was no mention of the demand for specific SC/ST/OBC reservations within the women’s quota and how the government was looking to address this.

Well before Finance Minister Nirmala Sitharaman rose to present the Interim Budget for 2024-25, there were indications as to what its focus would be. Doubts that this would be anything more than a vote-on-account had been settled when Prime Minister Narendra Modi publicly declared that “when polls are this close, the government presents an interim budget” — and went on to say with confidence of a victory in the polls, “we will bring a full budget when a new government is formed”.

Meanwhile, an ‘interim Economic Survey’, innocuously titled “The Indian Economy: A Review”, has presented a survey of post-Independence economic development, with a periodisation that divides those years into the pre- and post-Modi government eras. In language reflective of an electioneering pamphlet, peppered with the Prime Minister’s own assessments of his government’s record, the document concludes that the decade 2014-24 was one of “transformative growth”. Periods of significant or even high episodes of growth prior to that transformative decade are identified as wanting, on the grounds that such growth either left structural challenges unaddressed or was the result of an unsustainable credit boom that damaged the banking sector.

A eulogy

Given this background, it was to be expected that the Budget speech would be a vocal expression of this eulogy of the two governments of the last 10 years. For years, Part A of the Budget speech has been a tiresome recounting of policies already adopted, and to be adopted, many of which have little to do with the issues of resource mobilisation and allocation and the strategy they signal, which must be the actual concern. That has been true of this year’s Interim Budget as well, which focused on all the “welfare” schemes, in areas varying from housing to food, which have been largely attributed to the Prime Minister. It is another matter that the Prime Minister has in the past dismissed such schemes as representative of a “revdi” (sweet gifts) culture when implemented by non-Bharatiya Janata Party (BJP) State governments.

With the Interim Budget being identified as a mere vote-on-account, Part B of the speech was a declaration that while pursuing consolidation in the sense of achieving periodically revised fiscal deficit to GDP ratios, the government will be stepping up spending on infrastructure and welfare. In the circumstances, what can be assessed from the detailed Budget documents is the fiscal performance of the Centre in the current (rather than next) financial year, 2023-24. Even that exercise is fraught with difficulty because the practice of presenting Budgets on February 1 adopted in recent years has meant that “revised estimates” for the financial year incorporate projections relating to most of the last quarter of the financial year extending to March 31.

CGA data sheds more light

The only substantial figures at hand are the estimates of actual expenditure under different broad heads for the first three quarters of 2023-24 provided by the Controller General of Accounts (CGA), which can be compared with the estimates for the whole year provided in the Budget. This is, in certain areas, quite revealing. For example, if we take the estimates for the Department of Rural Development, under which the all-important Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) scheme falls, as compared to budgeted expenditures of ₹1,57,545 crore for 2023-24, the revised estimates are placed at a much higher ₹1,71,069 crore. That points to a significant step up relative to that budgeted, despite claims that the NREGA scheme is being inadequately funded, wages are in arrears and job card holders are being excluded from work because wage payments are to be linked to Aadhaar.

Editorial | Poll posture: On the 2024 Interim Budget

But a comparison of revised and budgeted expenditures conceals what is actually occurring. The actual expenditure on the MGNREGA scheme was ₹1,11,170 crore in the COVID-19 year 2020-21 and ₹98,468 crore in 2021-22. That came down to ₹90,806 crore in 2022-23 and the revised estimate projects spending on the programme in 2023-24 at an even lower ₹86,000 crore. The figures clearly do not match the government’s pro-poor rhetoric. Interestingly, the CGA reports that expenditure of the Department of Rural Development till December 2023 amounted to only ₹1,07,912 crore or 63% of the total projected in the revised estimates. So, more than a third of the estimated expenditure for the financial year is projected to occur in the last quarter of the year.

That deviation between revised expenditures over the financial year and the actual till December 2023 is even larger in the case of the Department of Agriculture and Farmers Welfare, under which the much-touted Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) scheme of transfers falls. The budgeted expenditure for 2023-24 for that department was placed at ₹1,15,532 crore and the revised estimate is projected at ₹1,16,789 crore. The actual till December is placed at ₹70,797 crore by the CGA, or 61% of the revised estimate. Spending on the PM-KISAN scheme alone, which amounted to ₹66,825 crore in 2021-22, fell to ₹58,254 crore in 2022-23 and is projected at ₹60,000 crore in 2023-24.

There are two ways in which such deviations between actual spending till December and the revised estimates in the Budget can be interpreted. One could be that the Finance Minister has chosen to inflate revised estimates of spending to back her claim that the government has provided massive support to farmers and rural workers. The other could be that, despite tardy spending till December, the government plans to launch a pre-election spending blitz in areas where it believes it can swing votes in favour of the BJP. Being election season, the latter is a possibility. But trends of the kind noted with regard to spending on the MGNREGA scheme suggest that the government believes that rhetoric can be a substitute for actual allocations. Thus, despite claims that free rations for 80 crore people are a huge expansion of food support under the National Food Security Act, the total food subsidy has fallen from ₹5,41,330 crore in 2020-21 to ₹2,88,060 crore in 2021-22 and a projected ₹2,87,194 crore (RE) in 2023-24.

Estimates and projections

At the macroeconomic level, the Budget’s claim is that in 2023-24, the central government has managed to ensure that its receipts other than borrowing are almost equal to that budgeted. This is because it has met budgetary expectations with respect to tax revenues as well as expects to raise its non-tax revenue receipts by 25% relative to budget. The explanation for that hefty increase is that income from dividends and profits is slated to rise from ₹99,913 crore in 2022-23 to ₹1,54,407 crore in 2023-24 (RE). This is because, as compared with a budgeted ₹48,000 crore to be received as dividend/surplus from the Reserve Bank of India and nationalised financial institutions, the revised estimates suggest that the actual inflow will be more than twice that figure at ₹1,04,407 crore, largely because of transfers from the central bank. This has more than made up for a projected fall in miscellaneous capital receipts, consisting of receipts from disinvestment from a budgeted ₹61,000 crore to ₹30,000 crore. It is not clear whether even the figure of ₹30,000 crore can be realised, since the CGA estimates that ‘other non-debt capital receipts’, consisting of disinvestment proceeds, just crossed ₹10,000 crore by December.

Estimates and projections of this kind allow the Finance Minister to claim that even while ensuring total expenditure in line with the budgeted, she has managed to keep the fiscal deficit, at 5.8% of GDP, marginally below the budgeted level, hoping to please financial markets with her government’s prudence. Whether it would please voters to give the National Democratic Alliance a “resounding victory”, as she hopes, is yet to be seen.

C.P. Chandrasekhar is an economist and columnist based in New Delhi

‘The FY25 interim Budget carries forward the ethos of public capex a notch higher, thereby bolstering the government’s commitment to high quality spending’
| Photo Credit: REUTERS

India’s economic recovery in the early post COVID-19 pandemic phase was distinctly underscored by a strong performance in exports and domestic investments. While exports benefitted from an easing of global supply chains and a structural pick-up in services exports, domestic investments are a manifestation of the government’s relentless capex push.

The prioritisation of capex continues

As such, India’s investment ratio is estimated by the National Statistical Office to have improved to 29.8% of GDP in the financial year 2023-24 from its recent low of 27.3% in 2020-21. With this, India stands out as the fourth best country (followed by Mexico, Italy, and South Africa) in the G-20 space with respect to an improvement seen in the investment ratio, three years after COVID-19.

The FY25 Interim Budget carries forward the ethos of public capex a notch higher, thereby bolstering the government’s commitment to high quality spending. The budgeted capex by the central government, an important metric for capacity creation in the economy, is slated to touch a record high of ₹11.11 trillion in FY25. As a ratio to GDP, this would tantamount to 3.4% of GDP, the highest in the last two decades. As a share of total expenditure, this comes to 23.3%, the highest in 32 years

Out of the budgeted capex outlay of ₹11.11 trillion, nearly two-thirds is earmarked for economic services (the lion’s share of approximately 46% is accounted for by hard infrastructure sectors such as roads and railways. In case of the railways, the Finance Minister has announced the identification of three major economic rail corridors under the PM Gati Shakti programme to improve logistics efficiency and reduce cost; energy, mineral and cement corridors; port connectivity corridors; high traffic density corridors, and 40,000 normal rail bogies will be upgraded to meet Vande Bharat standards

Defence capex, a niche priority segment under the Atmanirbhar Bharat campaign, will see a record high allocation of ₹1.72 trillion (although it is budgeted to remain unchanged at 0.5% as a ratio to GDP between FY24 and FY25). This will be supplemented with the launch of a new scheme for strengthening deep-tech technologies for defence purposes and expediting ‘atmanirbharta’.

Loans and advances (form of capital transfers) is budgeted to jump to ₹1.71 trillion in FY25, implying a 20% annualised growth. This will enable States to continue marching in lock step on capex creation at the ground level. After all, States play an equally important role in the creation of regional infrastructure — on an annualised trailing basis, States had a share of approximately 44% (as of December 23) in general government capex.

A tango with the capex push

While the focus on hard infrastructure is easily palpable, the government has also been active in pushing forward its inclusion agenda with interlinkages with the infrastructure sector. In this context, despite its limitations, the FY25 Interim Budget has placed an adequate and timely emphasis on the housing sector. With the target of three crore houses for PM Awas Yojana (Grameen) being nearly met, the Finance Minister expanded the scope to include two crore additional houses in the next five years. This has the potential to boost affordable housing, which in turn would support rural infrastructure demand.

Further, the capex thrust is also seen to be integrating the government’s green energy ambitions. As per the FY25 Interim Budget, one crore households would obtain 300 units of free electricity every month through rooftop solarisation. While each household is expected to save between ₹15,000 to ₹18,000 annually, this would help in the creation of solar assets, especially in rural parts of the country.

Some weak spots in the capex story

Notwithstanding the unambiguous policy focus on government capex, there seems to be a slowdown in capex spending by public sector enterprises (PSEs). The PSE capex budget for FY24 has been axed from ₹4.88 trillion in initial Budget estimates to ₹3.26 trillion in the revised estimates. This will result in PSE capex contracting by approximately 10% in FY24. Going forward, PSE capex is budgeted to increase modestly to ₹3.43 trillion in FY25, implying a growth of approximately 5%. As a ratio to GDP, PSE capex is slated to moderate to 1.0% in FY25, the lowest in recent history.

The high point of this Budget is fiscal consolidation. While subdued PSE capex takes away some sheen from the overall capex thrust by government agencies, this is getting compensated by the better-than-expected pace of fiscal consolidation — the FY25 Interim Budget has pegged the fiscal deficit target at 5.1% of GDP, lower than the consensus expectation of 5.3%-5.4%.

With gross g-sec borrowing now slated to moderate to a three-year low of ₹14.13 trillion, the private sector would benefit from better availability of lendable resources, hopefully at a lower rate (the 10Y g-sec yield closed 8 bps lower at 7.06%, its lowest levels in six months). This would bring collateral benefits to the overall economy. Fiscal rectitude and conservatism have been the hallmarks of this government’s Budget making.

Vivek Kumar is Co-Head, Research, QuantEco. Shubhada Rao is Founder, QuantEco

Former Finance Minister and Congress leader P Chidambaram addresses the media regarding the Union Interim Budget 2024 during a press conference, in New Delhi on Thursday.
| Photo Credit: ANI

India’s demographic dividend has been “destroyed” as the BJP-led National Democratic Alliance’s approach to the economy “is biased in favour of the rich”, Congress leader and former Finance Minister P. Chidambaram said on Thursday, after the presentation of the Interim Union Budget in Parliament. He added that the party was not afraid of a white paper analysing the previous Congress-led United Progressive Alliance government’s record on handling the economy.

Congress president Mallikarjun Kharge, in a video statement, claimed that both “vision and accountability were missing” from the Interim Budget. “Any budget has two aspects: one, to provide a status report on the previous years, and the other is to provide a vision for the next year. Both of these are missing from this Interim Budget,” Mr. Kharge said.

Addressing a press conference at party headquarters, Mr. Chidambaram slammed the Budget’s provisions for key sectors, including the youth, women, and farmers, as well as the policy of “minimum government and maximum governance”.

‘Rampant unemployment’

While Finance Minister Nirmala Sitharaman had talked about youth, she did not acknowledge the “rampant” unemployment, said the Congress leader, adding that she had not mentioned that over 30,000 farmers and agricultural labourers had died by suicide between 2020 and 2022, nor the low participation of women in the labour force.

“By deliberate neglect over the last 10 years, the government has destroyed the demographic dividend story and dashed the hopes of millions of youth and their families,” Mr. Chidambaram said. “It is a government of the rich, by the rich and for the rich. The government is either ignorant or callous to the fact that the top 10% owns 60% of the nation’s wealth and earns 57% of the national income, and that income inequality has widened significantly in the last 10 years,” he added.

Per capita income vs GDP

Asked about India being described as the fastest growing economy, the former Finance Minister said that the “fastest growing economy is not a badge of honour”.

“China’s GDP is five and a half times more than our GDP. If they grow at, say 3%, in order to match their annual growth, we have to grow at 15%… So don’t talk about GDP growth. Talk about the per capita income growth. If the GDP is growing at such a high rate, why is the per capita income growing at half that rate?” he asked.

High food inflation

The Congress veteran said that the Finance Minister had barely touched on the issue of inflation, despite the fact that food inflation is at 7.7%, while the real wages for casual workers have stagnated for four years. “She spoke about free grain to 80 crore persons, but she did not speak about India’s rank in the Global Hunger Index or the widespread malnutrition among children leading to a high proportion of stunting and wasting,” he said.

Mr. Chidambaram added that the “minimum government” policy has, in reality, “undermined federalism, starved State governments of funds and virtually reduced the third tier of governance — panchayats and municipalities — to ciphers”.

The interim Budget saw an allocation of ₹13,000 crore for the Ministry of Tribal Affairs for the next fiscal year. 
| Photo Credit: BISWARANJAN ROUT

The Estimates presented by Finance Minister Nirmala Sitharaman for financial year 2024-25 on February 1 left the budgets for Social Justice and Tribal Affairs Ministries largely unchanged with marginal increases seen in the estimated allocations for both ministries compared to the FY 2023-24 Budget Estimates (BE). While ₹14,225 crore has been set aside for the Ministry of Social Justice and Empowerment, ₹13,000 crore has been allocated for the Ministry of Tribal Affairs for the next fiscal year.

This comes even though the Revised Estimates for FY 2023-24 saw expenditures reduced by 38% and 23% for the Tribal Affairs Ministry and Social Justice Ministry, respectively, compared to the allocations set aside in BE 2023-24.

The Social Justice Ministry was able to spend only small percentages of the amounts set aside for key schemes like the SEED scheme for Denotified, Semi-Nomadic and Nomadic Tribes, the National Action Plan for Drug Demand Reduction, and the NAMASTE scheme to end unsafe sewer cleaning throughout FY 2023-24, as per the Revised Estimates. Similarly, the Tribal Affairs Ministry fell short in spending on its flagship project of Eklavya Model Residential Schools (EMRS) and on transfers to States under the PM Adi Adarsh Gram Yojana.

Despite this, the government has prioritised spending on these schemes for the next financial year. For instance, the Social Justice Department has increased the allocation under the NAMASTE scheme to ₹116.94 crore even though it was able to spend just ₹30 crore out of the ₹97 crore allocation made in this financial year’s estimates. Similarly, the SEED scheme’s allocation has been maintained at around ₹40 crore for the year even though the department was able to spend just ₹15 crore on it.

As for the Tribal Affairs Ministry, despite being able to spend just ₹2,471.81 crore out of its ₹5,943 crore allocation for this fiscal on its flagship EMRS project, the Ministry has set aside ₹6,399 crore for this project to be spent over the next fiscal. The PM-JANMAN programme targeted towards the Particularly Vulnerable Tribal Groups (PVTGs), launched in November, 2023, saw an allocation of ₹240 crore under the transfers to States head, with a ₹25 crore allocation for the Central sector component of it under the Tribal Affairs Ministry. Apart from this, ₹1,600 crore has been set aside to be disbursed as grants under Article 275(1) of the Constitution for the welfare of Scheduled Tribes.

In addition, the government has reduced the allocations for FY 2024-25 under the Free Coaching Scheme for Scheduled Castes and Other Backward Classes by over ₹12 crore; the allocation for the Pradhan Mantri Janjatiya Vikas Mission (PMJVM) — for forest produce self-help groups (SHGs) — also saw a reduction of over ₹110 crore compared to the FY 2023-24 estimates. Further, the allocation under transfers to States for the PM Adi Adarsh Gram Yojana has gone down by over ₹400 crore.

Furthermore, the government has made sure that there is a marginal increase in the overall allocation for the pre- and post-matriculation scholarship schemes (all components put together) available for Scheduled Castes, Scheduled Tribes, Other Backward Classes, and Denotified, Semi-Nomadic, and Nomadic Tribes — both in its share and in the share meant to be transferred to States and UTs.

As part of the Interim Budget documents, the government also put out a table on the implementation progress of significant announcements made in the 2023-24 Budget speech. Among these, the Sickle-Cell Elimination Project’s progress has been slow, with just a little over 64 lakh screenings conducted till November 2023, out of a target of conducting over two crore by the end of the fiscal.

Under the PM-JANMAN scheme, the government said that shared databases had been set up to collect village-level population data of PVTG communities, and that a mobile app had also been created by the Bhaskaracharya National Institute for Space Applications and Geoinformatics (BISAG-N) for verifying PVTG population, village data with infrastructural gaps in these villages/habitations.

Further, the government had announced a plan to hire as many as 33,000 teachers and non-teaching staff for EMRSs. Of this, the first batch of over 10,000 staff members are set to be selected for postings by the end of the fiscal. The exam for this selection was conducted in December, 2023.

Union Finance Minister Nirmala Sithaman addresses the press conference after presenting the Union Interim Budget 2024 at Parliament, at the National Media Centre, in New Delhi on Thursday.
| Photo Credit: ANI

The Budget Estimate for the Union Minority Ministry remain almost unchanged with marginal increase for a couple of schemes and programmes. The budget allocation for the ministry has been increased from ₹3,097.60 crore in the financial year 2023-24 to ₹3,183.24 crore for 2024-25.

The Revised Budget for the Minority Ministry in 2023-24 was ₹2,608.93 crore.

Budget 2024 updates 

The budget for Quami Waqf Board Taraqqiati Scheme and Sahari Waqf Sampati Vikas Yojna, was ₹17 crore in 2023-24, while the Revised Budget remained ₹8 crore. The government still allocated ₹316 crore for the same in the financial year 2024-25. These schemes are meant to implement the Computerisation of Records, Strengthening of State Waqf Boards and to protect vacant urban Waqf land from encroachers apart from developing it on commercial lines for generating more income in order to widen welfare activities, respectively.

The budget for total education empowerment of minorities was slightly decreased, nearly ₹125 crore, reportedly due to cancellation of scholarship schemes like pre-metric as well as the Maulana Azad National Fellowship (MANF).

The Right to Education Act (RTE Act) covered compulsory education up to Class 8 for all students which is why the pre-metric scholarship was cancelled, said the government in its response in Parliament. The scheme in its new form only covers students of Classes 9 and 10. Smriti Irani, Minister for Minority Affairs, had told the House that the MANF was scrapped as it overlaps with various other fellowship schemes for higher education implemented by the government which also covers students from minorities.

Also read: Key takeaways from interim Budget 2024-25 in charts

The Education Scheme for Madrasas and Minorities has been slashed to ₹2 crore from ₹10 crore in the last budget. The revised budget in the category was ₹5 crore.

The allocation of ₹910 crore has been made under the Pradhan Mantri Jan Vikas Karyakaram (PMJVK), which was ₹600 crore for 2023-24. The objective of the PMJVK is to address the development, deficits in the selected Minority Concentration Areas (MCAs i.e. identified districts headquarters blocks/towns/clusters of villages having substantial minority population which are relatively backward). The Multi-sectoral Development Programme (MsDP) has been restructured and revamped for implementation as the Pradhan Mantri Jan Vikas Karyakaram.

Photo used for representation purpose only.

Signalling a commitment to research and innovation for India’s “tech-savvy youth,” Finance Minister Nirmala Sitharaman, in her Interim Budget speech on February 1, mentioned a corpus of ₹1 lakh crore, that would be available on ‘minimal or nil interest rates’ to “encourage” the private sector to invest in research and development in ‘sunrise sectors.’ It was not clear if this corpus was targetted at a specific Ministry or intended as a more broad-based encouragement to research.

Experts said that while it is a “welcome” development, it remained to be seen how the scheme would be implemented. “There are many possibilities at this juncture but I’m not aware of any specific discussions [on beneficiaries and implementation] and the ministries which will be involved. However, it is very good as it envisages both the public and private sector to invest in research and development,” V.K. Saraswat, Member, NITI Aayog (science and technology), told The Hindu.

Budget 2024 updates 

Among the significant steps taken by the Science Ministry in 2023 was clearing the National Research Foundation Bill. To be piloted by the Department of Science and Technology (DST), this envisages an autonomous body with a corpus of ₹50,000 crore, of which nearly ₹36,000 crore will come from the private sector and non-governmental sources. A major long-standing concern of the government has been in getting private sector enterprises to invest in core research and development, with nearly three-fourth of such R&D expense now borne by the government. The DST has provisioned ₹2,000 crore in 2024-25 towards the NRF.

Modest allocations

Whether the new corpus has a connection to the NRF is unclear. Allocations to civilian science departments, namely the DST, the Department of Biotechnology, the Council of Scientific and Industrial Research and the Ministry of Earth Sciences (MoES), were modest with the CSIR getting a 10% raise from the ₹5,746 crore allocated in 2023-24 to ₹6,323 crore and the DST a 1% raise over the ₹7,931 crore in 2023-24 to ₹8,029 crore.

Also read: Key takeaways from interim Budget 2024-25 in charts

The National Quantum Mission, a much talked about scheme of the DST that envisages developing critical technolgies using the principles of quantum mechanics and with applications in cryptography and computing, has for the first time been provisioned ₹2,819 crore — reflecting a commitment to making headway this year. In her speech, Ms. Sitharaman mentioned, again without details, “…A new scheme will be launched for strengthening deep-tech technologies for defence purposes and expediting ‘atmanirbharta.’ ” Deeptech is a buzzword that lacks a precise definition but refers to start-ups working towards proprietary technologies in the field of artificial intelligence and other esoteric research areas and requiring large, sustained research investment.

The Department of Biotechnology has seen allocations cut to ₹2,251 crore this year from ₹2,683 crore (2023-24) and MoES a cut from ₹3,319 crore to ₹2,521 crore. A senior official explained the cuts as occurring due to budgets for major programmes often being spread out over 3-5 years and the inability of ministries to spend budgeted amounts within the prescribed financial years. The Finance Ministry, in its overall assessment of ‘Research and Development’ spending (spanning multiple ministries), has allotted ₹13,208 crore for 2024-25, up from the ₹12,850 crore in 2023-24. The actual spending during 2023-24 (till December) was ₹12,943 crore.

Union Finance Minister Nirmala Sitharaman holding a folder-case containing the Interim Budget 2024. Ministers of State Bhagwat Kishanrao Karad and Pankaj Chaudhary are also seen.
| Photo Credit: Shiv Kumar Pushpakar

Whilst maintaining the status quo with respect to direct and indirect taxes, Finance Minister Nirmala Sitharaman in her maiden interim budget presentation proposed to withdraw small, non-reconciled and disputed direct tax demands. This implies tax demands of up to ₹25,000 pertaining to the period up to FY 2009-10, and up to ₹10,000 for FY 2011 to 2015 — would be withdrawn. Ms Sitharaman held that that the moves were part of the treasury’s intent to improve ‘ease of living and doing business’.  

Also read: FM Nirmala Sitharaman delivers her shortest Budget speech till date 

This turned out to be the major policy announcement on February 1 as Ms. Sitharaman maintained the status quo for direct and indirect taxes, including import duties.  

‘Improving ease of living and doing business’ 

Elaborating the rationale for the withdrawal, she told the House that there existed a “large number of petty, non-verified, non-reconciled or disputed direct demands”. Many of which went as far back as 1962., she said, as they continue to remain on the books, they were “causing anxiety to honest taxpayers and hindering refunds of subsequent years.” 

The Finance Minister said the move would benefit “about a crore taxpayers”. 

Gouri Puri, Partner at law firm Shardul Amarchand Mangaldas & Co. told The Hindu that the issue (about direct tax demands) has been pertinent to smaller taxpayers. Further, this would help address “legacy demands” that have been existing in the system but might be lacking merit. “There are clients that have non reconciled demands that have not been resolved for five, six or may be ten years,” she said. “The concerned officer will now have an administrative basis to resolve such tax demands,” Ms. Puri added. Terming it as a “welcome move”, Ms. Puri said, “It may not be worthwhile for the government or taxpayers’ time or effort to keep such demands pending or disputed.”  

Before announcing the tax proposals, Ms. Sitharaman had highlighted the government’s prerogative to improve taxpayer services. She pointed to how the “age-old jurisdiction-based assessment system” was transitioned to “faceless assessment and appeal”. This, according to her, imparted greater efficiency, transparency and accountability. The finance minister also said the introduction of updated income tax returns, a new form 26AS and prefilling of tax returns have made filing “simpler and easier”. Further, the average processing time for returns stands reduced from 93 days, as observed in 2013-14, to 10 days at present, she stated.  

No change to direct and indirect tax rates 

Stating that she would be “keeping with the convention”, Ms. Sitharaman proposed to retain the same tax rates for direct and indirect taxes, including import duties. This is in contrast to the last Interim Budget (2019-20), which proposed amending Section 87A of the Income Tax Act to increase the income base for tax rebates from ₹3.5 lakh to ₹5 lakh, breaking from the convention of announcing populist measures before the country heads into a general election.  

Tax holiday extended 

However, tax holidays for start-ups and (tax) benefits on investments made by sovereign wealth or pension funds alongside exemptions on certain income of some IFSC units were extended to March 2025. It was set to expire by March-end this year.  

Rohinton Sidhwa, Partner at Deloitte India explained that the benefits would be relevant in three arenas. Firstly, for start-ups: with the date of incorporation for an eligible start-up extended by one year. Secondly, sovereign wealth funds, who benefit from the extension in making investments that qualify for exemption. And finally, the IFSC units whose date of commencement of operations would now be March 2025. “This extension applies only to specific income — specifically leasing of aircraft and ships and transfer of capital assets on the IFSC exchange,” he explained.  

A surprise on the front sprung up with the sunset clause not being extended for new manufacturing units. “This seems contrary to the policy of the Government to promote manufacturing in India under the PLI scheme. I do hope that this is an error of omission, and we will see a notification to extend this benefit soon,” stated Sanjiv Malhotra, Senior Advisor at Shardul Amarchand Mangaldas & Co.  

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