India’s Finance Minister Presents Interim Budget
India’s Finance Minister Nirmala Sitharaman delivered a budget speech that lasted 58 minutes, as this was an interim budget before the upcoming elections. A full-fledged budget will be presented by the new government in July. The focus of the 2024-25 budget is on economic growth and modernization of India by 2047. The key features include people-centric inclusive development, policies for the poor, youth, and farmers, sustainable development, infrastructure and investment, and reducing fiscal deficits.
No Changes to Direct and Indirect Tax Rates
The Finance Minister proposed to retain the direct and indirect tax rates, including import duties. Corporate tax remains at 22% for companies and 15% for new manufacturing companies. However, tax benefits were announced for startups and sovereign wealth funds/pension funds. The withdrawal of pending direct tax demands up to Rs 25,000 up to FY10 and up to Rs 10,000 up to FY15 was also announced.
No Announcement of Crypto Taxes
The government has not provided any relief to the crypto industry, maintaining the flat 30% tax on virtual assets proposed in FY22. The industry had requested a reduction in tax-deducted at source (TDS) from 1% to 0.01%. Crypto leaders are focused on educating and advocating for digital asset tax reforms.
Infrastructure Spending and Investment
The budget allocates Rs 11.1 trillion for capital spending on infrastructure in the coming fiscal year, an increase of 11%. The Ministry of Defense, Ministry of Road Transport and Highways, and Ministry of Railways receive the largest allocation. Major schemes such as employment guarantee, healthcare, solar power, green hydrogen mission, and production incentives are also prioritized. Additionally, a tech innovation fund of $12 billion is allocated.
Budget Deficits
The government aims to reduce the fiscal deficit to 5.1% of GDP in 2024-25, lower than economists’ expectations. The federal government will provide long-term loans to states for infrastructure spending. The Indian rupee and bonds rose after the budget announcement due to a lower borrowing program.
Hot Take: India’s Interim Budget Focuses on Economic Growth and Modernization
The interim budget presented by Finance Minister Nirmala Sitharaman lays out the plans for economic growth and modernizing India by 2047. With a focus on inclusive development, infrastructure, and reducing fiscal deficits, the budget sets the stage for the next phase of India’s development. However, the lack of changes in tax rates and no relief for the crypto industry may disappoint certain stakeholders. Nevertheless, the allocation of funds for infrastructure and investment shows a commitment to driving progress in key sectors. Overall, this budget sets the tone for India’s future trajectory as it prepares for a full-fledged budget later in the year.
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