Targeted spending, infrastructure revamp likely as FM Sitharaman presents Budget on July 23

The live blog session has concluded. For more news, views and updates, stay tuned with Moneycontrol.com.

The upcoming Union Budget might propose increasing the agricultural loan target for 2024-25 by up to 25 percent, potentially reaching Rs 25 lakh crore. This adjustment will be based on the assessment conducted by the National Bank for Agriculture and Rural Development (NABARD) through the Potential Linked Credit Plan (PLCP) at the block level, evaluating the capacity to absorb credit, as per a Moneycontrol report.

Since 2020, India has introduced incentives aimed at boosting manufacturing across various sectors, from drones to pharmaceuticals, stated a Reuters report. However, manufacturers focusing on novel drugs are currently excluded from these incentives. India's export sales, particularly in the US generics market, are anticipated to grow significantly, potentially reaching $55 billion by 2030. This projection comes from the Pharmaceuticals Export Promotion Council of India (Pharmexcil), a government-supported trade body.

Pharmaceutical firms are seeking tax incentives and financial support for research into innovative drugs as Prime Minister Narendra Modi's government prepares to unveil the federal finance budget expected in July, as per a Reuters report. This budget is anticipated to mark Modi's first significant policy announcement in his third term as prime minister. Experts stated that Indian drug manufacturers need to prioritise the development of complex drugs beyond their traditional generics to maintain the country's reputation as the 'pharmacy of the world' known for affordable medicines.

Industry bodies are advocating for incentives to boost research and development (R&D) investments, corporate tax breaks, and the implementation of a robust intellectual property rights framework to foster growth in the domestic pharmaceutical sector. Anil Matai, Director General of the Organisation of Pharmaceutical Producers of India (OPPI), outlined these priorities ahead of the upcoming Union Budget, emphasizing the need for deductions on R&D expenditures, incentives tied to research activities for multinational corporations, and tax concessions for businesses.

The Central government is actively considering expanding the reach of its Ayushman Bharat health insurance scheme to improve healthcare accessibility. Official sources have indicated plans to double the coverage over the next three years, starting with including all individuals aged 70 and above. There are also discussions to raise the annual insurance coverage from Rs 5 lakh to Rs 10 lakh per beneficiary. These proposed changes, projected to cost an additional Rs 12,076 crore annually according to estimates from the National Health Authority, are expected to be announced during the upcoming Union Budget presentation later this month.

The fiscal policy is expected to constrain growth in FY25 due to the government's pursuit of fiscal consolidation targets, according to the note. It highlights that the government has limited room to boost growth given the high levels of public debt, despite previous infrastructure investments having positive economic effects that are difficult to forego. The upcoming Union Budget may emphasize a long-term policy vision towards 2047, with a focus on employment and controlling inflation.

Goldman Sachs anticipates that the upcoming Budget will prioritize capital expenditure without compromising on fiscal consolidation. The firm is cautious about expecting any relaxation in fiscal targets or a shift towards increased welfare spending at the expense of capital expenditure, as outlined in a note released on July 8. They project the government will maintain the fiscal deficit target of 5.1 percent for FY25, with a potential further reduction to 4.5 percent by FY26.

Goldman Sachs economists expect the government to adhere to its fiscal deficit target of 5.1 percent of GDP set in the interim budget but anticipate an "overarching statement" about long-term economic policy. It expects the budget to promote labor-intensive manufacturing through fiscal incentives across sectors such as toys, textiles, and apparel manufacturing, as well as commercial aircraft manufacturing, as per a Reuters report.

-- The first budget by Prime Minister Narendra Modi's new government may lean towards welfare spending, particularly focusing on the rural economy and job creation, according to a note by economists at Goldman Sachs today. Goldman Sachs economists anticipate the government will adhere to its fiscal deficit target of 5.1 percent of GDP, set in the interim budget, but also make a significant statement regarding long-term economic policy.

-- As the new Narendra Modi government gets into gear, the full union budget for FY2025 will be the government’s first big economic statement. The industry's expectations are centred on how the government will resume its path of strategic growth and sustainable development.

-- At the forefront of these expectations is the government’s commitment to improve logistics and create robust rural and urban infrastructure. Enhancing the financial ecosystem for micro, small, and medium enterprises (MSMEs) also remains a key focus area, along with the economy's growing digitisation.

In the interim Budget presented in February 2024, Union Finance Minister Nirmala Sitharaman increased the tourism sector allocation to Rs 2,449.62 crore, a 44.7% rise from the previous fiscal's revised figure.

Rajesh Magow, Co-founder and Group CEO of MakeMyTrip, emphasises the need for further support. “The Travel and Tourism industry has been growing at a healthy rate post-pandemic. The upcoming Union Budget 2024-2025 offers the Hon’ble Finance Minister an opportunity to build on this momentum. Strategic investments in this sector can unlock economic opportunities, boost employment, and enhance the competitiveness of India's tourism landscape,” he said.

Magow believes the time is right for the Finance Minister to introduce changes that incentivise the industry and sustain its growth trajectory.

Electronics and smartphone manufacturers are calling on the government to slash tariffs and duties on components and sub-assemblies used in smartphone manufacturing in the forthcoming Union Budget. Through the India Cellular and Electronics Association (ICEA), they have put forward a proposal for an incentive scheme totaling Rs 40,000-45,000 crore over eight years. The high tariffs are viewed as a factor that raises production expenses, potentially hampering competitiveness and global integration efforts.

Budget 2024-25 could see India pushing its success story in production linked incentives (PLIs) for electronics further with the announcement of a new PLI for sub-assemblies and components. Pegged to be in the range of Rs 35,000-40,000 crore, the scheme has been in the works since February at the Ministry of Electronics and Information Technology with a clear purpose to build an ecosystem for higher local sourcing of components, multiple sources told Moneycontrol. Read the exclusive report here.

The upcoming Union Budget could announce an increase of up to 25 percent in the target for agricultural loans in 2024-25 at Rs 25 lakh crore, after assessing the potential to absorb credit block-wise, a government official said.

“The agricultural credit target is expected at Rs 25 lakh crore for the current year. It depends on the Potential Linked Credit Plan (PLCP) carried out by the National Bank for Agriculture and Rural Development (NABARD) at the block level, which is assessed depending upon the potential to absorb the credit,” the official told Moneycontrol on condition of anonymity. Read more.

- Budgets rely on Money Bills, which are introduced in the Lok Sabha and passed by a simple majority. The Rajya Sabha does not vote on Money Bills.

- Over the past 10 years, the BJP, with its numerical advantage, has used the Money Bill route to pass not only the Union Budget's tax proposals but also key economic legislation such as the Insolvency and Bankruptcy Act.

- The amendments suggested by the Rajya Sabha to a Money Bill are inconsequential since the Lok Sabha can accept or reject them at will. This time, without a majority in the Lok Sabha, the BJP and Prime Minister Narendra Modi are not in the same strong position to push through economic legislation without addressing the concerns of other parties.

"Drawing on the successful implementation of GST reforms, an anticipated reduction in the GST rate for LED TVs larger than 32 inches, from the current 28% to 18% in Budget 2024, is expected. This adjustment aims to encourage consumer spending in the electronics sector. Additionally, expanding Production-Linked Incentive (PLI) schemes to include smart TVs, refrigerators, and washing machines is essential to foster broader market growth and enhance manufacturing capabilities", said Avneet Singh Marwah, CEO of Super Plastronics Pvt Ltd.

-- India's transportation infrastructure is set for substantial upgrades with significant budget allocations: Rs 2.55 lakh crore for enhancing Indian Railways and Rs 2.78 lakh crore for road transport and highways.

-- The focus on railways includes upgrading rail bogies to Vande Bharat standards and developing three economic corridors, aimed at boosting efficiency, connectivity, and revenue growth. Meanwhile, the road sector aims to expand the national highway network with projects totaling Rs 79,789 crore, targeting over 6,270 km of new highways to improve goods and passenger transportation across the nation.

1. Tax Relief on Deposits: They propose tax relief on interest earnings from deposits to incentivize depositors and enhance capital formation in India.

2. Home Loan Benefits: Recommendations include benefits such as tax relief on home loans to stimulate housing sector growth.

3. Refinancing Entity for NBFCs: There's a call for establishing a dedicated refinancing entity to support Non-Banking Financial Companies (NBFCs) in their financing needs.

State Bank of India (SBI) chairman Dinesh Khara highlighted these proposals, emphasizing the potential benefits for both depositors and the broader economy.

- The salaried class will be closely monitoring the upcoming full budget for FY25 in hopes of securing tax breaks amid rising living costs.

- According to Deloitte, salaried individuals are looking for a revamp of tax slabs, adjustments to housing rent allowance (HRA) rates, incentives for electric vehicle (EV) sales, and a bigger push for affordable housing in the Budget 2024.

- Chandrababu Naidu's TDP and Nitish Kumar's JD(U) have sought about $5.7 billion (nearly Rs 48,000 crore) worth of funds from the Prime Minister Narendra Modi-led Centre ahead of the 2024 Union Budget, which will be tabled on July 23.

- According to documents reviewed by Reuters and a source, the two key allies of the BJP have requested these funds (running into thousands of crores) for the current financial year, in addition to a higher borrowing limit for infrastructure projects. Read more here.

The Union Budget is likely to decriminalise provisions in as many as five Acts administered by the Reserve Bank of India (RBI).

It is for the first time that Acts under the central bank are being discussed for decriminalisation, a government officialtoldMoneycontrolon July 4.

In a move aimed at bolstering healthcare accessibility, the Indian government is actively contemplating expanding the beneficiary base of its flagship Ayushman Bharat health insurance scheme. Official sources told PTI that the plan involves doubling the coverage over the next three years, starting with the inclusion of all individuals aged 70 and above. Additionally, there are discussions to increase the annual insurance coverage from the current Rs 5 lakh to Rs 10 lakh per beneficiary.

- In the last five years, the value of defence production has been increasing steadily, recording a growth of 60 percent. The ministry of defence said it has achieved the highest-ever growth in indigenous defence production in value terms in the last financial year (FY24).

- According to government data, the value of defence production has gone up to a record-high of Rs 1,26,887 crore, reflecting a growth of 16.7 percent compared to the previous financial year, the ministry said.

The Union Budget is likely to decriminalise provisions in as many as five Acts administered by the Reserve Bank of India (RBI).

It is for the first time that Acts under the central bank are being discussed for decriminalisation, a government officialtoldMoneycontrolon July 4.

Andhra Pradesh Chief Minister Chandrababu Naidu has urged the central government to announce the establishment of a new refinery by Bharat Petroleum Corporation Limited (BPCL) in the upcoming Budget.

Meeting with Minister: Naidu met with Petroleum and Natural Gas Minister Hardeep Singh Puri on July 4 to discuss the proposal and possible collaborations in the energy sector.

Section 93(4) of APR Act: The request for the refinery is made under Section 93(4) of the Andhra Pradesh Reorganisation (APR) Act, 2014.

Government's Statement: The Andhra Pradesh government stated that the establishment of the refinery in the state would increase the country's refinery capacity and aid in India's development.

- The Chandrababu Naidu-led Andhra Pradesh government has submitted a detailed list of requests to the Centre for inclusion in the upcoming Union Budget.

- On Thursday, Naidu visited New Delhi and had a meeting with Prime Minister Narendra Modi where he is said to have made a strong push for short term funds and additional capex support for Andhra Pradesh. Read more here.

- India's pharmaceutical companies are hoping for tax incentives and financial assistance for research on innovative drugs as Prime Minister Narendra Modi’s government readies a federal finance budget likely to be presented in July.

- The upcoming budget would be Modi’s first major policy announcement in his third term as prime minister.

- Indian drug manufacturers must focus on developing complex drugs beyond the usual generic variety if the country is to continue being renown for being the ’pharmacy of the world’ for its affordable medicines, experts say

The final 2024-25 budget is due to be presented later this month. Compared to the interim budget, the fiscal situation of the Government of India (GoI) appears to have improved marginally.

GoI’s gross tax revenue (GTR) growth for 2023-24 turned out to be 13.5% implying an annual buoyancy of 1.4. In contrast, the interim budget, according to the RE for 2023-24, had considered a growth of 12.5%. This higher growth will give an improved base magnitude for GoI’s GTR for projecting the tax revenues for 2024-25, which in turn will depend on the likely performance of macro parameters particularly the nominal GDP growth.

Finance Minister Nirmala Sitharaman, speaking after the GST Council Meet, reaffirmed the Centre’s commitment to supporting states' economies through timely tax devolution and settlement of GST compensation arrears. She emphasized the 'Scheme for Special Assistance to States for Capital Investment', noting that while most loans are unrestricted, some are contingent on states implementing citizen-centric reforms and specific capital projects across various sectors.

India's economic resilience and growth are inextricably linked to the expansion of its manufacturing sector. The nation's ambitious 'Aatmanirbhar' vision rests on bolstering manufacturing prowess, amplifying exports through the Make in India initiative, fostering innovation and investment, nurturing industrial champions via the Production Linked Incentive (PLI) Scheme, and enhancing competitiveness through SAMARTH Udyog Bharat 4.0. Read more.

President Droupadi Murmu described the upcoming budget as "futuristic" and noted that it would include "far-reaching policies" during her inaugural address to the elected members of the 18th Lok Sabha on Thursday, June 27.

- Industry bodies emphasize the need to incentivize research and development (R&D) investments in the domestic pharmaceutical industry.

- There is a call for corporate tax concessions to support the growth of the pharmaceutical sector.

- Effective Intellectual Property Rights Regime: Establishing a robust intellectual property rights regime is deemed essential for the industry's growth.

- Anil Matai, Director General of the Organisation of Pharmaceutical Producers of India (OPPI), urges the government to explore methods such as deductions on R&D expenses and research-linked incentives for multinational companies (MNCs).

New PLI Scheme for Electronics: Budget 2024-25 is expected to introduce a new Production Linked Incentive (PLI) scheme for sub-assemblies and components in the electronics sector.

Estimated Budget Allocation: The scheme is anticipated to have a budgetary allocation in the range of Rs 35,000-40,000crore.

Purpose: Aimed at bolstering local sourcing of components, the scheme is designed to build a robust ecosystem for electronics manufacturing in India.

Stakeholder Involvement: The scheme has been developed with extensive participation from stakeholders in the electronics industry.

Challenges: Despite meeting most criteria, companies are struggling with local sourcing norms due to inadequate domestic manufacturing capabilities of high-quality components.

- Hospitality players want the government to accord infrastructure status to hotels to make investments on new properties more attractive rather than categorising them as luxury or even 'sin goods' in the upcoming Union Budget considering the sector's potential to play a key role in India's growth.

- They also want the government to consider incentives in the form of tax breaks or subsidies for adopting sustainable and eco-friendly practices, while asserting that the upcoming budget must accelerate the tourism agenda saying it is an opportunity to make Indian hospitality the emerging engine for GDP growth and employment generation.

- There is a need to incentivise R&D investments, offer corporate tax concessions and establish an effective intellectual property rights regime in order to push the growth of domestic pharmaceutical industry, as per the industry bodies.

- Outlining the sector's wish list for the upcoming Union Budget, Organisation of Pharmaceutical Producers of India (OPPI) Director General Anil Matai urged the government to explore methods to incentivise R&D investments, such as deductions on R&D expenses, research-linked incentives for MNCs, and corporate tax concessions.

In order to strengthen India's insolvency framework, the government has been mulling upon a series of amendments to the Insolvency and Bankruptcy Code (IBC) 2.0 since last year.

The amendments include expanding the pre-pack insolvency framework to larger companies, group insolvency, time-bound admission process, etc.

- In the case of India, a 15 percent short-term capital gain is levied on listed equity shares and equity funds where securities transaction tax is paid, whereas the rest are treated at the normal tax rate.The holding period for assets to be classified as short term is less than 12 months across classes, except for less than 24 months for unlisted shares and residential property.

- Unlisted dated government securities need to be held for over 36 months to be classified for long-term capital gains.In the case of long-term capital gains, the levy is 10 percent without indexation for gains exceeding Rs 1lakhand 20 percent with indexation for the unlisted. Debt mutual funds attractLTCGat a normal tax rate, whereas residential property attracts a 20 percent tax with indexation.

Finance Minister Nirmala Sitharaman will present the Union Budget for the fiscal year 2024-25 on July 23, as announced by the government on Saturday. The Budget Session of Parliament will commence a day earlier, on July 22, and will run through until August 12, according to Parliamentary Affairs Minister Kiren Rijiju.