Why we are expecting a pro-investment budget

Keeping in line with the focus on India’s financial growth the budget is expected to be pro-investment. .

The Union Budget 2024 is anticipated to be as progressive as the Union Budget 2023, which lived up to the expectations of the public, entrepreneurs, and youth by focusing on increasing financial growth, improving infrastructure and youth empowerment.

Keeping in line with the focus on India’s financial growth while the economies of several countries are facing challenges and increased interest rates, we expect the Union Budget 2024 to be pro-investment. With emphasis on improving the ease of doing business and attracting foreign investment into India.

Investing In GIFT City

The Government may encourage investment in Gujarat International Finance Tec-City (GIFT City), a tax-neutral financial centre, by pushing regulators to provide clarity on the regulatory framework and structures for overseas investment into GIFT City. The goal is to compete with hubs like Singapore and Dubai and attract foreign as well as Indian investment in GIFT City.

Several investors looking to invest in GIFT City anticipate the Government to require the regulators to issue clarifications and introduce timelines for setting up funds such as family investment funds in GIFT City.

With the aim to attract funds from foreign investors, the Central Government on January 24, 2024 issued the Companies (Listing of equity shares in permissible jurisdictions) Rules, 2024 and the Foreign Exchange Management (Non-debt Instruments) Amendment Rules, 2024, permitting Indian public companies to directly list their equity shares on ‘India International Exchange’ and the ‘NSE International Exchange’ in GIFT City.

However, there has not been any official communication from the Reserve Bank of India on overseas investment in the ‘financial services activities’ in GIFT City since the introduction of the Foreign Exchange Management (Overseas Investment) Regulations, 2022; there is hope that the Government nudges the regulators to issue an official clarification to put an end to the looming uncertainty on this matter.

Promoting EV Manufacturing

There are expectations of new initiatives to enhance the electric vehicle (EV) ecosystem in the country by encouraging the manufacturing of EVs in India through an increase in subsidies. Further, introduction of incentives is expected that will reduce the upfront cost of EVs, making it a more attractive choice for buyers. This will support the Government's environmental goals to reduce carbon emissions and promote sustainability.

With the colossal hike in Bitcoin prices in the beginning of 2024 due to the US Securities and Exchange Commission's approval of spot Bitcoin exchange-traded funds; the public is expecting the introduction of a comprehensive policy on regulation of cryptocurrency. Further, the industry is hopeful for a reduction in the current 1% tax deducted at source and 30% capital gains tax that is imposed on crypto transactions.

While there is no expectation of significant tax reforms or tax policy shifts, announcements related to tax relief measures to aid agriculture are expected. Further, increase in agricultural credit, subsidies on fertilizers, and increase in government expenditure on the rural sector infrastructure and expansion is likely. Further, with the growing demand for small loans by individuals and small businesses, fiscal incentives and compliance relaxations for small-sized NBFCs are expected to boost new age micro-lending in India.

The overall Union Budget 2024 is likely to be a positive and balanced one with the general elections around the corner. The Government’s focus will be on economic growth of India along with special attention to the rural sections of the country.

Moin Ladha is Partner and Priyal Sanghvi is Associate at Khaitan & Co. Views are personal, and do not represent the stand of this publication.