GS Paper 3
Syllabus: Indian Economy
Source: PIB
Context: The Union Finance Minister presented the Interim Union Budget 2024-25 in Parliament, emphasizing the principles of ‘Sabka Saath, Sabka Vikas, and Sabka Vishwas,’ along with the nationwide approach of “Sabka Prayas”
What is Budget?
The Union Budget is the annual financial statement of the Indian government, presented by the Finance Minister on February 1st. It consists of the Revenue Budget and Capital Budget, covering expected income and expenditures. The budget includes macroeconomic details in Part A and taxation proposals in Part B, presented as a Money Bill defined in Article 110 of the Constitution. After independence, India’s first Budget was presented in 1947 by Finance Minister RK Shanmukham Chetty.
Article 112 of the Indian Constitution mandates the Union Budget as the government’s estimated receipts and expenditures.
Key Budget documents include:
- Annual Financial Statement (Article 112)
- Demands for Grants (Article 113)
- Finance Bill (Article 110)
- Fiscal Policy Statements mandated under the FRBM Act, 2003, including
- The Macro-Economic Framework Statement and
- The Medium-Term Fiscal Policy cum Fiscal Policy Strategy Statement.
Objectives of budget:
The Union Budget focuses on objectives such as stimulating economic growth, promoting social justice and equality, ensuring effective resource allocation, and maintaining fiscal stability.
Stages of Budget presentation:
| Stage | Description |
| President’s Address | Joint address by the President of India to both Houses of Parliament, outlining government policy priorities, achievements, and legislative agenda. |
| Economic Survey Presentation | Prepared by the Economics Division of the Department of Economic Affairs under the Chief Economic Advisor’s guidance. Tabled in Lok Sabha a day before the Union Budget presentation. |
| Railway Budget (Till 2016) | Presented separately until 2016, merged with the General Budget in 2017. |
| Union Budget Presentation | Presented by the Finance Minister on February 1st. |
| General Budget Discussion | After the Budget presentation, discussed in both Houses of Parliament. Allows critique and debate on the Budget. |
| Voting on Demands for Grants | Parliament approves Demand for Grants for ministries and departments, authorizing proposed expenditures. |
| The passing of Finance Bill | Finance Bill, containing taxation proposals, passed by both Houses of Parliament and enacted. The budget comes into effect after Presidential assent. |
Difference between annual budget and Interim budget:
The Annual Budget covers all aspects of government finances, including revenue generation, expenditure allocations, and major policy announcements. It is presented on February 1st each year, outlining the government’s financial roadmap for the entire fiscal year (April 1 to March 31). The annual budget involves major policy decisions, such as changes in tax and import duty structures, and undergoes rigorous parliamentary debates and analysis.
On the other hand, an Interim Budget focuses primarily on maintaining essential spending for ongoing schemes and critical public services until the new government takes charge. The interim budget avoids major policy pronouncements or significant changes to tax structures due to its transitory nature, and it receives less scrutiny compared to the annual budget.
Macro-economic Highlights:
| Highlights | Budget Estimates 2024-25 |
| Total receipts other than borrowings | 30.80 lakh crore |
| Tax receipts | 26.02 lakh crore |
| Total expenditure | 47.66 lakh crore |
| Fiscal Deficit | The estimated fiscal deficit in 2024-25: 5.1% of GDP |
| Revised fiscal deficit for 2023-24 (FY24): 5.8% of GDP | |
| Adheres to the path of reducing fiscal deficit below 4.5% by 2025-26 | |
| Lower borrowings by the Central Govt | Gross market borrowings: about 14 lakh crore in 2024-25 |
| The reduction compared to 2023-24 | |
| Continuation of Fifty-year Interest-Free Loan | The scheme continued with a total outlay of 1.3 lakh crore |
| Indirect taxes | FM proposes to retain the same tax rates for indirect taxes and import duties |
| On GST: Average monthly gross GST collection doubled to Rs 1.66 lakh crore this year. The GST tax base has doubled. GST led to supply chain optimization. GST reduced the compliance burden on trade and industry. Lower logistics costs and taxes helped reduce prices of goods and services, benefiting the consumers | |
| Direct taxes | FM proposed to retain the same tax rates for direct taxes. Direct tax collection tripled, and return filers increased to 2.4 times, in the last 10 years. No changes introduced in income tax slabs
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| Withdrawal of Direct Income Tax Demands | The government will withdraw outstanding direct tax demands up to Rs 25,000 for the period up to the financial year 2009-10 and up to Rs 10,000 for the financial years 2010-11 to 2014-15. |
| Extension of Tax Exemptions | Tax exemptions for start-ups extended till March 31, 2025 |
| Achievements in tax-payer services | The average processing time of tax returns has reduced to 10 days from 93 days in 2013-14. Faceless Assessment and Appeal were introduced for greater efficiency. Updated income tax returns, new form 26AS and prefilled tax returns for simplified return filing. Reforms in customs leading to reduced Import release time |
| Tax rationalization efforts | No tax liability for income up to Rs 7 lakh. Corporate income tax decreased to 22% from 30% for existing domestic companies
The corporate income tax rate at 15% for new manufacturing companies (these reductions were done in the previous budget)
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Sectorwise budget highlight will be uploaded with tomorrow’s CA
