As the Union Budget for the fiscal year 2024-25 approaches, Finance Minister Nirmala Sitharaman will present the financial roadmap on February 1, 2024. Set against the backdrop of upcoming elections in 2024, the budget is expected to tread cautiously, with minimal room for big-bang announcements. However, the focus remains on the budget itself, as stakeholders eagerly await insights into the government’s economic vision and policies for the coming fiscal year. Various sector-specific expectations have emerged from pre-budget surveys, providing valuable insights into the diverse needs and hopes of different industries.
Here are some key anticipations from the upcoming Union Budget for FY 25 based on Deloitte’s pre-budget survey.
Economic outlook
Despite global economic challenges and uncertainties, India’s growth outlook remains optimistic. The International Monetary Fund (IMF) recently revised its projections for India upward, signaling positive momentum. Deloitte India echoes this positivity, anticipating India’s growth between 6.5% and 6.8% during FY2023–24, with an average growth rate of 6.65% and 7.95% over the subsequent two years.
However, challenges such as inflation and the impending national and state elections may introduce policy pauses. The incoming government is expected to prioritize policies related to energy supplies, climate change, sustainable development, international trade, maritime, space, cyber-security, non-proliferation, and cross-border terrorism in the Union Budget.
What different sectors in India expect in the Union Budget
Agriculture
Given that India is predominantly an agrarian economy, the agriculture and allied sectors play a pivotal role in livelihoods. In FY23, the Gross Value Added (GVA) for the sector reached around US$ 275 billion, contributing approximately 15% to the total GVA. Key expectations for the agriculture sector include:
- Increasing Digital Adoption: The government should promote the adoption of technology-driven agricultural practices, such as crop mapping, precision farming, and automation, through interventions that enhance affordability, accessibility, and investment in research and development (R&D). Public-private partnerships are crucial for fostering the adoption of digital technologies.
- Strengthening Food Processing Value Chain: To accommodate changing consumption patterns and generate employment, the government should support cluster development and the creation of micro-processing units across states.
- Improving Post-Harvest Infrastructure: Addressing post-harvest losses through the creation of multi-commodity cooling and grading centers, solar-powered micro-cooling units, and strategically located cooling units can significantly reduce losses for perishable foods.
- Boosting Export Ecosystem: Focused measures to enhance agricultural exports can lead to increased earnings for farmers, positively impacting their income.
Education
In the education sector, key expectations focus on enabling foreign investments, streamlining clearances for foreign donations, and introducing flexibility for fee payments.
- Enable Foreign Investments and Loans: Amend exchange control regulations to allow foreign investments and foreign currency loans for educational institutions, fostering better infrastructure and technology adoption.
- Expediting Clearances for Foreign Donations: Define clear timelines for obtaining clearances from the Ministry of Home Affairs, streamlining the process for educational institutions to receive grants and donations from foreign sources.
- Flexibility for Fee Payments: Allow foreign education institutions in GIFT City to receive student fees in Indian currency also, alleviating the financial burden on students and parents.
Technology, media and communication
The key asks from this sector are:
- Royalty Payments for Technological Capabilities: Issue guidance/notification to field officers on reviewing transactions involving royalty payments for the use of technological capabilities, promoting investments in the technology sector.
- Exemption on GST TCS for E-commerce Operators: Amend regulations to exempt GST TCS obligations for e-commerce operators facilitating zero-rated supplies, easing cash flow issues for exporters and streamlining compliance.
Consumer industry
The Indian consumer industry is set to become the world’s third-largest by 2027. One of the world’s largest retail markets, India is projected to reach US$ 1.41 trillion by 2026. Moreover, India is expected to see over 900 million new internet users by 2025. Consumer protection is another trend gaining momentum as an imperative for the government and industries.
The top expectations of this sector are:
- Control Inflation and Increase Consumption: Take steps to control inflation and boost consumption, considering the challenging international landscape affecting fuel prices and geopolitical conditions.
- Investment in Digital Commerce: Significantly invest in the Open Network for Digital Commerce (ONDC) and digital infrastructure building to propel the digitization wave in the consumer industry.
- Regulatory Framework for Gig Workers: Establish a balanced legal framework for gig workers, initiating tripartite consultations to harmonize business growth with the welfare of gig workers.
- Stability through Regulatory Flexibility: Create a flexible and informative mechanism for the timely exchange of critical information and regulatory directives in the dynamic retail sector.
Financial services and financial inclusion
The top asks of the financial services sector include:
- Clear Capital Gains Tax Regime: Simplify the capital gains tax regime to boost capital markets, addressing complexities related to multiple rate slabs and differentiated outcomes linked to holding periods.
- Accelerate Technology Adoption: Consider regulatory and tax relaxations to encourage technological adoption, focusing on generative AI, industry convergence, digitization of money, and digital identity with safeguards against fraud.
Global Capability Centers (GCCs)
With over 1580 GCCs employing 1.66 million people currently, the journey of India’s GCCs is set for further growth. In couple of years, the number of GCCs is projected to reach 1900, employing up to 2 million people with a revenue of US$60-80 billion
Key expectations include:
- Enhance Export Incentives: Expand export incentives to contribute to the growth and success of GCCs in India, maintaining India’s position as a preferred global hub.
- Develop Tier 2 Locations: Invest in infrastructure and create a supportive business environment in Tier 2 locations to attract companies and develop mature GCC hubs.
- Advance Skill Development: Support the opening of institutions and labs offering training in emerging technologies to meet the demands of GCCs moving up the value chain.
Technology stack and digital infrastructure
India’s technology stack and digital infrastructure have experienced a transformative evolution. Fueled by the Government of India’s consistent push for digitization, numerous governance operations have been streamlined and automated thereby improving the ease of doing business in India. Top anticipations in this sector are:
- Unified Digital Infrastructure: Streamline and unify digital infrastructure to reduce reporting and reconciliation efforts for data filed under different regulations.
- New Digital Public Infrastructure: Foster the creation of Digital Public Infrastructure (DPI) to unlock innovation and address structural problems in various sectors.
Deloitte’s pre-budget analysis provide a comprehensive overview of the expectations and demands across key sectors crucial for India’s economic growth. As the government prepares to unveil the Union Budget, addressing these sector-specific expectations can pave the way for a resilient and thriving Indian economy in the years to come.
Source: Deloitte
