As India’s full-year Union Budget for FY25 approaches, anticipation builds among various industries. Prime Minister Narendra Modi, Finance Minister Nirmala Sitharaman, and senior bureaucrats have recently met with eminent economists at Niti Aayog to discuss strategies for furthering economic growth. This crucial meeting sets the stage for the Modi administration to outline its vision for the next five years in the upcoming budget.

During the interim budget presentation on February 1, Finance Minister Nirmala Sitharaman emphasized the goal of ‘Viksit Bharat by 2047.’ The detailed roadmap for achieving this vision is expected to be unveiled in the full budget on July 23.

Here are the expectations and insights from key experts across the sector for the budget in July 2024:

Mr. Himanshu Kohli, Co-founder, Client Associates: “The Indian Government will present its first full-fledged Budget for FY 2024-25 on July 23, and there are already positive expectations surrounding the measures to be announced that day. If we look at this government’s track record, it has always been business as usual, and the major policy announcements have typically been laid down outside the budget. This time will not be different, and it will also be a growth-focused and reform-oriented budget aimed at promoting inclusive economic growth.  

We expect the government to maintain fiscal prudence by lowering the fiscal deficit target to 5% from 5.1%, as mentioned in the Interim budget. The RBI’s decision to transfer a record INR 2.11 trillion as a dividend to the government will assist the government in maintaining fiscal consolidation. We also expect the government to increase revenue expenditure through higher transfers to states for capital expenditure or by raising transfers to farmers through PM Kisan from INR 6000 to INR 8000 annually.  

It is a well-known fact that India continues to be the fastest-growing economy globally, but our data shows alarming consumption trends. Hence, along with measures to bring down interest rates, there will be incentives for increasing consumption through tax cuts or other measures to boost rural spending. Capex has always been a focus area in previous budgets, and this time, it will not be any different, which will be a big positive for maintaining sustainable and resilient economic growth. Another priority area for the government will be affordable housing for the urban and rural poor, which will, in turn, positively impact the industrial and consumer goods sectors. The government has already started working on this front by approving three crores more houses under the Pradhan Mantri Awas Yojana (PMAY). Finally, we expect the government to enhance its support for the startup culture in India via GIFT City. This could be achieved by encouraging foreign-domiciled Indian startups to relocate their corporate headquarters to India through GIFT City or by providing more tax breaks for companies to come in via the GIFT City route. 

While there is a general expectation that the budget will focus more on populist measures, we believe the government will still prioritize prudent fiscal management and economic growth. There is also likely to be a focus on targeted social welfare programs for both urban and rural poor. Overall, there are positive expectations for the budget, as it will set the policy tone for the next five years, potentially impacting the markets and the economy. 

Mr. Tarun Singh, Managing Director of Highbrow Securities: “As the Union budget approaches, I am optimistic about transformative reforms that will uplift the MSME sector, a cornerstone of our economy. I foresee significant initiatives aimed at investment in human capital, improved credit access, streamlined listing processes, extended moratoriums, lower interest rates, and interest subvention schemes. 

These measures are poised to empower MSMEs by reducing operational costs, enabling them to expand their customer base, and enhancing their competitiveness on a global scale. This, in turn, will significantly contribute to India’s trajectory towards becoming a global economic superpower. 

Recent developments have opened new funding avenues for MSMEs through innovative value-building and asset unlocking strategies. Encouraging such financial strategies not only elevates corporate governance and financial reporting standards but also fosters a culture of accountability and transparency. 

Moreover, incentivizing MSMEs with tax benefits, subsidies, and support for technological upgrades will promote a focused approach on value creation. This will ultimately strengthen the overall economic framework, driving sustainable growth and development. As we look ahead, it is imperative that the budget reflects a deep commitment to bolstering the MSME sector, ensuring its resilience and growth in the face of global challenges.”

Ashish Singhal, Co-founder, CoinSwitch: “As the government prepares for the upcoming Union Budget 2024-25, we urge them to create a conducive regulatory and tax environment that supports the burgeoning digital economy and fosters innovation. The current taxation framework for Virtual Digital Assets (VDAs), introduced over two years back in the Feb 2022 Budget, has led to unintended consequences even for the Govt and the exchequer, primarily via a massive shift in VDA transactions to offshore platforms, impacting tracking and tracing of such transactions.

We believe that with a new Government in place, and to capitalise on India’s Web3 opportunity, a relook at the tax treatment on VDAs in the July 2024 Union Budget will be very timely. Some of our budget recommendations are as follows:

• Reduce TDS Rate on VDAs: Lower the rate of TDS on the transfer of VDAs from 1% to 0.01% under Section 194S to bring the majority of VDA transactions within the tax oversight mechanism, to improve tax compliance, and prevent capital flight.
• Allow Loss Offset: Allow the offset of losses similar to other sectors to encourage responsible trading practices and reduce the risk of tax evasion.
• Re-examine Flat 30% Tax Rate: Re-examine the flat rate of 30% applicable to income from the transfer of VDAs to ensure parity with other tech-enabled sectors.
• Additionally, the threshold of Rs 10,000 / Rs 50,000 can also be revisited. Most of the crypto sellers (mainly individuals) are in the low-income bracket. Increasing the threshold will reduce the administrative burden on the tax department in processing refunds.

These adjustments can help the government create an environment where digital assets can thrive, contribute significantly to economic growth, and achieve the vision of steering India towards becoming a $5 trillion economy.”

Dr. Alok Misra, CEO & Director of MFIN: “Mainstreaming of CGSMFI scheme for guaranteeing bank loans to MFIs. CGSMFI, which was launched by Department of Financial Services (DFS) was hugely successful in guaranteeing about Rs 7,200 Cr of bank loans to 38 MFIN member MFIs and 99% of that was on-lent to almost 17.75 Lk microfinance borrowers. CGSMFI will be a huge support to the sector, as liquidity stress is inherent in NBFC-MFIs across all sizes. 

* A customised guarantee scheme for regulated entity (RE) loans to microfinance borrowers which has a lower guarantee ceiling (up to Rs 5 Lk), reasonable guarantee fee without any risk premium, shorter lock-in period (up to 9 months) and single tranche settlement facility. In combination with CGSMFI, such a scheme will not only help in mitigating credit risk of the REs but also has the potential to lower cost of funds and thereby lower interest rates for the end client. 

* To address the challenge of lack of access to low-cost debt from banks which has a spiralling effect on sustainability of NBFC-MFIs, growth and in fulfilling the credit needs of their clients, a dedicated refinance facility of Rs 30,000 Cr may be set-up under the aegis of SIDBI or NABARD for on-lending to NBFC-MFIs at lower cost. Terms and conditions applicable for such refinance facility should be such that it suits MFIs of different sizes. The funding should be at viable but not commercial rates, so that end client gets the benefit of lower interest rate. 

* Further, India Micro finance Equity Fund (IMEF) be enhanced to Rs 1,000 Cr (from present Rs 300 Cr) so that the equity needs of small and mid-sized players are met effectively. The criteria of support under IMEF needs to be reviewed so that the benefits can be far reached to various sizes of NBFC-MFIs. At present, it remains poorly utilised.”

Mr. Naman Jhawar, Partner and Head of India & SEA, Picus Capital: “As we look ahead to Union Budget 2024, it holds immense potential to propel innovation and economic growth forward. Streamlining regulatory frameworks to facilitate startup access to capital and scale operations is crucial. Increased allocation towards digital infrastructure, particularly in AI, fintech, and clean energy, promises transformative outcomes. Incentives for research and development will not only stimulate indigenous innovation but also attract global investments. Venture capitalists have emphasized the urgent need for the government to establish a new fund to support startups focusing on emerging technologies like AI, akin to subsidies provided in other sectors. Additionally, they advocate for fostering a robust research and development ecosystem in climate technology within India, ensuring clear commercialization pathways to retain local talent and intellectual property and prevent migration overseas. Simplifying tax regimes and enhancing compliance mechanisms are essential steps to improve the ease of doing business. By prioritizing these measures, the government can foster an environment conducive to entrepreneurship, job creation, and economic resilience. This budget presents a pivotal opportunity for India to solidify its position as a global hub for innovation and technology-driven growth.”    

Mr. Mayank Bhatnagar, Co-founder and COO, FinEdge: “The Government would keep a close watch on the fiscal deficit target. With a fiscal deficit target of 4.5%, the government would look at boosting tax collections and keep a check on non-plan expenditure. The government is also pursuing its goal for India to become a manufacturing hub and a preferred manufacturing destination. Hence, we expect a renewed focus on creating world class infrastructure with higher allocation in sectors like Railways, Roadways, Renewable Power generation, Ports and Airports etc. 

On the personal income tax front, we expect the basic limit of tax exemption to be increased from Rs. 3,00,000/- to 5,00,000/- under the new tax regime. We could also see an increase in the limit of standard deduction thereby increasing more money in the hands of the taxpayer. The government could also consider an increase in tax exemption limit under Section 80C and section 80D. In an effort to promote savings towards retirement, the government should provide additional tax deductions for investment in retirement benefit schemes like NPS (National Pension Scheme). 

We also expect to see initiatives for financial inclusion specifically for women. Special tax saving schemes for women and incentivizing women to invest would be measures that could contribute to a more inclusive and diverse investment landscape.” 

Union Budget Expectations: Here’s What Experts Across Financial Services Industries Anticipate From The FY25 Budget