USISPF commends the interim budget, presented on February 1st by the honorable Finance Minister Mrs. Nirmala Sitharaman, for its consistency and focus on growth. As an interim, pre-election budget with no major policy pronouncements, it represents a welcome statement of responsible fiscal management in an election year.
According to budget projections, the fiscal deficit for the upcoming financial year (2025) will narrow to 5.1% and GDP growth will remain between 6-7% GDP. On the expenditure side, the government’s priorities will remain focused on short-term spending for social protection and job creation, and medium-term growth fueled by enhanced capital expenditure. We believe these priorities, within the framework of fiscal consolidation, will help strengthen India’s macroeconomy, lower government borrowing costs, and support the increased foreign trade and investment that is the foundation of the US-India partnership.
In line with growing US-India commercial ties, we commend the government’s continued focus on the trinity of infrastructure, inclusive growth, and fiscal prudence. The 2024 budget increases capital expenditures, which are critical to maintaining the engine of economic growth, by 11.1%, to $133.9 billion. At the same time, the government has prioritized funding for infrastructure projects, with $130 billion allocated for roads, rails, ports, and airports. All of these investments will help attract private investment in these sectors, including foreign direct investment from the United States.
We also recognize and support the important social spending included in the budget, such as the construction of 20 million affordable houses in the next five years, which will give a boost to the rural economy with new jobs and the construction sector. We commend the continued steps toward meeting India’s clean energy goals, including the project to provide free rooftop solar-generated electricity to 10 million households. Additional investments in the healthcare, education, and manufacturing sectors, the latter through investments in the PLI schemes, will help attract high-end tech manufacturing and build on resilient supply chains, critical priorities for both Washington and New Delhi.
On the revenue side, the budget eschewed significant tax policy changes, keeping rates steady for the salaried middle class and maintaining 15% corporate rate through March 2024. We welcome this policy of tax stability, which is a critical support to increased investment and job creation, and hope to see it extended beyond the new fiscal year starting April 1, 2024. We also welcome the extension of tax benefits to leverage the start-up ecosystem through INDUS-X and promote India as an attractive destination for long-term funds for sovereign wealth funds and pension funds.