20240201 Nirmala Sitharaman
India's GDP growth prospects have been given a further upgrade by the IMF. The confidence in the Indian economy shows up loud and clear in Nirmala Sitharaman's interim budget projections. Image Credit: Bloomberg

Dubai: The transportation, tourism and tech startup sectors shared the limelight with agriculture in India’s 2024-25 interim budget presented by Finance Minister Nirmala Sitharaman. The budget also had all the hallmarks of one done with an eye on the next central elections.

"The impact of all-round development is discernible in all sectors," said Sitharaman in her speech. "There is macro-economic stability, including in the external sector. Investments are robust. The economy is doing well.

"People are living better and earning better, with even greater aspirations for the future. Average real income of the people has increased by 50 per cent.

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"Inflation is moderate. People are getting empowered, equipped and enabled to pursue their aspirations. There is effective and timely delivery of programmes and of large projects."

Big push in transport

There will be further expansion of existing airports and building of new ones as ‘India’s airlines have collectively placed orders of more than 1,000 aircraft’, said the FM.

New measures are being implemented that will help India to become a global economic superpower...

- Yussuf Ali M.A. of LuLu Group

Similar focus is also there on the country’s already extensive railway networks, with ‘rail corridors’ to be created as India tries to reinforce its credentials as a place to manufacture for global businesses.

This emphasis on transport infrastructure has NRI business chiefs excited.

“The key takeaway for me is the huge emphasis on transportation and connectivity, especially in the railway and aviation sectors,” said Yussuf Ali M.A., Chairman of LuLu Group, the hypermarket operator with distribution, logistics, retail and real estate interests in multiple Indian states.

“These steps will surely benefit all round growth and as a key retail player, I am very optimistic about the impact this will have on various related sectors such as logistics, sourcing and shopping in general.”

FM spelt out a broad roadmap to 2047 while maintaining the path of fiscal rectitude with fiscal deficit targeted at 5.1% in FY25 and down to 4.5% in FY26.

- G. P. Hinduja of Hinduja Group

As per the Budget outlay, India will increase infrastructure spend by 11 per cent for the coming financial year.

$ 596 b

India's FDI inflow during 2014-23 and 'marking a golden era', says Nirmala Sitharaman

Getting the growth boost

It was a confident Finance Minister who spelt out the key pointers of the interim budget, and dwelled on what the NDA government under Prime Minister Narendra Modi had achieved in the last 10 years.

That includes record inflows for foreign direct investment (FDI) as well as on GST (Goods and Service Tax) collections, to keep the levers of the India economy humming nicely.

"The interim budget commendably shunned any populist measures so often resorted to by the governments," said G. P. Hinduja, Chairman of Hinduja Group. "But Bharat can certainly do more on its infrastructure capex budgeting, which increased nominally by 11 per cent.

We are glad the Indian government is considering more hospitals in all districts in the country, which is essential to meet rising demand. We would recommend focusing on public-private partnerships (PPP) to address this.

- Dr. Azad Moopen, founder and Chairman, Aster DM Healthcare

"Some bold measures are needed to increase the annual FDI level of $60 billion further. The banking and power sector reforms coupled with further impetus on digital infrastructure are imperatives to 'Vikasit Bharat' with improved sovereign rating.

"Overall, stability and continuity with judicious acceleration are the wheels deployed through this interim budget for taking off this flight. Now, it’s over to July 2024 (when the full budget will be unveiled)."

The gold sector in India will keep looking for some cuts to gold import duties from 15%. While that’s not there, the budget does a lot to keep India growth momentum going

- Joy Alukkas, Chairman of Joyalukkas Group

FDI numbers swell up

"The FDI inflow between 2014-23 amounted to $596 billion, twice that between 2005-14," said James Mathew, CEO and Managing Partner at the Dubai-based audit consultancy UHY James. "Bolstering the infrastructure corporate income tax rate of 15 per cent will come into play for new manufacturing companies.

"And three major economic railway corridor programmes will be structured to accelerate logistics efficiency through rail, road, and ports - aiming for a direct impact on India’s GDP. Economic vigour has been the underlying theme from a governance perspective. This is seamlessly reflected in the financial future India is curating and stepping into."

The latest (interim) budget highlights the impact infrastructure and inclusivity have had in defining India over the last decade.

- James Mathew of UHY James

IMF revises up India forecasts

The IMF sure believes this to be the case, updating its GDP growth forecast to 6.7 per cent in the new financial year from 6.3 per cent (which was made in October last).

But being an interim budget – the full one will be in July after the elections (and which the FM expects to make) – the emphasis was on achievements. And a glimpse of what’s in store.

This was going to be a ‘vote on account’ budget, and generally no big bang announcements can be made...

- Krishnan Ramachandran of Barjeel Geojit Financial Services

“This was going to be a ‘vote on account’ budget, and generally no big bang announcements can be made,” said Krishnan Ramachandran, CEO of Barjeel Geojit Financial Services. “The emphasis thus was on the long-term growth trajectory for India, with a big push for infrastructure and related sectors.”

No changes to the tax regime

Currently, there is no tax liability for Indian tax payers with income up to Rs700,000, up from Rs220,000 in 2013-14.

The threshold for presumptive taxation for retail-focused businesses was raised from Rs20 million to Rs30 million.

Also, the threshold for professionals eligible for presumptive taxation rose from Rs5 million to Rs7.5 million.

One could indeed sense it was a relaxed Finance Minister Nirmala Sitharaman who was announcing she is keeping the status quo on direct and indirect taxes. This is perhaps first time in 75 years

- Dr. Ram Buxani, Chairman of ITL Cosmos Group

And corporate tax rate was decreased from 30 per cent to 22 per cent for existing domestic companies and to 15 per cent for 'certain new manufacturing companies'.

"This was done in last year's budget," said Pankaj S. Jain, Managing Director of AskPankaj Tax Advisors. "There are no changes in tax rates this interim one. The headline statement from the government has been that no tax is payable for income up to Rs700,000."

The Finance Minister talked up India's positioning in a trade and economic corridor that would eventually link the country's manufacturing base to Europe via the Middle East.

UAE-India CEPA definitely helped us expand market access, opening up new avenues for trade and collaboration

- Dr. Dhananjay Datar of Al Adil Trading

"The India-Middle East-Europe Economic Corridor is a strategic and economic game changer," said Sitharaman in the speech. "In the words of Hon’ble Prime Minister, the corridor 'will become the basis of world trade for hundreds of years to come, and history will remember that this corridor was initiated on Indian soil'.

India-Middle East corridor – and CEPA

The UAE-India CEPA (Comprehensive Economic Partnership Agreement) continues to make headway in building on the trade and business volumes between the countries. And also slots in with the India-Middle East-Europe corridor the FM was talking about.

"Since the introduction of CEPA, we have indeed seen a notable easing of processes for imports and exports in and out of India,” said Dr. Dhananjay Datar, Managing Director of Al Adil Trading. “Now, all we need to do is provide the manufacturing and supplier details of the product, and we can easily obtain the country of origin certificate.

"On obtaining the country of origin certificate, we are eligible for a 5 per cent duty refund on most goods. This not only simplifies the overall process but also provides a financial incentive.”

While the Budget does not carry any landmark provisions, it does come up some welcome initiatives, particularly in the realm of infrastructure development

- Shamlal Ahamed, Managing Director for Intetnational Operations at Malabar Gold & Diamonds

No NRI mention

But when it comes to specific incentives for NRIs, there weren't any. "This is perhaps the fourth consecutive year where NRIs have had no mention from Ms. Sitharaman," said Dr. Ram Buxani, Chairman of ITL Cosmis Group. "NRIs have disappeared from playing any economical role. This is discouraging and should be looked at seriously."

The corpus will provide long-term financing or refinancing with long tenors and low or nil interest rates

- Parthi Duraisamy of Alaan

A big push for tech and startups

For the tech startup sector, India will set up 1 Rs1 trillion corpus that will offer 50-year interest free loans. "The corpus will provide long-term financing or refinancing with long tenors and low or nil interest rates," said the Finance Minister. "This will encourage the private sector to scale up research and innovation significantly in sunrise domains."

Overall, the budget effectively balances various facets of development, showcasing India's dedication to becoming the world's third-largest economy by 2027.

- Dr Raza Siddiqui, Executive Director of RAK Hospital

Now, the tech focus has generated attention among NRI entities.  "It will be interesting to see how these benefits revitalize the sector, which is going through a certain regulatory overhaul right now," said Parthi Duraisamy, CEO and co-founder of Alaan, a fintech. "This year's budget has focused on some thoughtful adjustments, notably the extension of tax benefits for startups and the provision for tax-free investments by sovereign wealth and pension funds."

Wait for the next

Market watchers are already waiting for the next budget once the election is done and dusted with. That could, based on various factors, could see reforms being initiated on multiple fronts. And possibly go deeper into sectors such as healthcare. 

Increased funding for healthcare infrastructure development will open corridors for investment opportunities from UAE

- Dr Thumbay Moideen of Thumbay Group

For now, "The interim budget outlines a promising roadmap in healthcare infrastructure, notably through the proposal to establish more medical colleges," said Dr Thumbay Moideen, founder president, Thumbay Group. "This initiative not only boosts domestic healthcare but also boosts knowledge exchange between India and the UAE, potentially leading to collaborations and research partnerships.

"Additionally, increased funding for healthcare infrastructure development will open corridors for investment opportunities from countries like the UAE."