Bharat is a bright spot amid the global economic outlook. The International Monetary Fund (IMF) and the Reserve Bank of Bharat (RBI) have projected Bharat’s economic growth for FY24 at 6.3 and 7 percent, respectively. Meanwhile, the IMF has declined its projection for global economic growth from 3.5 percent in 2022 to 3 percent in 2023 and 2.9 percent in 2024.

However, Bharat is facing volatile inflation, especially food price inflation. As per the official data released by the Ministry of Statistics and Programme Implementation, prices of cereals rose by 10.27 percent and vegetables by 17.7 percent in November on a year-on-year basis. Pulses were up by 20.23 percent, spices by 21.55 percent, and fruit prices were up 10.95 percent last month.

Amid all the ups and downs in the international economy and our domestic ones, Union Finance Minister Nirmala Sitharaman will present the interim budget for the years 2024–25 on February 1, 2024. The full budget will be announced after the formation of the new government following the general elections.

As the word itself signifies, this interim budget is a temporary budget. An interim budget is presented by a government that is going through a transition period or is in its last year in office before the general elections are held every five years.

Now let us look at the economic indicators and examine what would shape the union budget for the next year, which is FY25.

Despite global uncertainties, Bharat’s GDP (Gross Domestic Product) has shown resilience, with incremental progress observed in recent quarters. This year, Bharat’s economic growth rose optimistically to 7.6 percent in real terms in Q2 FY24, which was higher than expected by economists. The IMF and RBI have projected Bharat’s economic growth for FY24 from 6.3 to 6.5 percent. Economic investments, measured by Gross Fixed Capital Formation (GFCF), grew at 9.5 percent in H1 FY24 and 11.0 percent in Q2 FY24. Inflation also moderated and remained under the RBI’s tolerance band, but high food price inflation poses an issue. The inflation rate is posing a challenge as well as an opportunity for policymakers.

The coming year can trouble the growth trajectory of Bharat due to the continuous global crisis.

There is a wide possibility that the government will prioritise fiscal caution. Making big-bang announcements is unlikely; rather, the government may focus on fostering economic impetus and bolstering market sentiments.

Concerning international situations, there is a fear that as the Israel-Palestine war intensifies, it could prolong regional disputes and impact global supply chains and the international economy. As stated in the (Deloitte 2023) report, “The ongoing Israel-Hamas conflict could destabilise already tense steel and oil supply chains worldwide. Crude price of US$90/bbl will put further stress on Bharat’s current account deficit. Higher import bills and a slowdown in export growth amidst a global slowdown can push the trade deficit high.”

The government has laid the groundwork for economic policies in the last couple of years and is expected to follow them, ensuring a seamless transition while addressing evolving economic demands.

Sanjeev Sanyal, a member of the Economic Advisory Council of the Prime Minister, said in a recent statement that sustained high GDP growth is always investment-led and that during sustained growth, consumption and investment cannot rise together.

This investment-led GDP growth will boost Bharat’s exports. 

Hence, based on the government’s policies and Sanjeev Sanyal’s statement, we must expect a high investment gateway and different measures to boost manufacturing sectors. The government can also make provisions for a risk-free flow of credit to MSME (micro, small, and medium enterprises) sectors.

Also, Finance Minister Nirmala Sitharaman has earlier said that the focus of the government is working on the four I’s—infrastructure, investment, innovation, and inclusiveness—to make Bharat a developed nation by 2047. NITI Aayog vice chairman Suman Bery earlier this year said that for Bharat to transit from the middle-income trap, the private sector needs to enhance its contribution to R&D (research and development) through its investments, as the onus is on them to pave the way towards a sustainable growth trajectory. Hence, it is compelling to believe that this year, the government will allocate a significant budget for R&D.