A Historical Perspective and Analysis of India’s 2024-2025 Interim Budget

History: - The first use of the word ‘Budget’ probably referred to this financial statement from the part of Robert Walpole who was the first British Prime Minister and first Chancellor of the Exchequer. Robert Walpole led the government of Great Britain for more than twenty years from 1721.  

                        

     Robert Walpole (Source - Portrait by Jean-Baptiste van Loo,1740)

During British Rule, The Budget was first presented in India on 7 April 1860 from the East-India Company to the British Crown. James Wilson presented the first Indian Budget on the 18th of February 1869. Mr. Wilson served as the Finance Member of the India Council which was the advisory body to the Indian Viceroy.

The first ever Union Budget of Independent India was introduced by the first ever Finance Minister of Independent India Sir R. K. Shanmugham Chetty on November 26, 1947. Most notably, the first-ever Union budget presentation happened at the time which was marked by devastating riots due to the partition of India. This was a budget for and half but half a year later that is by mid-March 1948 a new budget should have been in place to start by April 1, 1948. For the first time in the Union Budget, it was agreed and decided that India and Pakistan would continue using the same currencies until September 1948.

Sir Chetty resigned from the Finance Minister of India post and the onus at last fell into the hands of John Mathai who presented the subsequent budgets known as the Union Budgets of 1949-50 and 1950-51. It is relevant to note that the budget of 1949-50 was the first ever budget prepared for United India, including all the princely states. The Railway Budget of the country has always been introduced as a separate budget for the past 92 years till 2017, which has now been merged with the union budget. However, PC Mahalanobis is commonly referred to as the father of Indian budgeting and CD Deshmukh became the first governor of the Reserve Bank of India.

What does Interim Budget mean?

The Interim Budget, therefore, is prepared by a government that is in transition or its last term before the general elections are called. An interim budget is made to facilitate government expenditure so that it can continue with its expenditures even when it is unable to prepare a regular budget. And basic needs until the setting up of the new government presents a coherent budget after assuming office.

• Some Facts and Constitutional Provisions Regarding Budget: -

1. The term “Budget” is not mentioned anywhere in the Constitution of India.
2. Nodal Body for Preparing Budget: - Budget Division (Dept. of Economic Affairs, Ministry of Finance) in Consultation with NITI Aayog (National Institution for Transforming India -Think Tank) formerly known as Planning Commission of India and concerned Ministries.
3. Article 110 of the Constitution of India defines money bill. Money bills are related to financial matters like taxation, public expenditure, etc. 
4. Article 112 deals with - (1) The President shall, in respect of every financial year, cause to be laid before both the Houses of Parliament a statement of the estimated receipts and expenditure of the Government of India for that year, in this Part, referred to as the “Annual Financial Statement”.
5. Estimate of expenditure under Article 113 of the Constitution: - The Consolidated Fund of India is included in the annual financial statement and must be voted on by the Lok Sabha and presented as a demand for grants.
6. Vote on Account is given in the Indian Constitution by Article 116, and it is an anticipation grant for the central government to cover its short-term expenditures from the Consolidated Fund of India.

• Interim Budget 2024-2025: - Recently the Interim Budget 2024-25 was presented in Parliament. “Developed India (Viksit Bharat)” has been envisioned by 2047.

• Trends in Central Government Expenditure (2024-25): - 

• Interest payments make up the biggest part (19%) of the central government's spending. However, subsidies comprise 6% of the Union government’s spending. Among these, food subsidies cost the most (₹2.05 lakh crore), followed by fertilizer subsidies (₹1.64 lakh crore), and petroleum subsidies (₹0.12 lakh crore).

• Trends in Central Government Income (2024-25): - 

 

• Debt and other liabilities are the largest component of the Union government's income. However, the most important development is the increase in the share of income tax in central government revenue (19%) for the years 2024–25, including goods and services tax (GST), corporation tax, etc., more than other revenue sources.

• Trends of Deficit (2024-2025): -

• The fiscal deficit, which increased significantly during the pandemic year, reached a record level of 9.2% in FY 2020–21. However, in its 2021–22 budget speech, the government announced it would reduce the deficit to 6.7% of GDP. Since then, it has continued to cut the deficit. It is expected to decrease to 4.9% of GDP in 2024–25 and go below 4.5% by 2025–26.

• The Nature of Deficit Financing: -

• Simple Definition of Budget deficit: - A budget deficit occurs when the government's revenue is less than its expenditure.
• Market borrowings through dated securities were estimated at ₹11.63 lakh crore in 2024–25, lower than in 2023–24, which had a positive impact on the Indian economy.

• Trend In Tax Receipts: -

• The tax-to-GDP ratio measures how much of a country’s total economic output is made up of tax revenue. If this ratio goes up, it generally indicates that the economy is growing. For FY 2024-25, India’s tax-to-GDP ratio is expected to be 11.8%. Out of this, around 6.8% will come from direct taxes, while 5% will come from indirect taxes.

•  Expenditure of Major Items 2024-2025: -

•     Here’s a closer look at some of these issues, their potential solutions, and how the budget is addressing them: - 
•     Issues or Challenges: -

•    High Unemployment: - According to the 2022 revision of the World Population Prospects the population stood at 1,407,563,842. India has more than 50% of its population below the age of 25 and more than 65% below the age of 35. In 2020, the average age of an Indian is 29 years, compared to 37 for China and 48 for Japan. but still, many job seekers struggle to find suitable employment.

•    Infrastructure Deficits: - Due to a lack of adequate basic infrastructure, our youth are facing stunted economic development and a low standard of living.

•     Regulatory Burdens or Red Tape: - Our Indian bureaucratic system is understaffed and faces problems like bribery and red tape from some government officials. Political interference and complicated government regulations are the biggest challenges faced by entrepreneurs who want to start a new business in the Indian region.

•     Environmental Concerns: - India's urbanization and industrialization are causing serious environmental problems. In Delhi, rapid urban growth has resulted in severe air pollution, making it one of the world's most polluted cities. Likewise, industrial activities along the Ganges River have polluted the water, affecting millions of people living in the Ganga River basin. Finding a balance between development and environmental sustainability is a significant challenge for the country, etc.

•       Solution or Suggestion: - 

1. The budget might increase spending on schemes like the Pradhan Mantri Kaushal Vikas Yojana (PMKVY), which provides vocational training to youth.

2. Increased funding for social schemes such as the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), which provides work opportunities in rural areas.

3. The budget often includes reforms to simplify business regulations and reduce bureaucratic hurdles. For example, the introduction of the Goods and Services Tax (GST) was a major step in this direction. The GST created a unified tax system, replacing numerous state and central taxes, making it easier for businesses to operate across the country. This reform has helped streamline the tax process and reduce the complexities businesses face.

4. The budget places a strong emphasis on sustainable development and environmental protection. Significant allocations are made for clean energy projects, such as solar and wind energy, and for initiatives aimed at reducing carbon emissions. A notable example is the increased investment in the Solar Park Scheme, with a target of at least 50 solar parks with an aggregate capacity of 40,000 MW which aims to expand India’s solar power capacity. The budget also supports the implementation of stricter environmental regulations and incentivizes businesses to adopt Green Technologies.

 

Overall, the Indian Budget 2024–2025 is designed to address these challenges through targeted investments and reforms aimed at paving the way for more balanced and sustainable economic growth.

• References:-
• Government of India- Expenditure Profile (July)2024-2025 Ministry of Finance Budget Division.
• The Constitution of India (19^th Edition) – P.M. Bakshi.
• Government of India – Budget 2024-2025 Speech of Nirmala Sitharaman (Minister of Finance) 
• Drishti IAS -Interim Budget Summary 2024-25.
•  Rau’s IAS Study Circle Budget-Highlights-2024-25.
• Indian Economy (16th Edition) – Ramesh Singh.
• The Indian Economy – Matthew McCartney (Affiliation: University of Oxford, Published online by Cambridge University Press:  09 August 2023).
•  The Economic Times.