As India prepares to unveil its Union Budget for 2024-25, there is significant anticipation for measures that will stimulate economic growth and attract foreign investment, essential steps towards achieving the government's $5 trillion economy goal. This budget is expected to be a critical milestone in India's journey to becoming a major global economic player, with several key areas in focus, especially Foreign Direct Investment (FDI).
In recent years, the flow of FDI into India has slowed, raising concerns among policymakers. The upcoming budget is anticipated to relax regulations for critical sectors such as defense, insurance, and plantations to attract more investments. These changes aim to streamline processes and make India a more attractive destination for foreign capital, aligning with the country's goals of "Atmanirbhar Bharat" (Self-Reliant India) and "Viksit Bharat" (Developed India) by 2047.
Key expectations from the budget include:
FDI Reforms: To reverse the decline in FDI, stakeholders expect the government to introduce meaningful policy changes. These reforms are expected to simplify regulatory frameworks, enhance investor confidence, and make India a more inviting environment for foreign investors.
Production Linked Incentive (PLI) Scheme: Central to India's manufacturing revival strategy, the PLI scheme is set for a significant boost. The recent interim budget increased the allocation for PLI schemes by 33% for FY25, raising it to ₹6,200 crore from ₹4,645 crore the previous year. This enhancement is expected to bolster manufacturing across 14 key sectors, including mobile phones, pharmaceuticals, automobiles, and electronics. Industry experts also anticipate the expansion of the PLI scheme into new sectors such as toys, textiles, apparel, and commercial aircraft manufacturing, with a focus on increasing domestic value addition and creating employment opportunities.
Digital and Physical Infrastructure: To drive growth and innovation, the budget is expected to prioritize both digital and physical infrastructure. Investments in logistics hubs, new airports, and leveraging tier II airports are anticipated to foster regional aviation development. Additionally, there is a strong push for developing digital infrastructure to support MSMEs in getting the necessary funding for their operations and expansions.
Research and Development (R&D): The budget is likely to prioritize R&D, following the example of last year’s Promotion of Research & Innovation Program (PRIP) Scheme. This focus aims to enhance India's role in global industries, particularly in sectors like pharmaceuticals, which rely heavily on exports.
Tax Incentives and Simplification: The budget may introduce tax incentives and simplify the tax regime to attract more investments and encourage economic activities. This includes rationalizing GST rates on EVs and their components, providing tax clarity for securities listed on IFSC exchanges, and simplifying procedures for withholding taxes.
Sustainable Growth: The budget is also expected to allocate significant resources towards green and sustainable energy initiatives, including policies and investments to support the electric vehicle (EV) sector. This includes the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME) policy and potential extensions of subsidy schemes to boost EV adoption.
Overall, the Union Budget 2024-25 is poised to be a transformative step towards achieving India's economic goals, with a strong emphasis on enhancing the investment climate, boosting manufacturing, and supporting sustainable development.