Budget: Government puts focus on tourism, transport infrastructure

The tourism sector in India is set to benefit from a number of new initiatives announced by Finance Minister Nirmala Sitharaman in her Interim Budget 2024-25 speech.

She highlighted the government’s commitment to enhancing tourism infrastructure and amenities, pledging that states will be supported and encouraged to develop tourist centres and promote them globally, in order to meet the growing interest in domestic tourism.

Aloke Bajpai, CEO of online travel portal ixigo, welcomed the government’s focus on growing tourism, saying: “We are also happy to see the government taking steps to develop new tourist destinations in India that can compete on a global scale. Infrastructure development and improved connectivity between offbeat tourist destinations will help build and promote the unexplored and hidden gems of India and will help further boost the tourism sector.”

One of the main strands outlined by the Finance Minister was improving connectivity and transportation between destinations, a move welcomed by Dinesh Kumar Kotha, CEO of ixigo trains.

He said that the decrease in overcrowding of high-traffic corridors and the enhancement of rail infrastructure would not only reduce costs but also improve the overall rail passenger experience, thus fuelling train travel demand in India.

“The current Budget’s focus on the active development and enhancement of railway infrastructure, better connectivity and new rail tracks will fuel train travel demand in India,” he said.

Sitharaman also announced the government will strengthen the electric vehicle ecosystem by supporting the manufacture of EVs and building charging stations, as well as encouraging a greater adoption of electric buses for public transport. She did not specify the cost or timeline for the project.

 

No changes to tax rates

In her speech, the Finance Minister said the government would refrain from extensive social spending, while also announcing there would be no change in tax policies and a reduction in subsidies on essential goods.

She also outlined the government’s plan to reduce the budget deficit to 5.1% of Gross Domestic Product (GDP) in 2024-25, with a revised lower deficit of 5.8% for the current fiscal year.

She said the emphasis on fiscal discipline would strengthen India’s case for a higher sovereign credit rating, potentially attracting more investment from overseas entities.

Economists believe that this fiscal consolidation will provide reassurance to investors and rating agencies, according to a report by news agency Reuters.

The Budget maintains the government’s focus on infrastructure development, with a planned 11% increase in capital expenditure on long-term projects. However, the overall spending growth is slower at 6%.

Sitharaman said the government would build 20 million affordable houses in the next five years in addition to the nearly 30 million houses built already.

“This will provide obvious impetus to the rural economy both in terms of job creation and construction, while also fulfilling the government’s socio-economic agenda,” said Shubhada Rao, an economist and founder of QuantEco Research.

The Interim Budget will come into effect from 1 April until a new government presents a full-fledged budget after coming to power at the forthcoming May elections.

However, some commentators were critical of the Interim Budget. “There has not been enough attention paid to creating ‘human capital’ in India,” Dr Raghuram Rajan, the former governor of India’s central bank RBI, told the BBC. This was a worry given India’s unemployment crisis, he said.

“We are flying blind without credible data on jobs,” Dr Rajan added.

Prime Minister Narendra Modi asserted that the Union Budget 2024 offers the “guarantee” of strengthening the foundation of a developed India. He said the Budget will empower the four pillars of developed India, namely the young, poor, women and farmers.

He said: “This is a budget of creating India’s future and is a reflection of the aspirations of a young India. [It] empowers the poor and middle class and will create countless employment opportunities for youth.