Union Budget 2024-25: Growth, reforms and infrastructure

The 2024 Budget signals policy continuity. The economy and the fiscal situation are in fine fettle. We are targeting real growth rates of 7%+ whilst keeping fiscal deficit at 4.9% for the year gone by (versus the 5.1% indicated earlier) and reducing it further to 4.5% in the coming year. Reassuringly, we are continuing to support investments in infrastructure with almost ₹11 lakh crore of spends allocated. This combination of continuing to drive growth through investments whilst keeping inflation low through tight control on fiscal deficit will augur well in the long run.

Specifically, the Budget focuses on these key priorities – resilient agriculture, promoting skill development, driving employment and inclusivity, accelerating infrastructure development, energy security, fostering innovation and progressive reforms. All of these are relevant and critical areas to focus upon.

From an automotive industry perspective three key aspects stand out.

Focus on infrastructure

The government has earmarked an impressive capital expenditure of over ₹11 lakh crore, equivalent to 3.4% of the GDP, towards infrastructure development. This substantial allocation marks strong conviction on delivering sustainable growth by bolstering the nation’s infrastructure. By making available ₹1.5 lakh crore additionally to States in the form of long-term interest-free loans, regional infrastructure development is also being supported. The introduction of viability gap funding with conducive policies will stimulate private sector participation. These focused initiatives will accelerate the pace of infrastructure growth across the country and support all round development.

6X increase in Auto PLI

The Auto PLI outlay at ₹3,500 crore in FY25 is a 6X increase over the ₹604 crore allocated last year. This underscores the government’s continuing commitment towards building an ‘Atmanirbhar Bharat’ and its thrust on creating a global hub for manufacturing EVs in line with the larger vision of ‘Make in India for the World’. With the outlay being stepped up, we now look forward to early finalising of the procedures for claiming and settling the PLI funds. This can help OEMs focus on driving up EV penetration, enhancing localisation, improve value adds and actualise the holistic benefits of this initiative. This coupled with the much-anticipated FAME 3 scheme will give the next leg up towards mass adoption of EVs.

Thrust on green energy

With the overwhelming response to the PM Surya Ghar Muft Bijli Yojna (over 1.28 crore registrations and 14 lakh applications), the exemption of customs duties on capital goods used for manufacturing solar cells and panels will further reduce the cost of producing solar energy. The exemption of customs duty on import of lithium, cobalt and other rare minerals plus extension of concessional customs duty on Li-Ion cells till March 2026 will make storing energy more cost-optimal. These targeted actions reiterate the government’s pledge to fulfil the country’s climate commitments and accelerate the production as well as adoption of green energy.

Overall, it is a budget that inspires confidence that the agenda is set, and we are making strong strides to deliver the same in an equitable, inclusive, balanced manner whilst seizing the future and creating a ‘Viksit Bharat (Developed India)‘.

(The writer is Group CFO at Tata Motors Ltd.)