The Union Budget - 2024

The Indian Union Budget is more than just an annual financial statement—it's a blueprint that charts the nation's economic future. Every year, the Government of India unveils its vision for the country's revenue generation and expenditure for the coming fiscal year. It's where taxation, spending priorities, and financial strategies are laid out, aiming to shape the economic direction of the country. It reflects the government’s priorities, such as economic growth, social welfare, and development projects.

THE 2024 UNION BUDGET

On July 23rd, Finance Minister Nirmala Sitharaman presented the first Union Budget of Modi 3.0, her seventh consecutive budget. In her address, she sketched out the government's ambitious financial blueprint for 2024-25, with total revenue (excluding borrowings) expected to reach ₹32.07 lakh crore and spending set at ₹48.21 lakh crore. Net tax receipts are projected at ₹25.83 lakh crore, with a fiscal deficit target of 4.9% of GDP, aiming to drop below 4.5% next year - a critical figure that will influence economic stability. The borrowing plan includes ₹14.01 lakh crore in gross market borrowings and ₹11.63 lakh crore in net borrowings, reflecting the government's strategy for the upcoming year.

Despite the global economy remaining under the grip of policy uncertainties, India’s economic growth continues to be the shining exception and will remain so in the years ahead. Nirmala Sitharaman, while presenting the Union Budget said that India’s inflation continues to be stable and moving towards the 4 per cent target. Core inflation (non-food, non-fuel) currently is 3.1 percent and steps are being taken to ensure supplies of perishable goods reach the market adequately.

The finance minister stated that the interim budget was made, keeping major focus on ‘Garib’ (Poor), ‘Mahilayen’ (Women), ‘Yuva’ (Youth) and ‘Annadata’ (Farmers). The key economic areas of importance for this budget were simplifying the income tax regime, macroeconomic stability, and fiscal support for states.

Speaking on the theme of the Budget, Smt. Sitharaman emphasized that this year's focus extends beyond immediate concerns to address long-term priorities. The budget particularly targets employment, skill development and MSMEs.

PRIORITIES OF THE 2024 UNION BUDGET

Sitharaman highlighted the Modi government's nine crucial priorities for transforming India into from a developing country into a developed country by 2047:

PRIORITY I: Productivity and Resilience in Agriculture

The budget introduces 109 climate-resilient crop varieties, supports 1 crore farmers in transitioning to natural farming, and invests in bio-input centers. Efforts will also be made to achieve self-reliance in oil seeds through enhanced production, storage, and marketing.

PRIORITY II: Employment & Skilling

New employment schemes will be implemented to skill 20 lakh youth and upgrade 1,000 Industrial Training Institutes. Revised loan schemes will support education and job creation, with enhanced financial assistance for students and workers.

PRIORITY III: Inclusive Human Resource Development and Social Justice

The government focuses on the development of eastern states and tribal communities through comprehensive plans, allocating significant funds for rural infrastructure and social welfare programs, particularly for women and girls.

PRIORITY IV: Manufacturing & Services

MSMEs receive enhanced credit access, including a self-financing guarantee fund and support for food processing and export activities. A new internship scheme will provide opportunities for 1 crore youth in top companies.

PRIORITY V: Urban Development

A ₹10 lakh crore investment will address the housing needs of 1 crore urban poor and middle-class families. Water and sanitation projects in large cities will be promoted in partnership with state governments and development banks.

PRIORITY VI: Energy Security

The PM Surya Ghar Muft Bijli Yojana will provide free electricity to 1 crore households through rooftop solar plants. Nuclear energy is expected to play a significant role in India's future energy mix.

PRIORITY VII: Infrastructure

The budget allocates ₹11.11 lakh crore for infrastructure, including new projects for rural connectivity and flood management in states like Bihar, Assam, Himachal Pradesh, Uttarakhand, and Sikkim.

PRIORITY VIII: Innovation, Research & Development

The Anusandhan National Research Fund will support basic research and prototype development. A ₹1,000 crore venture capital fund will boost the space economy, aiming to expand it fivefold in the next decade.

PRIORITY IX: Next Generation Reforms

Land reforms will focus on integrating digital platforms and easing compliance for industries. Simplified FDI rules will attract investments, while new pension schemes will offer greater flexibility and financial security.

NEW INCOME TAX REFORMS

The new income tax slabs announced in the Budget 2024 for the new regime are as follows:

• Up to ₹3 lakh: 0 percent

• ₹3 lakh to ₹7 lakh: 5 percent

• ₹7 lakh to ₹10 lakh: 10 percent

• ₹10 to ₹12 lakh: 15 percent

• ₹12 to ₹15 lakh: 20 percent

• Above ₹15 lakh: 30 percent

MAJOR CHANGES

1. Custom duties on gold and silver reduced to 6% and platinum to 6.4%.

2. Duties cut on phones to 15%

3. TDS on e-commerce cut to .1% from 1%.

4. Corporate tax on foreign companies was reduced to 35%.

5. A blow to F&O traders as the STT rate rose from 0.01 to 0.02%.

6. Custom duties on plastic increased.

7.  Long-term capital gains on all financial and non-financial assets will be taxed at a rate of 12.5%.

   
   
   
   

KEY NUMBERS

• Fiscal Deficit: The Budget 2024 aims to reduce the fiscal deficit to 4.9% of GDP for FY25, down from the 5.1% forecast in the Interim Budget, targeting 4.5% by next year.

• Capex Target: The infrastructure capex outlay remains at ₹11.1 lakh crore, unchanged from the interim budget.

• Gross Market Borrowing: The gross market borrowing target is slightly reduced to ₹14.01 lakh crore from ₹14.13 lakh crore.

• Housing: ₹10 lakh crore is allocated to provide one crore houses for the urban poor and middle class.

• Youth Employment and Skilling: The budget proposes incentives for 30 lakh youth to enter the job market with a one-month PF contribution, creating 4.1 crore jobs over five years with ₹2 lakh crore allocated. Additionally, ₹1.48 lakh crore is earmarked for skilling initiatives.

TEN TAKEAWAYS

1. The union finance minister announced full exemption of customs duty on three key cancer drugs with an aim to provide relief to cancer patients

2. Budget 2024 earmarks ₹90,958 crore for health sector

3. Sitharaman plans to scrap the 2% equalization levy on a wide array of services rendered by offshore tech firms including cloud services and e-commerce services from 1 August.

4. The ANGEL tax was abolished for all classes of investors.

5. The government would develop an 'economic policy framework' to outline its overall approach to economic development and pave the way for next-generation reforms.

6. The government has strengthened its commitment to create opportunities for employment and self-employment

7. Duties to be lowered for properties purchased by women.

8. 12 industry parks to be set up.

9. Government to launch auction of first offshore mining.

10.  Hundred post payment banks to be set up in the northeast.

THE POSITIVES AND NEGATIVES

POSITIVES:

The government has laid out a clear vision for "Viksit Bharat" by addressing key areas such as agricultural reforms, manufacturing push, employment generation, youth skilling, MSME support, and urban infrastructure development. One of the notable aspects of the budget is its fiscal discipline. Balanced fiscal approach ensures that resources are efficiently channeled to the desired sections while maintaining fiscal stability. Such stability is expected to attract liquidity flows into country and result in a lower cost of capital for India, fostering a conducive environment for economic growth. Support for MSMEs is a key highlight of the budget. The reduction in customs duties on mobile phones, gold, and silver is another positive move. The abolition of the angel tax is a significant step towards fostering a vibrant startup culture in India. Increasing the participation of women in the workforce is a priority, and many schemes are designed to empower women, providing them with the skills and opportunities needed to contribute to the economy.

NEGATIVES:

The Union Budget 2024-25 has faced criticism for several reasons. One major concern is the projected fiscal deficit, which is targeted at 5.1% of GDP, raising worries about the government's ability to maintain fiscal discipline while managing rising debt levels, as interest payments are expected to consume a significant portion of revenue receipts.

Additionally, the budget did not introduce substantial new tax relief measures, leaving many taxpayers feeling underwhelmed, particularly as direct and indirect tax rates remain unchanged. Critics also highlighted that while the budget emphasizes infrastructure and employment generation, specific details on new schemes and their implementation were lacking, leading to uncertainty about their effectiveness. Furthermore, the focus on capital expenditure may not sufficiently address immediate social welfare needs, particularly for the most vulnerable populations, potentially sidelining crucial areas such as healthcare and education funding.

CONCLUSION

The Union Budget 2024 sets a strong foundation for India's growth trajectory during the Amrit Kaal period. With a balanced fiscal strategy, the budget emphasizes substantial investments in infrastructure, strong support for MSMEs, and initiatives to boost consumption and entrepreneurship, all aligning with the vision of Viksit Bharat 2047. Key sectors such as manufacturing, infrastructure, MSME/mortgage credit, and consumption stand to gain significantly from the measures introduced. The emphasis on infrastructure development is particularly noteworthy, as it is expected to create a ripple effect, driving economic activities and generating employment across various industries. The Union Budget 2024 is well balanced, with the new government focusing on long-term schemes and benefits across various sectors.

-Jasraj Singh Seth