The budget echoes the Developed India vision
The Union Budget for this fiscal presents a holistic approach to economic development, balancing fiscal prudence with targeted interventions for inclusive growth
Finance minister Nirmala Sitharaman has meticulously assessed India’s economic vitality. Her seventh consecutive budget demonstrates this clearly. There is a marked focus on uplifting the disadvantaged sections, including the poor, women, youth, and farmers.
Budget 2024 unveiled a comprehensive strategy built on nine foundational pillars — agriculture, employment, inclusive development, manufacturing and services, urban development, energy, infrastructure, innovation/research and development, and next-gen reforms. These pillars will serve as guiding principles aimed at fostering broad-based opportunities and sustainable progress across the country.
Central to the budget’s agenda is the enhancement of agricultural productivity and resilience to achieve $100 billion from agricultural exports. A significant allocation of ₹1.52 lakh crore has been made to the agriculture and allied sectors, underscoring the government’s commitment to modernising farming practices and bolstering rural economies. The budget introduces three pivotal employment schemes linked to enrolment in the Employee Provident Fund Organisation (EPFO). These initiatives include a Direct Benefit Transfer equivalent to one-month salary for first-time employees , up to ₹15,000, incentives for manufacturing job creation, and employer subsidies on EPFO contributions for additional employees over a two-year period.
Youth empowerment and skill development feature prominently in the budget’s initiatives, with provisions for subsidised educational loans up to ₹10 lakh and a 3% interest subvention for higher education (only for domestic institutions). Furthermore, internship programs have been launched to bridge the gap between academic learning and practical skills, enhancing employability across diverse sectors.
Small and medium enterprises (MSMEs), particularly those in labour-intensive manufacturing, receive targeted support. The budget raises the Mudra Loan limit to ₹20 lakh for entrepreneurs who have successfully repaid loans under the Tarun category, aiming to stimulate entrepreneurship and economic resilience.
Under the PM Awas Yojana Urban 2.0, ₹10 lakh crore has been earmarked for addressing the housing needs of one crore urban poor and middle class families. Additionally, reducing the stamp duty for properties purchased by women is aimed at empowering them economically and socially. This will help inculcate a sense of security among the women of the country, which may appear small but is a very important step, from the point of view of furthering social progress. Infrastructure development, crucial for economic growth, retains a substantial allocation, of ₹11.11 lakh crore or equivalent to 3.4% of GDP.
The budget also emphasises enhancing tourism infrastructure. Tourism will act as a catalyst in overall development of the economy as it will support local entrepreneurs, developing good roads, air connectivity and allied infra shall boost the activity. This is expected to create jobs at the grassroots level.
The states of Bihar and Andhra Pradesh were the biggest beneficiaries in terms of development initiatives, infrastructure projects; hence, they may attract tourists from around the globe. Foreign tourists shall also help bring in much-desired forex flows, helping narrow the current account deficit. The budget also prioritises rationalising taxation policies to simplify compliance and reduce litigation. This budget has tried to rationalise tax rates with an increase in standard deduction for salaried employees, and benefits in tax slab in new tax regime.
The budget aimed at standardising the definition of long-term and short-term assets across various asset classes. It has tried to standardise the long-term capital gains (LTCG) tax at 12.5% and the short-term capital gains tax at 20%. However, the indexation benefit, that allows for inflation adjustment, has been removed from LTCG computation.
The budget has simplified the tax system to a large extent and also tried to reduce the tax burden on an overall basis. However, there is a marginal increase in equity tax. The reduction in import duty on gold and silver to 6% will make the imports cheap and is seen as a welcome move by the consumers.
Social security benefits are strengthened through increased deductions for National Pension System (NPS) contributions, incentivising savings and ensuring financial security for employees across private and public sectors. This move is expected to attract sustainable investments in the debt and equity markets, fostering long-term economic growth.
In conclusion, the Union Budget for this fiscal year presents a holistic approach to economic development, balancing fiscal prudence with targeted interventions for inclusive growth. By addressing various facets of the economy and prioritising social welfare, the budget sets a bold trajectory towards a prosperous and resilient India, echoing the vision of Viksit Bharat by 2047.
Author: Nilesh Shah is managing director, Kotak Mahindra Asset Management.
