On July 23rd 2024, the Finance Minister of India, Mrs Nirmala Sitharaman presented the financial budget for the financial year 2024-25. Earlier in February she had presented the Interim budget for four months. This will be the first budget of NDA 3.0 which is crucial since the current government is a coalition one. On 22nd July, the minister submitted the Economic Survey for the year 2023-2024. India grew by 8.2% in the past year. PM Modi also spoke on the budget during his address. He called for inclusive growth, empowerment of the middle class, and a path for developed India.
It is to be noted that the Economic Survey itself gave a lot of scope for discussion and a lot of data to talk about. Important questions have largely been raised on India's economic relations with China such as import-export relations, FDI and much more. At the same time, concerns were raised about the stock market asking SEBI to step in more. It has highlighted the role of AI in employment and more opportunities. On the flip side, it was more conservative as it sought to blame the private players for encouraging unhealthy diets, more online activity as a cause for unemployment and requests to switch back to traditional vegetarian diets.
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| Credits- AI Garden |
Major Announcements from the Budget Speech
- The fiscal deficit target will be lowered to 4.9% and later 4.5% by 2026.
- Focus on four castes- Poor, Youth, Women, Farmers
- Government's criteria- GDP - governance, development, performance
- Nine Priorities- Productivity, Jobs, Social Justice, Urban Development, Energy Security, Infrastructure, Innovation, and Reforms.
- Budget Size- 48.21 Lakh crore
- Education, Employment and Skilling- Rs 1.48 cr
- Agricultural Sector- Rs 1.52 cr
- Cities to be made growth hubs
- Abolish Angel Tax
- Pilgrimage-centric-tourist destinations to be developed
- Changes in the New Tax Regime
- Standard Deduction raised to Rs 75,000 in New Tax Regime
- PM Suryaghar Muft Bijli Yojana- Free rooftop solar energy scheme
- Rs 26,000 cr for Bihar
- Rs 11, 500 cr for Bihar flood control
- Rs 15,000 cr for Andhra Pradesh's new capital
- Internship opportunities for youth in 500 top firms with Rs 5000/month stipend
- Educational loans up to 10 lakhs in domestic institutions
- Street Food Hub in selected Cities
- Rs 1,000 cr VC fund for Space Economy
- Credit Support Scheme for MSMEs
- FDI in the last ten years doubled compared to the previous year
- Expected 6.5-7% growth rate
- Nominal Growth Rate 10.5%
- Market Borrowings reduced to 14.01 crore
- More support for states affected by Natural Disasters
- Direct Cash Transfer up to Rs 15,000 in addition to salary for first-job entrants in the formal sector.
Major Takeaways
- Budget Speech was 85 minutes
- The government believes India is the faster-growing economy
- Govt. to aim for more revenue from the stock market
- Decreased the custom duty on Mobiles which will make it cheaper
- A review of the IT Act 1961 means we can expect a new tax law
- More incentivisation for the New Tax Regime
- Reduction in Corporate Tax from 40% to 35% for foreign companies working in India
- Announced Critical Mineral Mission announced wherein 25 of them are exempted from customs duty
- Small Capital Gains tax hiked from 15% to 20%
- Capital Gains tax hiked from 10% to 12.5%
- TDS on e-commerce reduced.
- The Securities Transaction Tax (STT) on futures will rise from 0.0125% to 0.02%, while the STT on options will increase from 0.0625% to 0.10%.
Income Tax Changes
Price Changes for Consumers
Criticisms
Very status-quo budget, nothing radical or special which was addressed besides the revision of the Tax law IT Act 1961. There weren't extreme bold decisions which may be very different for India as a growing economy. The mixed messaging on the Stock market by increasing the taxation has been emphasised too much on taxing profits earned from trading. Adding STT will keep people away from investing in the stock market despite a strong standing.
The Opposition leader Rahul Gandhi heavily criticised the budget as the "Save the Coalition" budget for appeasing its alliance partners. He took a dig at states other than Andhra Pradesh and Bihar being heavily ignored. Similarly, he claimed that the entire budget is a copy-paste of Congress manifesto.
Analysis
As an election year, this can be considered a revised form of the interim budget. Modi and BJP are extremely politically oriented, Unlike the interim budget, this one did not have any political rhetorics. The NDA 3.0 has continued the economic views of NDA 2.0 showing a strong sense of continuity. Hence, we can argue this is the main reason for a very status-quo budget. Yet there has been a focus on different sectors than what traditionally has been the centre of focus. Despite that, there has been more focus on Andhra Pradesh and Bihar where NDA's most important allies JDU and TDP come from. Appeasing them and keeping them on good terms is the way NDA can be strong.
Modi government's social schemes got the highest attention in the budget. Even though the Modi government claim these are not freebies and giving essential services to the needy; Welfare is one of the most important pillars of the Modi government. This budget continued to show that aspect.
One of the most discussed election issues was unemployment. The first good initiative that happened here as been the acknowledgement that unemployment is very serious hence, they have tried to include internships for 1 crore youth with a Rs 5000 per month stipend and Rs 6000 one-time allowance. The money for this can come from CSR as well. The first job entrants (of the formal sector) will receive the benefit of a Direct Cash Transfer of up to Rs 15,000 in addition to salary. The government is worried about jobless growth, wants a lot of changes, and is ready to look for more overseas investments and more startups to begin in India.
The macroeconomic fundamentals of the Indian economy remain strong. There is a mixed response among the public on whether the budget overall was beneficial or not. The Middle Class has been pretty unhappy with the government for being very status-quo and retention of high tax rates. We hope India will achieve good economic growth and that the current and future policies will pave for a better future.
Credits- MoneyControl, NDTV, Hindustan Times, The Indian Express, TOI, Onmanoram, 24 News
Image Credits- NDTV
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