Union Budget 2024-25: An In-depth Analysis
Earlier today, Finance Minister Nirmala Sitharaman presented the Union Budget for the financial year 2024-25 in Parliament. This marks her seventh budget and the first of Prime Minister Narendra Modi's government's third term.
Economic Outlook and Priorities
In her speech, the Finance Minister emphasised India's robust economic growth, contrasting it with global economic uncertainties. "India's economic growth continues to be the shining exception and will remain so in the years ahead," she stated. Despite better-than-expected global economic performance, significant risks to growth and inflation persist.
The budget outlines nine key priorities: enhancing agricultural productivity, boosting employment and skills, promoting inclusive human resource development and social justice, strengthening manufacturing and services, advancing urban development, ensuring energy security, expanding infrastructure, fostering innovation and R&D, and implementing next-generation reforms. These priorities aim to generate employment and stimulate consumption, potentially benefiting sectors such as consumer goods, real estate, and automotive. However, the lack of major changes in personal income tax was a disappointment for salaried individuals. "In this budget, we focus on employment, skilling, MSME, middle class," the Finance Minister asserted.
Key Highlights of the 2024 Budget
- The government has allocated ₹11.11 lakh crore for capital expenditure for FY25, representing 3.4% of India's GDP, consistent with February's allocation. This is an increase from the previous year's revised estimate of ₹9.5 lakh crore.
2. Tax Reforms
- Income Tax: Changes in the new tax regime include an increase in the standard deduction to ₹75,000 from ₹50,000.
- Salaried employees in the new tax regime will save up to ₹17,500 in income tax.
- Capital Gains Tax: Long-term capital gains on all assets will now attract a tax rate of 12.5%, up from 10%. Short-term capital gains tax has increased to 20% from 15%, with the exemption limit set at ₹1.25 lakh per year.
- Futures and Options (F&O): The Securities Transaction Tax (STT) rate has been doubled to 0.02%, impacting equity and index traders.
- Angel Tax: The government announced the abolition of Angel Tax.
3. Customs Duty Adjustments
- The Basic Customs Duty (BCD) on mobile phones and related components will be reduced to 15%.
- Customs duty on gold and silver will be reduced to 6%, and platinum to 6.4%.
- The BCD on specific telecom equipment's printed circuit board assemblies will increase from 10% to 15%.
- Exemptions on customs duties for 25 critical minerals and reductions for two specific minerals.
4. Employment and Skilling Initiatives
- PM Package of 5 Schemes: An allocation of ₹2 lakh crore, with ₹1.48 lakh crore for education, employment, and skilling.
- Job Creation Schemes: Three schemes will offer employment-linked incentives, focusing on EPFO enrolment and supporting first-time employees. Up to ₹15,000 in direct benefit transfers (DBT) will be provided to new hires in three instalments, with a salary cap of ₹1 lakh per month, benefiting 2.1 lakh youths. Employers will receive reimbursements up to ₹3,000 per month for two years for each new employee, supporting 50 lakh new jobs and 30 lakh youths. An internship scheme for one crore youths over five years and rental housing for industrial workers in PPP mode will also be introduced.
- Women Empowerment: Over ₹3 lakh crore allocated for schemes benefiting women and girls, including the establishment of hostels and women-specific skilling programmes.
5. Agriculture and Rural Development
- Agriculture Sector: ₹1.52 lakh crore allocated for agriculture and allied sectors, with a comprehensive review of agricultural research to improve productivity and develop climate-resilient varieties.
- Rural Development: ₹2.66 lakh crore allocated for rural initiatives, including introducing one crore farmers to natural farming over two years.
6. Regional Development: Bihar and Andhra Pradesh
- Bihar: The budget will expedite external assistance requests, fund new airports, medical facilities, sports infrastructure, and ₹26,000 crore for highways.
- Andhra Pradesh: ₹15,000 crore allocated, with future support for the Pollavaram irrigation project and other capital investments.
7. MSME and Manufacturing Support
- A new scheme will offer term loans for MSMEs to purchase machinery without collateral. A guarantee fund of up to ₹100 crore will support credit guarantees. Technology support packages and 24 new SIDBI branches for MSME clusters were also announced.
8. Financial Initiatives
- Mudra Loans: Limit increased to ₹20 lakh from ₹10 lakh for previous borrowers.
- Higher Education Loans: Financial support for loans up to ₹10 lakh, with e-vouchers and a 3% interest subvention.
- Insolvency and Bankruptcy Code (IBC): An integrated tech platform to improve IBC outcomes. The IBC has resolved over 1,000 companies, recovering ₹3.3 lakh crore for creditors.
- FDI Rules: Simplification of rules and recognition for Foreign Direct Investments.
9. Infrastructure and Development
- Infrastructure: Additional ₹26,000 crore allocated for road connectivity projects.
- Critical Mineral Mission: Establishing a mission for recycling critical minerals and overseas acquisitions, with plans for offshore mining block auctions.
- Affordable Housing: ₹10 lakh crore investment for housing for one crore urban poor and middle-class families. Under the PM Surya Ghar Muft Bijli Yojana, rooftop solar panels will be installed for one crore households.
10. Nuclear and Space Initiatives
- Nuclear: Partnership with the private sector for Bharat small reactors, modular reactors, and new nuclear technologies.
- Space: Expansion of the space economy by five times over the next decade, with a ₹1,000 crore venture capital fund.
Budget Estimates for FY25
- Fiscal Deficit: Lowered to 4.9% of GDP from 5.1%, with a goal of below 4.5% by FY26.
- Market Borrowing: Reduced to ₹14.01 lakh crore from ₹15.43 lakh crore for FY24.
- Receipts: Projected at ₹32.07 lakh crore.
- Expenditure: Projected at ₹48.21 lakh crore.
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