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Budget 2024: FM Sitharaman Promises Empowering Middle Class, Enhancing Job Creation, Driving Economic Growth

Top 5Budget 2024: FM Sitharaman Promises Empowering Middle Class, Enhancing Job Creation, Driving Economic Growth

Presenting her 7th budget, Finance Minister Nirmala Sitharaman announced a wide-ranging plan focused on boosting employment, enhancing skills, and fostering inclusive growth across multiple sectors. At its core, the budget introduces a transformative package of five schemes aimed at creating opportunities for 4.1 crore youth over five years, with a substantial central outlay of Rs 2 lakh crore.

The centrepiece of the budget is the Prime Minister’s Employment Linked Incentive Package to deal with the long standing issue of unemployment.

The first scheme offers a one-month wage to new workforce entrants in all formal sectors. The second targets job creation in manufacturing, providing incentives for Employees Provident Fund contributions. The third scheme supports employers across all sectors, reimbursing up to Rs 3,000 monthly for two years towards EPF contributions for each additional employee. The fourth focuses on skilling 20 lakh youth over five years, upgrading 1,000 Industrial Training Institutes. The fifth introduces a comprehensive internship program aiming to place 1 crore youth in 500 top companies over five years, providing an internship allowance of Rs 5,000 per month and one-time assistance of Rs 6,000.

Similarly, education and skill development received significant attention in the budget. As per it, the Model Skill Loan Scheme will be revised to facilitate loans up to Rs 7.5 lakh. Financial support for higher education loans up to Rs 10 lakh will be provided, with e-vouchers for 1 lakh students annually for interest subvention.

The budget has allocated  Rs 1.48 lakh crore for education, employment, and skilling initiatives this year.

For agriculture, the budget allocated Rs 1.52 lakh crore. It has  introduced 109 high-yielding and climate-resilient crop varieties, with the aim to initiate 1 crore farmers into natural farming, and plans to establish 10,000 bio-input resource centres. The government will also implement a Digital Public Infrastructure in agriculture.

The Micro, Small & Medium Enterprises sector too has received substantial support. The Mudra loan limit has been  enhanced to Rs 20 lakh for successful “Tarun” category borrowers. A new credit guarantee scheme for term loans up to Rs 100 crore will be introduced, the finance minister announced. The turnover threshold for mandatory onboarding on the TReDS platform has been  reduced to Rs 250 crore, which was Rs 500 crore earlier.  This will facilitate MSMEs to unlock their working capital by converting their trade receivables into cash.

Urban development was also one of the  key focuses, with plans to address housing needs of 1 crore urban poor and middle-class families through a Rs 10 lakh crore investment under PM Awas Yojana Urban 2.0. The budget also focuses on developing “Cities as Growth Hubs” and formulating Transit Oriented Development plans for 14 large cities. Additionally, 100 cities will see the development of “plug and play” industrial parks, and 12 industrial parks under the National Industrial Corridor Development Programme will be sanctioned.

To develop rural areas, rural development has received Rs 2.66 lakh crore, including for infrastructure development.

The budget document has also announced the launch of  Phase IV of Pradhan Mantri Gram Sadak Yojana to provide all-weather connectivity to 25,000 rural habitations. Similarly, the PM Janjatiya Unnat Gram Abhiyan will cover 63,000 villages, benefiting 5 crore tribal people.

In energy security, the government plans to partner with the private sector for nuclear energy initiatives, including setting up Bharat Small Reactors and research in newer technologies. A joint venture between NTPC and BHEL will set up an 800 MW commercial plant using AUSC technology.

The budget has also introduced  several tax reforms, including simplification of the Income-tax Act, merging of tax exemption regimes for charities, and reduction of TDS rates. Personal income tax witnessed changes, with increased standard deduction for salaried employees and enhanced deduction on family pension for pensioners. The so-called angel tax for all classes of investors has been abolished to boost the startup ecosystem.

For the middle class, the standard deduction has been increased to Rs 75,000 from Rs 50,000, alongside minor adjustments to the tax slabs under the New Tax Regime (NTR). These adjustments are expected to provide individual taxpayers under the NTR with an annual tax benefit of up to Rs 17,500. While the Old Tax Regime remains unchanged, these enhancements in the NTR are likely intended to make it more appealing to salaried taxpayers. This move reflects the government’s ongoing efforts to promote the simplified and exemption-free NTR as the preferred tax regime for this demographic.

The budget has placed a strong emphasis on women-led development, demonstrating the government’s commitment to gender equality and empowerment. Finance Minister Sitharaman announced a substantial allocation of more than Rs 3 lakh crore for schemes specifically benefiting women and girls.

A new “Purvodaya” plan for the development of eastern states, which will encompass Bihar, Jharkhand, West Bengal, Odisha and Andhra Pradesh was announced. As part of Purvodaya, the government will support several major infrastructure projects. These include the development of road connectivity projects such as the Patna-Purnea Expressway, Buxar-Bhagalpur Expressway, and spurs connecting Bodhgaya, Rajgir, Vaishali, and Darbhanga, along with an additional 2-lane bridge over the Ganga at Buxar. The total cost for these road projects is estimated at Rs 26,000 crore. Additionally, the plan includes power projects, notably a new 2,400 MW power plant at Pirpainti, Bhagalpur,  with a total investment of Rs 21,400 crore. The Purvodaya initiative also promises the construction of new airports, medical colleges, and sports infrastructure in Bihar, signalling a comprehensive approach to boost the eastern region’s economic and social development.

The budget includes a significant provision for Andhra Pradesh, acknowledging the state’s need for a capital. Finance Minister Sitharaman announced that the government will facilitate special financial support for Andhra Pradesh through multilateral development agencies. Specifically, in the current financial year, arrangements will be made to provide Rs 15,000 crore to support the development of the state’s capital. This move recognises the unique challenges faced by Andhra Pradesh following its bifurcation and aims to assist the state in establishing and developing its new capital infrastructure.

The ruling BJP is dependent on the support of its allies Telugu Desam Party and the Janata Dal United that are in power in Andhra Pradesh and Bihar, respectively, for its survival at the Centre and hence it was expected that both these states would receive special attention in the budget.

The budget introduced  full exemption of customs duties on 25 critical minerals crucial for sectors such as nuclear energy, renewable energy, space, defence, telecommunications, and high-tech electronics. Additionally, the Basic Custom Duty (BCD) on two of these minerals has been reduced. This move aims to boost domestic processing and refining of these strategic minerals.

The budget also reduces customs duties in several other areas. BCD on mobile phones, mobile PCBAs, and mobile chargers has been reduced to 15%. BCD on certain broodstock, polychaete worms, shrimp, and fish feed has been reduced to 5%. BCD on real down filling material from duck or goose has been reduced to enhance export competitiveness in leather and textile sectors. BCD on ferro nickel and blister copper has been removed to reduce steel and copper production costs.  BCD on oxygen-free copper for manufacturing resistors has been removed to support the domestic electronics industry. BCD on ammonium nitrate has been reduced from 7.5% to 10% to support existing and new capacities.

Customs duties on gold and silver have been reduced to 6% and that on platinum to 6.4% to boost domestic value addition in jewellery.

The government has raised the monetary thresholds for filing tax appeals to reduce litigation and ease the burden on the judicial system. The new limits are: For Tax Tribunals: Increased to Rs 60 lakh; for High Courts: Increased to Rs 2 crore; for the Supreme Court: Increased to Rs 5 crore. This change applies to appeals related to direct taxes, excise, and service tax.

The government has set an ambitious goal of expanding India’s space economy by five times over the next 10 years. To support this objective, a venture capital fund of Rs 1,000 crore will be established. This fund is expected to stimulate private sector investment and innovation in space technology, potentially leading to the development of new space-based services and applications.

A slew of measures related to land-related reforms in both rural and urban areas have also been announced. For rural areas this includes: Implementation of ULPIN or Bhu-Aadhaar for all lands; Digitization of cadastral maps; Survey of map sub-divisions as per current ownership; Establishment of a land registry and linking to the farmers’ registry. These actions aim to facilitate credit flow and other agricultural services.

For urban areas,  digitization of land records with GIS mapping and establishment of an IT-based system for property record and tax administration to improve the financial position of Urban Local Bodies and enhance urban planning and development has been announced.

The government plans to incentivize states to implement these land-related reforms and actions within the next 3 years through appropriate fiscal support. These measures are expected to streamline land administration, improve transparency, and facilitate more efficient use of land resources in both rural and urban settings.

The increase in the defence budget for the upcoming fiscal year was minimal, with just a 4.8% rise over the previous year’s estimates, which actually turns negative when considering revised figures. The total defence budget now stands at Rs 6.2 lakh crore ($74 billion), nearly unchanged from the interim budget in February. This has happened amidst the escalating threats from China, which continues to bolster Pakistan’s military capabilities against India.

Capital expenditure for military modernization saw a 5.8% increase to Rs 1.7 lakh crore compared to last year’s estimates, aimed at addressing critical capability gaps through significant acquisitions in the current and future fiscal years. However, this amount is overshadowed by the revenue outlay of Rs 2.8 lakh crore, which covers day-to-day operational costs and salaries for the large armed forces and defence civilians. A notable portion, Rs 92,088 crore, is allocated for operational readiness.

Despite these allocations, the overall defence spending amounts to just 1.9% of the projected GDP for 2024-25 when considering the substantial Rs 1.4 lakh crore set aside for defence pensions for ex-servicemen and retired civilians. Excluding the pension, this percentage drops to below 1.5%. Experts argue that at least 2.5% of GDP is necessary to effectively counter the collusive threat posed by China and Pakistan.

According to the budget documents, the allocation for information and publicity in the current fiscal year amounts to Rs 1,089 crore, which includes a capital outlay of Rs 38 crore. These funds are categorized under social services. This allocation roughly accounts for one percent of India’s total advertising revenue, which was approximately Rs 1 lakh crore in FY23, and constitutes nearly one fourth of the overall budget of the Ministry of Information and Broadcasting (MIB). As per the interim budget session announcement, the total allocation for the MIB in 2024-2025 is set at Rs 4,342 crore. Specifically for broadcasting, which encompasses entities like Prasar Bharti, All India Radio, Community Radio, and related infrastructure such as Direct-to-Home (DTH), the allocation has been reduced from Rs 3,071 crore to Rs 2,960 crore.

The Ministry of Health and Family Welfare has received a significant 12.9% increase in its budget allocation for the fiscal year 2024-25. The Union Budget has allocated Rs 90,958 crore to the ministry, up from Rs 80,517.62 crore in the revised estimates for 2023-24.

This allocation encompasses both the Department of Health and Family Welfare, which has been allotted Rs 87,656 crore (a 12.92% increase from the revised estimates of Rs 77,625 crore in 2023-24), and the Department of Health Research, which received Rs 3,302 crore (a 14% increase from Rs 2,893 crore in revised estimates for 2023-24).

Under the budget, the government’s flagship universal health coverage scheme, Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana, has seen a 10% increase in its allocation to Rs 7,300 crore from Rs 6,800 crore in revised estimates for 2023-24. This follows earlier plans to include ASHA and Anganwadi workers in the scheme.

Additionally, there has been a notable 44% increase in funding for strengthening drug regulatory systems, with an allocation of Rs 75 crore compared to Rs 52 crore in last year’s revised estimates.

The budget also provides increased funding for initiatives against non-communicable diseases, the establishment and enhancement of regional branches of the National Centre for Disease Control, and health programs targeting neglected tropical diseases and antimicrobial resistance.

In related sectors, the Department of Pharmaceuticals, under the Ministry of Chemicals and Fertilisers, has witnessed a substantial 51.6% increase in its budget to Rs 4,090 crore for 2024-25 from Rs 2,697 crore in revised estimates for 2023-24. This rise supports the development of Jan Aushadhi Kendras and National Institutes of Pharmaceutical Education and Research.

Similarly, the Ministry of Ayush has seen a 23.75% increase in its budget to Rs 3,712.5 crore for 2024-25 from Rs 3,000 crore in revised estimates for 2023-24. The increase primarily supports the National Ayush Mission and various research centres focusing on Ayurveda, homeopathy, and Unani.

Following Sitharaman’s announcement of tax proposals for Indian stock market investors in Budget 2024, the market went on a swift descent. The FM has proposed doubling the Securities transaction tax (STT) rate on equity and index trades, increasing the Long Term Capital Gain (LTCG) Tax rate from 10 percent to 12.50 percent, and raising the Short Term Capital Gain (STCG) Tax rate from 15 percent to 20 percent.

Brokerage firm Zerodha is likely to collect Rs 2,500 crore from the hike in securities transaction tax (STT) from the current 0.01 per cent to 0.02 per cent, said Nithin Kamath, founder & chief executive officer (CEO) at Zerodha & Rainmatter after the announcement.

Market indicators at both  National Stock Exchange and Bombay Stock Exchange closed at lower points than Monday, suggesting that the investors were not too happy with the budget announcements.

Later, Prime Minister Modi commended FM Sitharaman and her team for the budget, highlighting its empowerment of the middle class. He emphasised the budget’s initiatives benefiting the Dalit and backward communities, as well as encouraging women’s participation. Regarding MSMEs and small businesses, PM Modi noted initiatives aimed at fostering their growth and development.

The budget, PM Modi stated, prioritises manufacturing and infrastructure, positioning India as a global hub for manufacturing. PM Modi underscored the NDA government’s commitment to  enhance credit accessibility for MSMEs and promote entrepreneurship across cities, villages, employment and self-employment, citing the newly introduced employment-linked incentive scheme expected to create millions of jobs.

PM Modi also praised the budget’s focus on skill development and higher education, predicting numerous opportunities for youth, including internships in top Indian companies. He highlighted tax relief measures for the middle class, such as income tax cuts and increased standard deductions, aimed at boosting savings.

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