Nirmala Sitharaman, the Indian Finance Minister, recently released the Union Budget 2024. The budget's central themes are job creation and skill development. The finance minister is known for her focus on inclusive growth, tax reforms, and investments in vital sectors. Nirmala Sitharaman, in her 7th consecutive 86-minute budget speech, explicitly stated that their focus is on employment, skilling, MSMES’, and the middle class. The union budget plans to spend $24 billion on job creation, education, and skilling.
The budget provisions ensure that the farmers' livelihood is supported and improved. The budget aims to sustain India's economic growth by focusing on employment, infrastructure, and manufacturing, which is crucial for maintaining India's status as one of the fastest-growing major economies.
The budget emphasizes fiscal consolidation, revising the fiscal deficit target to 5.8% of GDP for FY24, with aims to reduce it to 5.1% in FY25 and 4.5% by 2025-26 to ensure long-term economic stability and boost investor confidence.
Some of the key highlights of the budget are:
1. The budget proposes a strategic reduction in the corporate tax rate for foreign companies from 40% to 35%. This move, in line with the government's vision for enhancing global competitiveness and attracting Foreign Direct Investment (FDI), is a critical factor in India's economic growth and job creation.
2. The budget's decision to maintain the income tax slabs for individual taxpayers is a clear signal of the government's focus on the corporate sector, which is responsible for increasing corporate activity and job creation, rather than the middle class.
3. The standard deduction will increase from ₹50,000 to ₹75,000, a significant boost for salaried employees under the new tax regime. This substantial increase not only enhances financial security for individuals but also fosters optimism about their future, potentially boosting consumer spending and stimulating economic activity.
4. The abolition of the angel tax for all classes of investors is a significant step towards promoting startups and investments. This move is expected to stimulate economic growth and foster hope for the development of startups and investments in India.
5. ₹2 lakh crore package to facilitate employment and skilling opportunities for 4.1 crore youth over five years. This decision reflects a proactive approach to addressing the unemployment issue.
6. ₹1.52 lakh crore for agriculture and allied sectors and ₹2.66 lakh crore for rural development, including infrastructure projects and housing.
7. Railways has a budget of ₹ 2.4 lakh crores, and defense has the largest share of the budget with ₹ 6.2 lakh crores. The investment will contribute to developing border infrastructure, a strategic asset for the country.
8. The budget includes developing 12 industrial parks and establishing a ₹1,000 crore venture capital fund to promote the space sector.
9. Over ₹3 lakh crore was allocated for welfare schemes benefiting women and girls, and the Mudra loan limit was substantially increased from ₹10 lakh to ₹20 lakh.
10. Capital gain taxes will be increased on short-term and long-term investments in stocks, land, and property. Citizens will now have to pay more tax on profits from these instruments.
The budget focuses on job creation, a significant challenge facing the country. In her speech, the Finance Minister stated that the government will spend ₹ 2 lakh crores on job creation for three initiatives.
1. The first initiative is a paid internship. In this initiative, the top 500 companies will be encouraged to recruit trainees and pay them ₹ 5000 monthly, and they will also pay them a one-time assistance amount of ₹ 6000. The companies will fund this project from their CSR budget. The Government of India states that 100 million youth will benefit from this program.
2. The second initiative is a skilling program, in which the government offers loans to the youth for upskilling. Candidates can get a loan from the government up to ₹ 7.5 lakhs.
3. The third initiative is a direct benefit transfer for those newly entering the workforce in the formal sectors. A sum of 15,000 or one month's salary, whichever is higher, will be deposited in their pension account. Around 2 million new job entrants can benefit from this scheme. Loans of up to ₹ 10 lakhs for over 100,000 students in domestic institutions have been announced for higher education.
The budget introduces significant changes in customs duties and taxation, 25 critical minerals, crucial for chip and electronics manufacturing, are now exempt from customs duties. Import taxes on gold, silver, mobile phones, and chargers have been reduced.
The Finance Minister has called for a comprehensive review of the Income Tax Act. These measures aim to boost domestic manufacturing and reduce consumer costs. However, the financial markets did not receive the announcement of changes to the capital gains tax well, with both the Sensex and Nifty indices closing in negative territory.
The 2024 Union Budget aims to foster inclusive growth, attract FDI, and enhance welfare.
However, the budget's success hinges on effectively translating policy into tangible outcomes. External pressure on commodity prices will challenge the stability of the inflation rate. The lack of changes in the middle-class personal income slabs means the overall tax burden for the taxpayer is the same, and it might further increase income inequality. India's 2024 budget presents a mix of continuity and reform, and its success depends on India’s ability to navigate both domestic and global economic challenges.
Dr Mythli Kolluru
The author is a National-Level Award-Winning Outstanding Women Educator and Scholar in Strategic Management. She is an assistant professor at the marketing and management department of the College of Banking and Financial Studies in Muscat and a member of Knowledge Oman.
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