The Union Budget 2024, presented by Finance Minister Nirmala Sitharaman, represents a significant milestone in India’s ongoing journey towards inclusive growth and economic resilience. With a strategic emphasis on job creation, infrastructure development, support for MSMEs, and affordable housing, this Budget addresses the nation’s critical needs while prudently reducing the fiscal deficit to 4.9%.
Stimulating employment and economic participation
A cornerstone of this Budget is the ambitious scheme to boost job creation in the manufacturing sector, specifically targeting first-time workers. Key components of this initiative include:
• EPFO contribution incentives for both employees and employers for the first four years of employment. • Expected benefits reaching 3 million young people, fostering employment across various sectors. • Government reimbursement of up to ₹3,000 per month for two years for each additional employee’s EPFO contributions. • An overarching goal to create employment opportunities for 5 million additional people.
Additionally, the introduction of a Direct Benefit Transfer (DBT) scheme provides ₹15,000 to new workers registered with EPFO, disbursed in three instalments. This initiative, benefiting 210 lakh youth, is designed to support individuals entering the formal workforce, with eligibility extending to salaries up to ₹1 lakh per month.
Empowering youth through skilling initiatives
The Budget places a strong emphasis on employment-linked skilling, unveiling schemes as part of the PM’s comprehensive package. These initiatives focus on recognising and supporting first-time employees. A PM Package, valued at ₹2 lakh crore, includes five schemes aimed at enhancing employment and skilling opportunities, with a substantial provision of ₹1.48 lakh crore allocated for education, employment, and skilling.
Supporting MSMEs and infrastructure development
In a significant boost to the MSME sector, the Budget introduces a new credit guarantee scheme for term loans aimed at purchasing machinery and equipment without the need for collateral. This scheme will offer guarantees up to ₹100 crore, enhancing the growth potential of small businesses. Additionally, the limit for MUDRA loans under the TARUN category has been increased from ₹10 lakh to ₹20 lakh for those who have successfully repaid previous loans.
On the infrastructure front, the Budget allocates ₹10 lakh crore to the PM Awas Yojana Urban 2.0, addressing the housing needs of the urban poor and middle class. An additional ₹2.2 lakh crore initiative focuses on making housing more affordable, reflecting the government’s commitment to improving living standards.
Advancing energy security and sustainable development
Energy security and sustainable development are pivotal elements of this budget. The PM Surya Ghar Muft BijliYojana, aimed at installing rooftop solar plants, promises to provide free electricity up to 300 units per month to 1 crore households. This initiative has already seen remarkable interest with 1.28 crore registrations and 14 lakh applications.
Fostering innovation and simplifying investment rules
To drive innovation, the budget proposes a mechanism to promote private-driven research at a commercial scale, supported by a financial pool of ₹1 lakh crore. Removing angel tax is a very positive step to boost start-up morale. Additionally, simplifying rules and recognition for Foreign Direct Investments (FDIs) aims to facilitate inflow and promote the use of the Rupee for overseas investments.
Promoting fiscal responsibility and tax overhauls
In its commitment to fiscal responsibility, the Budget plans to reduce the fiscal deficit to below 5%. Numerous reforms in tax law operations are introduced to simplify the process for taxpayers and rationalise tax rates, ensuring the system remains straightforward and inflation is controlled. The market is expected to absorb a slight increase in long-term and short-term capital gains taxes from 10% and 15% to 12.5% and 20%, respectively, which will be balanced by benefits to salaries and the middle class due to lower tax burdens. Similarly, a modest rise in the Securities Transaction Tax (STT) on Futures and Options (F&Os) is deemed manageable.
The Union Budget 2024 is a well-rounded strategy to foster inclusive growth, enhance economic stability, and improve the overall quality of life for all citizens. By focusing on vital areas such as job creation, skill development, support for MSMEs, and infrastructure enhancement, this budget lays the groundwork for sustained economic prosperity in India. The government’s approach ensures balanced and inclusive development, steering India towards a future of economic resilience and equitable growth.
(The writer is Founder, IIFL Group)
