Union Finance and Corporate Affairs Minister Nirmala Sitharaman announced the Union Budget 2024 on July 23, her seventh straight budget in the parliament, exceeding the record of ex-Prime Minister Morarji Desai. The experts expected this budget to simplify the tax structure, introduce a ‘New Direct Tax Code’, increase compliance, and support MSMEs, infrastructure development, and clean energy. These anticipations were driven by the need to accelerate economic growth, improve public services and nurture an ecosystem for sustainable development, aligning with broader economic goals.
However, the Union Budget for fiscal year 24-25 is focused on providing inclusive support to the agriculture sector, unveiling new schemes related to employment, financial support for medium and small businesses, and infrastructural development, and committing to reducing the fiscal deficit projection from 4.9% to 4.5%. The government has revised the tax slabs under the new tax policy and reduced customs duties, altering the capital gain taxes for the fiscal year.
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Clean and Renewable Energy are Priority
The Union Budget 2024 will be known for its emphasis on clean and renewable energy since the Finance Minister pushed the PM Surya Ghar Muft Bijli scheme, aiming to install 10 million rooftop solar panels in India. However, the scheme has already gained momentum with 1.28 crore registrations and 14 lakh applications, observing a noteworthy phase in India’s renewable energy journey. In addition, the government has removed glass, solar glass and copper wire connectors from the customs duty exemption list, a tactful action to support budding domestic manufacturers.
Nevertheless, the experts suggest additional efforts to boost the inclusive development of manufacturing capacity. They are also convinced that the Union Budget 2024 will significantly help attract foreign investment, generating new opportunities for local manufacturers.
An Upper Hand for MSMEs
The government’s boost for MSMEs is one of the key highlights of this budget. The Finance Minister’s key initiatives, such as doubling the Mudra loan limits to ₹20 lakh for borrowers who have repaid their previous loans, will provide significant support to MSMEs. Furthermore, the introduction of a forward-looking digital credit assessment model by public sector banks establishes a robust framework to enhance the growth and resilience of MSMEs.
The government’s pledge of ₹11.11 lakh crore for capital expenditure and strategic infrastructure investments over the next five years will create significant opportunities for MSMEs to flourish in a favourable business environment. Initiatives such as opening 24 new SIDBI branches in MSME clusters and establishing e-commerce export hubs will further enable MSMEs to expand their reach in global markets.
STT and Capital Gain Hikes
The finance ministry has announced an increase in the Securities Transaction Tax (STT) on options from 0.062% to 0.1% and on futures from 0.0125% to 0.02%, effective October 1st, 2024. In addition, the long-term capital gains (LTCG) tax has been raised from 10% to 12.5%, and the short-term capital gains tax has increased from 15% to 20%, effective today, July 23rd. Rumours about the STT hike have already been circulating, and the declining interest in fixed deposits (FDs) is causing challenges for banks. These tax changes may prompt investors to re-evaluate their strategies, potentially leading them to seek more tax-efficient investments. Banks might also need to adjust their strategies to attract more FD deposits.
Special Budget for Bihar and Andhra
The budget set aside a lot of money for infrastructure projects in Bihar and Andhra Pradesh. Bihar, which has elections next year, got Rs 60,000 crore for expressways, power plants, heritage corridors, and new airports. Andhra Pradesh, whose ruling party recently joined the BJP-led alliance, received Rs 15,000 crore in financial aid from international agencies.
The announcement is very crucial since Nitish Kumar in Bihar and Chandrababu Naidu in Andhra Pradesh played key roles after the Lok Sabha election results, helping the BJP-led National Democratic Alliance (NDA) return to power for a third term. Even though the opposition-led INDI alliance tried to get Nitish Kumar and Chandrababu Naidu on their side, both leaders stayed loyal to Prime Minister Narendra Modi.
PM Awas Yojana 2.0
The government is set to make significant investments in the PM Awas Yojana (Urban) 2.0 to provide housing for 10 million poor and middle-class urban families, with a total investment of Rs 10 trillion. This includes policies for fair and clear rental housing markets. In addition, other relevant measures include building more homes under PMAY (Urban), improving public transportation, creatively redeveloping cities, developing industrial parks, providing rental housing for industrial workers, digitising land records, developing industrial parks, and reducing stamp duty, especially for women buyers. These actions will help modernise Indian cities.
Nirmala Sitharaman announced that this year’s budget theme is ‘Viksit Bharat Budget 2024’, aiming for a developed India by 2047. Viksit Bharat’s four main focuses are the Garib (poor), Mahilayen (women), Yuva (youth), and Annadata (farmers). This is also reflected in the announcements made and initiatives taken under this budget, focusing on agriculture, jobs and skills training, human resources and justice, manufacturing services, urban development, energy security, infrastructure, research and development, and next-generation reforms. It also proposes a simpler tax structure for individuals.
