What Budget 2024 means for India Inc.

What the budget 2023-24 means for India Inc

The NDA 3.0 government’s first budget outlined the government's commitment towards infrastructure spending, announced measures to boost the rural economy and consumption through changes in income tax and other schemes, and gave a boost to domestic manufacturing.

Moneycontrol takes a look at how the budget will impact the Indian corporate sector

Infra push

The Modi government throughout its tenure has been focusing on driving economic growth through massive infrastructure funding. In her speech, Nirmala Sitharaman, stayed the course on the government’s infrastructure capex plans for the fiscal with infra spending of Rs 11.11 trillion, or 3.4 percent of the GDP, despite the pressure of a coalition government.

The continued focus on infra spend will be a positive for cement and steel and will further help crowd in private capex.

“The Union Budget has maintained the capital expenditure at Rs.11.11 lakh crore, in line with the allocations of the Interim Budget. The provision of interest-free loans amounting to Rs.1.5 lakh crore to states represents a strategic initiative to enhance their capital expenditure. According to CareEdge Ratings, there is an anticipated rise in the participation of the public-private partnership model within the infrastructure ventures,” said Maulesh Desai, Director at CareEdge Rating.

Consumption boost

The NDA government came out with several measures to boost consumption with major spends announced for the rural economy and changes in the personal income tax slab for individuals.

The FM announced a provision of Rs 2.66 lakh crore for rural development including rural infrastructure. On the income tax front, the FM increased the standard deduction for salaried employees from ₹50,000 to ₹75,000.

Further changes in income tax slabs for the new tax regime will help in savings of up to ₹ 17,500 in income tax for the common man.
These measures are expected to boost lagging rural demand, give further support to demand in urban centres and increase discretionary spends, thereby helping corporates in the consumer sector.

Domestic manufacturing

Sitharaman announced hikes or cuts in customs duties for several products with the aim of boosting domestic manufacturing in key sectors.

This will benefit companies across various sectors such as capital goods, steel, copper, critical minerals, IT and electronics manufacturing and others.

For instance, to promote domestic manufacturing of mobile phones, Sitharaman proposed to reduce the basic customs duty on mobile phones, mobile PCBA (printed circuit board assembly) and mobile chargers to 15 percent from 20 percent.

“India has positioned itself as a major exporter of mobile phones, in line with increasing this, parts for manufacture of mobile phones have also been reduced. In Part A of the speech, the FM laid out the various infrastructure investments proposed which clearly showed a focus for enhancing exports and increase the manufacturing in India for domestic and international markets,” said Shashi Mathews, Partner, IndusLaw.

Other announcements to promoter domestic manufacturing include setting up of new industrial parks.

“The announcement for the set-up of 12 new industrial parks will boost the manufacturing sector and encourage new entrants to get easy entry into the space with much-needed financial support. It will also enhance employment opportunities and enable the banking sector to participate while financing the working capital needs,” said Manoj Purohit, Partner & Leader, Financial Services Tax, Tax & Regulatory Services, BDO India