It is safe to say that the full Union Budget for 2024-25 has something for everybody. This is particularly impressive in light of the continued emphasis on fiscal consolidation. This budget also lays out the pillars that will drive India’s progress towards Viksit Bharat or developed India.
According to the finance ministry’s latest numbers, the Indian government’s fiscal deficit is expected to be brought down to a five-year low of 4.9 percent of Gross Domestic Product (GDP) in the current financial year ending March 2025. Moreover, the finance minister has reiterated the government’s commitment to “staying the course” and reducing it further to under 4.5 percent of GDP in 2025-26. It is worth recalling that this reduction in the fiscal deficit has been managed despite two crucial counteracting forces: an incredible increase in capital expenditure and the cleaning-up of the government’s finances.
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It is essential to not underestimate this dynamic. If achieved, this would be a tremendous achievement considering it usually gets more and more difficult to compress the deficit as it treads lower levels on account of the committed expenditure of the government, such as salaries, pensions, and subsidies. But crucially, the fiscal deficit for 2024-25 has also been reduced in absolute terms to Rs 16.13 lakh crore. The estimates for the central government’s borrowings have also been reduced in both gross and net terms compared to the interim Budget. This can only create more space for the private sector to access funds.
The capital expenditure target has been retained at the interim Budget level of Rs 11.11 lakh crore, but it must be noted that this is still more than 17 percent higher from last year’s capex.
India is, by far, the world’s fastest growing large economy. The challenge, recognised by one and all, is inclusion. Hence, creating enough and more jobs is paramount.
In recent months, there has been plenty of debate on whether the economy has been providing the requisite amount of employment to the youth. While disagreements over the finer details are common in every discussion, it should not derail further progress. The government has not let that happen, with each of the nine priorities of the 2024-25 Budget – from ‘Employment & Skilling’ to ‘Next Generation Reforms’ – aimed at directly or indirectly boosting the availability of jobs in the future.
The Budget continues to deliver on its promise to make the working environment more conducive for job generators, with the corporate tax rate on foreign companies being cut to 35 percent from 40 percent, the so-called ‘Angel tax’ being abolished, Micro, Small and Medium Enterprises getting further support in various forms, and the development of ‘industrial parks’ in or around a hundred cities.
Households have not been forgotten either, with the new personal income tax regime getting another boost in the form of a 50 percent increase in standard deduction to Rs 75,000 and improvements to the rate structure. Market has taken in its stride, increase in securities transaction tax, on futures and options trading and capital gains tax.
The Budget-making exercise in India is rather complex. Invariably, not all stakeholders will be satisfied to the fullest extent. But it speaks volumes when the government is able to offer something to everyone even as it maintains the path of fiscal prudence. The finance minister has recognised what is essential for strong and stable growth and delivered on it.
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