By Vikas Khemani, Founder of Carnelian Asset Management & Advisors
The Union Budget 2024 is balanced, with the new government focusing on long-term schemes and benefits across various sectors. The government has laid out a clear vision for "Viksit Bharat" by addressing key areas such as agricultural reforms, manufacturing, employment generation, youth skilling, MSME support, and urban infrastructure development.
From the budget, it is evident that long-term investors have reasons for optimism. The budget is constructive and inclusive, placing significant emphasis on continued capital expenditure, rural development, and education. A notable positive is the government's commitment to fiscal discipline, maintaining a fiscal deficit of 4.9 percent for the current year and targeting a reduction to 4.5 percent next year.
This balanced fiscal approach ensures that resources are efficiently channeled to the desired sectors while maintaining fiscal stability. Such stability is likely to attract liquidity flows into the country and result in a lower cost of capital for India, fostering a conducive environment for economic growth.
The budget has earmarked Rs 11.11 lakh crore for infra capital expenditure, accounting for 3.4 percent of GDP. This significant allocation underscores the government’s commitment to building infrastructure and boosting the manufacturing sector. The focus on infrastructure development is expected to create a ripple effect, spurring economic activities and generating employment opportunities across various sectors. So with continues focus on the capex will ultimately helps in job creation.
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Support for MSMEs is a key highlight of the budget. Providing credit guarantee for MSME loans up to Rs 100 crore and Mudra Loans are aimed at bolstering the growth of small and medium-sized enterprises. These measures will provide MSMEs with the necessary financial support to expand their operations, innovate, and contribute significantly to the economy. Salaried employees stand to benefit from the new tax regime, with potential savings of up to Rs 17,500 in income tax. This relief is expected to boost small-ticket consumption, as individuals will have more disposable income to spend on goods and services. The increased consumption will, in turn, drive demand and support economic growth.
The government’s commitment to social welfare is evident in its plan to spend Rs 3 lakh crore on schemes benefiting women and girls. Increasing the participation of women in the workforce is a priority, and these schemes are designed to empower women, providing them with the skills and opportunities needed to contribute to the economy.
The government offers education loans up to Rs 10 lakh for students enrolled in any course at domestic institutions. This initiative aims to make higher education more accessible and will boost talent creation in the country. Additionally, students benefit from a 3% interest subvention e- voucher, reducing the overall loan cost.
While the budget includes an increase in long-term capital gains (LTCG) tax by 2.5 percent to 12.5 percent and short-term capital gains (STCG) tax by 5 percent to 20 percent, STT (Securities Transaction Tax) on futures increased from 0.0125 percent to 0.02 percent which is negative for financial markets, however it is not expected to significantly impact market sentiment. Investors are likely to view these changes as manageable, given the overall positive measures in the budget.
In conclusion, the Union Budget 2024 lays a robust foundation for Bharat during the Amrit Kaal period. With a balanced fiscal approach, substantial investments in infrastructure, support for MSMEs, and initiatives to boost consumption and entrepreneurship, the budget aligns perfectly with the vision of Viksit Bharat 2047. We are highly confident in investing in India and believe that sectors such as manufacturing, infrastructure, MSME/mortgage credit, and consumption will greatly benefit from the measures outlined in this budget.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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