Union Budget 2024-25: Key Highlights and Initiatives

Finance Minister Nirmala Sitharaman presented the Union Budget 2024-25 on July 23, 2024, outlining the government’s financial roadmap for the upcoming fiscal year. This budget, the first of Prime Minister Narendra Modi’s third term, focuses on employment, skilling, MSMEs, and the middle class, with a strong emphasis on transforming India into a ‘Viksit Bharat’ by 2047.

Overview

The budget presentation, lasting approximately 90 minutes, unveiled a series of measures aimed at boosting economic growth, creating jobs, and enhancing social welfare. Sitharaman announced a capital expenditure of ₹11.1 lakh crore for the next fiscal year, marking an 11% increase from the current year.

Capital Expenditure and Infrastructure Push

One of the most significant announcements was the allocation of ₹11.1 lakh crore for capital expenditure, representing a substantial 11% increase from the current fiscal year. This massive outlay, amounting to 3.4% of GDP, underscores the government’s focus on infrastructure development as a key driver of economic growth. The Railways sector received a substantial boost with an allocation of ₹2.4 lakh crore. Additionally, three major economic railway corridors were introduced under the PM Gati Shakti initiative, aimed at improving logistics efficiency and reducing costs.

Fiscal Management and Economic Outlook

The Finance Minister set an ambitious target for fiscal consolidation, aiming to reduce the fiscal deficit to 5.1% of GDP for the upcoming fiscal year, with a further reduction to 4.5% planned for FY26. This demonstrates the government’s commitment to fiscal prudence while maintaining a growth-oriented approach. Sitharaman projected remarkable growth for the next five years, emphasizing India’s resilience and potential. The budget forecasts a robust economic expansion, with GDP growth expected to remain strong in the coming years.

Employment Generation and Skill Development

Addressing the critical issue of job creation, the budget allocated ₹2 lakh crore specifically for employment generation initiatives. This substantial investment is expected to create numerous opportunities across various sectors of the economy. The Finance Minister announced three new employee-linked incentive schemes as part of the Prime Minister’s package. These schemes will focus on recognizing first-time employees and providing support to both employers and employees, aligning with enrolment in the Employee Provident Fund Organisation. A comprehensive internship program was unveiled, aiming to provide real-life business exposure to 1 crore youth over five years. This initiative involves partnerships with 500 top companies, offering 12-month internships to enhance employability and bridge the skill gap.

Education and Human Resource Development

The budget allocated ₹1.48 lakh crore for education, employment, and skill development, highlighting the government’s commitment to human capital formation. A notable initiative includes providing support loans of up to ₹10 lakh for students pursuing education in domestic institutions who have not yet benefited from any government schemes. E-vouchers will be provided directly to 1 lakh students each year for interest subvention of 3% on their education loans, making higher education more accessible and affordable.

MSME Sector Boost

Recognizing the crucial role of Micro, Small, and Medium Enterprises (MSMEs) in the economy, the budget introduced several measures to support this sector:

• A new credit guarantee scheme to facilitate term loans for machinery without collateral or third-party guarantees.
• A self-financing guarantee fund providing cover up to ₹100 crore for each borrower.
• A new assessment model for MSME credit by public sector banks, based on digital footprints rather than traditional asset and turnover criteria.
• Enhanced Mudra loan limits from ₹10 lakh to ₹20 lakh for successful previous borrowers.
• Opening of 24 new SIDBI branches in MSME clusters within three years to improve credit access.

Agriculture and Rural Development

The budget allocated ₹1.52 lakh crore for agriculture and rural development, emphasizing the government’s commitment to the farming sector. Key initiatives include:

• Promotion of natural farming practices.
• Efforts to achieve self-sufficiency in pulses and oilseeds production.
• Development of digital public infrastructure for agriculture.
• Extension of the PM Garib Kalyan Anna Yojana for five years, benefiting over 80 crore people.

Urban Development and Housing

A significant allocation of ₹10 lakh crore was announced for urban housing, addressing the growing need for affordable housing in India’s rapidly urbanizing landscape. This investment is expected to boost the real estate sector and improve living conditions in urban areas.

Tourism and Cultural Development

The budget introduced measures to boost tourism, including:

• Provision of interest-free loans to states for tourism development.
• Allocation of funds for developing tourism infrastructure in Lakshadweep.
• Launch of 517 new routes under the Udan Scheme to enhance air connectivity.

Tax Reforms and Ease of Doing Business

Several tax-related announcements were made to simplify the tax structure and promote ease of doing business:

• No changes in direct and indirect tax rates, including import taxes.
• Extension of tax breaks for start-up investments made by sovereign wealth funds until March 31, 2025.
• Withdrawal of old disputed direct tax demands up to ₹25,000 till FY2009 and ₹10,000 for 2010-11 to 2014-15, benefiting 1 crore taxpayers.
• Reduced processing time for tax returns from 93 days in FY14 to 10 days.
• Projection of tax receipts for 2024-25 at ₹26.02 lakh crore.

Women-Led Development

The budget allocated over ₹3 lakh crore for schemes benefiting women and girls, reinforcing the government’s commitment to gender equality and women’s empowerment.

Regional Development Initiatives

Specific allocations were made for regional development, particularly focusing on eastern states:

• Support for building expressways in Bihar at a total cost of ₹26,000 crore.
• Investments in power projects, new airports, medical colleges, and sports infrastructure in Bihar.
• Funding for basic infrastructure like water, power, and roads in Andhra Pradesh under the AP Reorganisation Act.

Innovation and Research

The budget emphasized the importance of innovation and research in driving India’s economic growth. While specific allocations were not detailed, the Finance Minister highlighted this as one of the nine priorities of the budget.

Energy Security and Sustainability

Energy security was identified as a key focus area, although specific measures were not elaborated in the initial budget speech. This suggests a continued emphasis on diversifying India’s energy mix and promoting sustainable energy solutions.

Digital and Technological Advancements

The budget recognized the role of digital technologies in transforming various sectors:

• Development of digital public infrastructure for agriculture.
• Utilization of digital footprints for MSME credit assessment.
• Promotion of e-commerce export hubs to enable MSMEs and traditional artisans to access international markets.

Impact on Various Sectors

Manufacturing Sector

The budget’s focus on labor-intensive manufacturing and support for MSMEs is expected to boost the manufacturing sector. The new credit assessment model and financial support mechanisms for MSMEs could lead to increased investment and growth in this sector.

Services Sector

The services sector, particularly tourism and IT, is likely to benefit from the budget allocations. The focus on developing tourism infrastructure and promoting digital technologies could create new opportunities in these areas.

Financial Services

The banking sector may see increased activity due to the new MSME credit assessment model and the expansion of SIDBI branches. The focus on digital footprints for credit assessment could lead to innovations in financial services.

Real Estate and Construction

The massive allocation for urban housing is expected to give a significant boost to the real estate and construction sectors. This could lead to increased demand for housing and related services.

Education and Skill Development

The education sector is set to benefit from the substantial allocation and new initiatives like support loans and internship programs. This could lead to improved educational infrastructure and better alignment between education and industry needs.

Healthcare

While specific healthcare allocations were not highlighted in the initial budget speech, the overall focus on human resource development suggests continued investment in this crucial sector.

Challenges and Criticisms

Despite the ambitious targets and allocations, the budget faces several challenges:

• Achieving the fiscal deficit target of 5.1% may be challenging given the substantial increase in capital expenditure.
• The lack of significant changes in tax structures might disappoint some sections of the population expecting relief.
• The effectiveness of the new MSME credit assessment model remains to be seen in practice.
• The budget’s impact on job creation and economic growth will depend on effective implementation of the announced schemes.

Summary

The Union Budget 2024-25 presented by Finance Minister Nirmala Sitharaman reflects a balanced approach, focusing on infrastructure development, job creation, and social welfare while maintaining fiscal prudence. The emphasis on MSMEs, agriculture, and skill development indicates a comprehensive strategy for inclusive growth. The success of this budget will largely depend on effective implementation of the announced schemes and the government’s ability to navigate global economic challenges. As India aims to become a ‘Viksit Bharat’ by 2047, this budget sets the tone for the economic policies that will shape the country’s trajectory in the coming years.

FAQs

• What is the total capital expenditure allocated in the Union Budget 2024-25? The total capital expenditure allocated is ₹11.1 lakh crore, which is an 11% increase from the previous year.
• How much has been allocated for agriculture and rural development? The budget has allocated ₹1.52 lakh crore for agriculture and rural development.
• What is the fiscal deficit target for FY25? The fiscal deficit target for FY25 is set at 5.1% of GDP.
• Are there any changes in income tax slabs in this budget? No, the Finance Minister proposed no changes in direct and indirect tax rates, including income tax slabs.
• What are the key initiatives for the MSME sector? Key initiatives include a new credit guarantee scheme, a self-financing guarantee fund, a new assessment model for credit, and enhanced Mudra loan limits.
• How much has been allocated for urban housing? The budget has allocated ₹10 lakh crore for urban housing.
• What is the allocation for education, employment, and skill development? ₹1.48 lakh crore has been allocated for education, employment, and skill development.
• Are there any new schemes for job creation? Yes, the budget introduces three new employee-linked incentive schemes and a comprehensive internship program targeting 1 crore youth over five years.
• What are the measures announced for the tourism sector? The budget includes provisions for interest-free loans to states for tourism development, funds for developing tourism in Lakshadweep, and the launch of 517 new routes under the Udan Scheme.
• How does the budget address women’s empowerment? The budget allocates over ₹3 lakh crore for schemes benefiting women and girls, emphasizing women-led development.

C.K. Gupta

Hello, I am C.K. Gupta Founder of Taxgst.in, a seasoned finance professional with a Master of Commerce degree and over 20 years of experience in accounting and finance. My extensive career has been dedicated to mastering the intricacies of financial management, tax consultancy, and strategic planning. Throughout my professional journey, I have honed my skills in financial analysis, tax planning, and compliance, ensuring that all practices adhere to the latest financial regulations. My expertise also extends to auditing, where I focus on maintaining accuracy and integrity in financial reporting. I am passionate about using my knowledge to provide insightful and reliable financial advice, helping businesses optimize their financial strategies and achieve their economic goals. At Taxgst.in, I aim to share valuable insights that assist our readers in navigating the complex world of taxes and finance with ease.