Budget 2024 was in line with the vision of building a self-reliant Bharat, focussing on the critical drivers that can propel the country to its next level of growth. The focus has been to keep the fundamentals strong, catalyse the pockets of opportunity, and not deflect from the fiscal glide path. Emphasising its efforts towards the nine priorities announced, the government has tried to build a growth road map through better collaboration, ease of doing business, and employment generation. From energy security to strengthening the tribunals in the country, the approach has been holistic in crafting the budget.
Boosting employment and employability
An allocation of ₹1.48 trillion for education, employment and skilling is well intended. India as a country of over 1.4 billion people needs more jobs and employable talent. The push to increase participation in the Employees’ Provident Fund Organisation (EPFO) is a critical step toward formalizing the labour market. By encouraging more companies to enroll in the EPFO, the government aims to provide greater social security to employees, which, in turn, makes formal employment more attractive. This initiative is expected to accelerate employment growth, as more workers are brought into the formal sector, benefiting from provident fund contributions and other employment benefits.
A particularly innovative aspect of the current policy measure is the focus on internships. Recognising the future needs of the economy, the government is encouraging the top 500 companies to undertake internship programmes. These programmes are not only aimed at enhancing the employability of young people but are also supported through incentives and the use of Corporate Social Responsibility (CSR) funds. This dual approach of providing practical work experience while still in education, supported by financial incentives, is expected to nurture future talent and also help these youngsters to find their career path.
Eye on fiscal discipline
The estimated fiscal deficit for FY25 has been pegged at 4.9%, lower than the 5.1% announced during the interim budget. The government acknowledged that the fiscal consolidation path had served the country well and it reflects the commitment to maintain this discipline and reduce central government debt progressively. This is a commendable feat. Reiterating the aim to take the fiscal deficit to below 4.5%, the finance minister has estimated FY26 fiscal deficit at 4.5%. This might also enthuse foreign rating agencies to look at a possible upgrade.
Taking financing to small scale enterprises
Micro, Small & Medium Enterprises (MSMEs) are growth engines for the country and employ lakhs of people and the finance minister gave impetus to this core focus area by announcing several financing measures for the MSME sector. A credit guarantee scheme will be introduced to provide term loans to MSMEs. From credit support to MSMEs during stressed periods to enhancing the limit of mudra loans from ₹1 million to ₹2 million to coming up with a new assessment model for public sector undertaking (PSU) banks to evaluate MSMEs for credit support are all initiatives that will benefit the sector. Small Industries Development Bank of India (Sidbi) expanding its branch presence to cover major MSME clusters will also facilitate greater ease of access to credit.
Fuelling rural development
The idea of a digital land registry that will have details of farmers and their land can help in formalising land data and provide more authentic information for assessing networth and providing access to finance. I feel one can create an Aadhaar kind of identity for land ownership as well. It also plans to release new varieties of high-yielding crops and encourage natural farming. All of these are focussed on aiding farmers to make the most of the land they own. Measures taken towards the agriculture sector directly impact the earnings of rural India. This, in turn, can boost consumption. The introduction of a National Cooperation Policy to fast-track the growth of the rural economy will also act as an enabler to boost the rural economy.
Increasing disposable income
The changes in the new tax regime announced by way of increasing standard deduction amount and the tax slabs will leave more money in the hands of taxpayers, thereby boosting spending and investment. Markets though expected some rationalisation to income tax exemption limits in the old regime too.
Increase in LTCG and STCG may not be a dampener
The increase in LTCG by 2.5% and in STCG by 5%, may not dampen market sentiment or have any significant negative impact. The rationale is that the substantial wealth created in the country over recent years makes the additional tax burden relatively minor for most investors. Moreover, investors typically base their decisions on potential returns and economic growth rather than solely on tax considerations. Those who invest in the stock market do so with a long-term perspective on potential gains and economic conditions. Therefore, marginal increase in taxes is unlikely to shift their investment strategies substantially.
Overall, I will give nine out of ten to this budget. It was pragmatic and without any shocks and considering India’s economic trajectory, that should be sufficient to further bolster growth.
The author is the managing director & CEO of Aditya Birla Sun Life AMC Ltd.