Union Budget 2024: Fiscally prudent, inclusive, and growth-oriented

The Budget is a fiscally prudent, inclusive, growth-oriented one, focused on creating jobs, empowering women, and supporting manufacturing and farm sectors.

In a volatile and uncertain global macro environment, it is reassuring to see that the government is targeting a tighter fiscal deficit of 4.9 per cent in FY25 and aims to further reduce it to 4.5 per cent in FY26. However, the fiscal discipline does not compromise the government’s intent on infrastructure development, which in this Budget is estimated at Rs 11.11 trillion, amounting to 3.4 per cent of GDP, a 17.1 per cent YoY increase.  The finance minister has further reiterated that the government debt will decline beyond FY26 as a percentage of GDP. In my opinion, this surely should lead rating agencies across the world to upgrade India.

Manufacturing was a key theme in the Budget. It was heartening to see that customs duties have been brought down in sectors like electronics, capital goods for solar cells and panels and on 25 critical minerals, thus providing further impetus to the government’s Make in India initiative.  The infrastructure spend will help us achieve the National Logistics Plan of bringing down logistics cost from 14 per cent of GDP to 8 per cent by 2030, thereby making us at par with several developed economies.

The MSME sector is the backbone of our economy, and I truly believe that for India to achieve its dream of becoming a US$5 trillion economy, this sector needs to be well supported. Hence, it was encouraging to see that the Mudra loan limit for MSMEs has been doubled to Rs 20 lakh. This, along with a new assessment model for MSME credit, coupled with enhanced credit guarantee scheme and support during periods of stress will boost the confidence of MSMEs and enable them to build world-class supply chains. 

One of the key focus areas in this Budget has been job creation, along with education and skilling. By incentivising both employers and employees, the government is making concerted efforts to move jobs from unorganised sector, which currently accounts for 80 per cent of jobs in India, to the formal economy. In my opinion, this will be a game changer as it will move individuals up the value chain providing them with access to several benefits that are offered with formal sector jobs.  The scheme to offer one-month wage to new entrants in all formal sectors is likely to benefit 21 million youth.  It was also encouraging to see that empowering Indian women continues to remain a key focus area for the government.

With 1.4 billion population, India needs to be self-sufficient in agriculture. This Budget proposes releasing new high-yielding varieties of crops, initiating 1 million farmers into natural farming, and providing digital public infrastructure for farmers to enhance their productivity and strengthen our agriculture sector.  

Continuing India's efforts towards energy security and achieving its climate targets, the Budget announced a slew of initiatives in nuclear, renewable, and thermal energy space. The government's decision to promote rooftop solar scheme has seen a remarkable response with 14 million registrations.  In fact, the Budget has also announced financial support to industries in 60 clusters, including brass and ceramic, for transitioning them towards use of clean energy. The focus continues to be on improving energy efficiency and emission targets to create a sustainable India carbon market. 

The state-specific initiatives are expected to develop infrastructure and promote tourism, especially in Andhra Pradesh and Bihar.

The abolition of angel tax, reduction of corporate tax rates on foreign companies are welcome moves. The proposal to decrease the timeline to reopen past tax assessments will help reduce tax uncertainty and disputes in the long run. 

One thing which really could have been avoided in this Budget was the removal of indexation benefit on housing as it is likely to impact the mid-income families who aspire to upgrade to a new house by selling their existing house after staying there for years. The cushion that they got through indexation helped them to dream of a bigger house.

Overall, I believe the Budget is progressive and has identified key priority areas and a clear road map for India's pursuit of 'Viksit Bharat'.

The writer is President and India Country Executive, Bank of America.