Union Budget 2024: Laying building blocks for a 'Viksit Bharat'

“Turning attention to full year and beyond, we particularly focus on employment, skilling, MSMEs (micro, small and medium enterprises) and the middle class,” said Finance Minister Nirmala Sitharaman, clearly summing up the government’s intent while presenting this year’s Union Budget.

For me, some of the themes stand out that will fortify the foundation for future economic growth. The most transformative proposal is the one aimed at job creation and skill development for the youth. The second relates to direct tax changes and the announcement of a comprehensive review of the Direct Taxes Code. The others are the government’s thrust on domestic manufacturing and focus on expanding the Digital Public Infrastructure (DPI).

With a median age of 28.4 years, it is a young India that would reinforce the country’s competitive advantage and unleash the consumption potential of the economy. The Budget's innovative proposal for the top 500 companies to train 10 million youth through one-year internships over the next five years is particularly noteworthy. Under the programme, the government will fund 90 per cent of the internship allowance — that is, over Rs 50,000 per intern — while the training costs and balance 10 per cent allowance can come from the corporate-social responsibility (CSR) funds of companies. This strategy will fulfil the dual objectives of providing businesses with skilled workforce and enhancing the employment rate.

For the programme's success, it will be crucial to specify the types of skills that will be imparted to enhance future employability. For instance, training in digital and advanced technologies would align more closely with market demands. The methodology for determining the number of interns per company and the selection process will also require careful planning. Providing skill certification will add more credibility to the programme and a digital platform to monitor the entire process will be essential. Most importantly, the true measure will be the eventual absorption of the trained manpower in the formal economy.

This programme will be complemented by the financial incentives for companies, such as the scheme of reimbursing up to Rs 72,000 to employers through the Employees’ Provident Fund Organisation (EPFO) contribution of each additional employee.

On the taxation side, the reintroduction of the Direct Tax ‘Vivaad Se Vishwas Scheme’ is a positive step that will enable taxpayers to settle pending disputes by paying the whole or part of the tax demand, thus avoiding penalty and prosecution.

The finance minister’s announcement of a comprehensive review of the existing Income-Tax Act to make it concise, lucid and easy to understand is also welcome. It offers the opportunity to incorporate international best practices, procedural simplification and alternative dispute-resolution measures like mediation. A case in point which requires attention is the taxation regime for charities, which has become complex due to multiple amendments.

Changes in the capital gains tax and the withdrawal of the indexation benefit for real estate will benefit property owners where the property appreciation is upwards of 9-11 per cent. However, in smaller cities and towns, where the appreciation rates might not be as high, property owners could be adversely affected. One of the ways to address this could be to change the year of fair value price from 2001 to 2010 or 2011.

The third theme is the continued focus on accelerating domestic manufacturing, which will create demand for skilled talent. Measures such as addressing inverted duty structures over the next six months, setting up of investment-ready ‘plug and play’ industrial parks, and making factors of production competitive along with facilitating markets will have a medium- to long-term positive impact. Changes in Customs duties on critical minerals, parts of telecom equipment, medical devices, capital goods for solar cell and module manufacturing, mobile phones and components, will have a more immediate impact. However, higher allocations for production-linked incentive (PLI) and clarity on Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME) schemes could have provided near-term momentum.

Finally, the Budget focuses on the expanded use of DPI across myriad sectors like agriculture, e-commerce, education, health, law & justice, logistics, MSME, and urban governance. These are proposed at population scale that should lead to productivity gains, new business opportunities, and innovation. Interoperability of DPI platforms, cybersecurity, artificial intelligence (AI) integration, and enhancing awareness of these platforms will help maximise the value of DPI.

I am excited that the government is thinking out of the box to address some of the immediate issues with long-term implications. Coupled with fiscal discipline and a prudent balance-sheet management, I am confident that India will not only sustain its fast and holistic growth but will also remain resilient against any external or internal shock.