Budget 2024 Updates: Path to ‘Viksit Bharat’ with Strategic Priorities

Budget 2024: The Union Budget presented on July 23 has sparked a diverse range of responses. Centered on the vision of a ‘Viksit Bharat’, the budget outlines nine strategic pillars: agricultural transformation, employment generation, social welfare, industrial growth, urban development, energy independence, infrastructure enhancement, technological advancement, and governance reform. By allocating substantial resources to these areas, the government aims to ignite economic growth, foster innovation, and build a resilient economy capable of sustained prosperity.

1. Economic and Industrial Policies

• Rs 2.66 lakh crore earmarked for rural development
• MUDRA loan limit increased to Rs 20 lakh for those who have successfully repaid previous loans
• New scheme introduced for MSME machinery and equipment loans without collateral, with a guarantee fund up to Rs 100 crore
• Increased focus on critical minerals, with a new mission for recycling and acquisition, and auction of offshore mining blocks
• Private-driven research to be boosted with a Rs 1 lakh crore financial pool

Impact: Positive

Allocating Rs 2.66 lakh crore for rural development and introducing new schemes for MSME loans will catalyze substantial economic growth. The investment in rural infrastructure will stimulate economic activity in these areas, while the increased credit availability for MSMEs will foster innovation and expansion. The focus on critical minerals and private-driven research will support long-term economic development and technological advancement. Collectively, these measures will enhance economic stability and drive growth across multiple sectors, reinforcing overall economic progress.

2. Housing and Urban Development

• Rs 2.2 lakh crore allocated to enhance housing affordability
• Rs 10 lakh crore investment under PM Awas Yojana, Urban 2.0, for urban poor and middle class
• Encouragement for states to lower stamp duties, particularly for properties purchased by women
• Development of 100 weekly street markets and transit-oriented plans for 14 large cities
• Phase IV of Pradhan Mantri Gram Sadak Yojana launched to provide all-weather connectivity to 25,000 rural habitations

Impact: Positive

The budget’s substantial allocation signals a major push for the real estate and construction sectors. This investment is poised to catalyze economic growth by creating jobs and stimulating local economies through new housing projects. Further, the proposed reduction in stamp duties and the development of urban infrastructure, including weekly markets and transit-oriented development, are expected to further propel sector growth. These measures collectively aim to enhance housing affordability, improve urban living, and contribute to overall economic stability and development.

3. Employment and Skill Development

• Rs 2 lakh crore allocated for employment and skill development projects
• New scheme to incentivize job creation in manufacturing with EPFO contributions for first-time employees
• Employment-linked skilling schemes to benefit 2.1 lakh youths with DBT of up to Rs 15,000

Impact: Positive

The allocation for employment and skill development is set to have a major impact on job creation and workforce enhancement. By providing incentives for job creation and increasing funding for skill development, the government aims to build a more skilled and productive workforce. This initiative is expected to drive economic growth by improving employment rates and supporting industrial productivity, ultimately leading to a more robust and capable workforce.

4. Education

• Rs 1.48 lakh crore allocated for education, employment, and skilling
• Financial support for loans up to Rs 10 lakh for higher education

Impact: Positive

The allocation of ₹1.48 lakh crore for education, employment, and skilling, along with financial support for loans up to ₹10 lakh for higher education, represents a strong investment in the future workforce. This funding will enhance educational infrastructure, improve access to higher education, and support skill development programs. These measures are expected to lead to a more educated and skilled population, which will contribute to increased productivity and economic growth. By addressing both educational and employment needs, these investments will strengthen the foundation for long-term economic development and innovation.

5. Taxation and Fiscal Policies

• Revisions in the new tax regime with revised tax rates and an increased standard deduction
• STT on Futures and Options increased; angel tax abolished
• Long-term capital gains tax rate set at 12.5% with no indexation bonus
• Reduced customs duty on gold and silver to 6%, platinum to 6.4%
• Corporate tax rate for foreign companies reduced from 40% to 35%
• Increase in monetary limits for tax appeals

Impact: Mixed

Revisions in tax rates and fiscal policies introduce both opportunities and challenges. Lower corporate tax rates are likely to stimulate economic growth by enhancing business profitability, while the increased STT on Futures and Options could affect investment patterns. The adjustments in the tax regime and increased standard deductions aim to boost disposable income. However, the overall economic impact will depend on how these changes balance out and their effects across different sectors and investment types.

6. Infrastructure and Development Projects

• Rs 26,000 crore allocated for road connectivity projects
• Rs 11.11 lakh crore allocated for capital expenditure, maintaining strong fiscal support for infrastructure

Impact: Positive

The allocation for road connectivity and capital expenditure demonstrates a strong commitment to enhancing infrastructure. Improved infrastructure will facilitate better connectivity and efficiency in transportation, essential for economic growth. This investment is expected to support economic activity and development across various sectors by reducing operational costs and improving logistics, thereby contributing to overall economic progress.

7. Research and Development/Innovation

• Space Economy Expansion: A venture capital fund of ₹1,000 crore will be established to expand the space economy fivefold over the next decade
• Private-Driven Research: A mechanism with a ₹1 lakh crore financial pool will be set up to support private-driven research at a commercial scale
• Development of Small Modular Reactors: The government will partner with the private sector to develop and research small and modular nuclear reactors

Impact: Positive

The above initiatives will significantly bolster innovation and technological advancement. These investments are expected to drive substantial growth in the space economy and support cutting-edge research across various fields. Further, the development of small modular reactors in partnership with the private sector is likely to advance nuclear technology, offering potential benefits in energy efficiency and sustainability. Collectively, these initiatives will foster a more dynamic and forward-looking research and development landscape, supporting long-term economic growth and technological progress.

8. Agriculture and Farmer Support

• Rural Development Allocation: ₹2.66 lakh crore has been earmarked for rural development, which includes agricultural initiatives
• Agricultural Research: A comprehensive review of the agricultural research setup will be conducted to boost productivity and develop climate-resilient crop varieties
• MSP and Food Security: Higher Minimum Support Prices (MSP) for major crops have been announced, along with an extension of the PM Garib Kalyan Anna Yojana, benefiting over 80 crore people
• Support for Flood-Affected Areas: Financial aid will be provided for flood control and reconstruction projects in Bihar, Assam, Himachal Pradesh, and Uttarakhand

Impact: Positive

The allocation will provide substantial support to the agricultural sector. By enhancing agricultural productivity and food security, these measures will contribute to economic stability and growth. The increased support for agriculture is expected to strengthen the sector and reinforce overall economic stability by improving productivity and resilience.

9. Manufacturing and Services (Including MSMEs)

• Employment Incentives: A new scheme will incentivize job creation in the manufacturing sector by providing EPFO contributions for first-time employees. Employers will receive up to ₹3,000 per month for two years towards EPFO contributions for each additional employee. This initiative aims to create 50 lakh new jobs
• Credit Guarantee Scheme for MSMEs: A new scheme will facilitate term loans for MSMEs in the manufacturing sector without requiring collateral or guarantees. The guarantee fund will offer up to ₹100 crore in guarantees
• Enhanced MUDRA Loans: The limit for MUDRA loans will be increased to ₹20 lakh from the current ₹10 lakh for those who have successfully repaid loans under the TARUN category

Impact: Positive

New schemes and credit guarantees for MSMEs and the manufacturing sector are set to drive growth and innovation. The increased limit for MUDRA loans and the introduction of new credit guarantee schemes will facilitate easier access to financing. These measures are anticipated to boost industrial productivity and support economic development. By enhancing financial access and providing incentives for growth, these initiatives will contribute to a more dynamic and resilient economy.

10. Defense

• Allocation: The defense outlay has been set at ₹4.56 lakh crore for the fiscal year 2024-25. This is a slight increase from the previous year’s allocation of ₹4.55 lakh crore, demonstrating the government’s ongoing commitment to national security.
• Focus Areas:
  • Modernization: Continued investment in modernizing defense capabilities and infrastructure.
  • R&D: Emphasis on research and development to enhance defense technology and equipment.
  • Procurement: Allocation supports procurement of advanced defense equipment and systems.

Impact: Neutral

The increased defense allocation to ₹4.56 lakh crore reflects ongoing investment in national security and modernization of defense capabilities. While this investment supports the defense sector and enhances national security, it does not directly impact other economic sectors. The focus remains on strengthening defense infrastructure and technology, with limited immediate effects on broader economic or sectoral growth.

The budgetary measures introduced are set to bring about substantial positive changes in healthcare, research and development, and education. Investments in the space economy, private-driven research, and the development of small modular reactors are expected to drive technological advancements and innovation. Meanwhile, the significant allocation for education and higher education loans will strengthen the workforce of tomorrow.

By Anamika Singh, Assistant Professor, Rajiv Gandhi College of Arts, Commerce and Science.

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