Budget 2024-25: A Comprehensive Insight in the Future Plans of the Union Government

Published: Jul 2024

The union Finance Minister (FM) - Nirmala Sitharaman presented the union budget 2024-25 on 23rd July 2024. The honorable minister has given a grip of uncertainty on the global economy. The Indian economy targets 4.0% inflation, keeping it low and stable for the current financial year, with the core inflation at 3.1%. However, the NDA government holds a positive outlook for the Indian economy. The nation subsequently would be focusing on employment, skilling, MSME (Ministry of Micro, Small & Medium Enterprises), and the middle class. The budget thus outlays various incentives, subsidies and policy measures, targeting sustained efforts in alignment with the 'Vikasit Bharat' initiative of the Modi government. The roadmap to achieve the important governmental milestones is based on 9 major priorities, including-

  • Productivity and resilience in agriculture, 
  • Employment and skilling, 
  • Inclusive human resource development and social justice, 
  • Manufacturing and services, 
  • Urban development, 
  • Emergency security, 
  • Infrastructure, 
  • Innovation, Research and Development (R&D), 
  • Next-generation reforms

The Government is also equipped to achieve ‘productivity and resilience in agriculture’ with a strong action plan to benefit the agriculture and allied sectors, by allocating a total of INR 1.52 lakh crore ($18.2 billion).  The government will promote R&D in the agriculture sector, especially eying the developments in climate resilient agricultural technologies. It would also focus on releasing a total of 109 new varieties of 32 field and horticulture crops. Additionally, 1 crore farmers will be initiated into natural farming, in the next two years, supported by branding and certification. 

The central government would also aid the establishment of 10,000 need-based bio-input resource centers to be established for natural farming. The crops that gained government focus for the upcoming year include pulses & oilseed. 

The government is also focusing on the large-scale production and supply chain development of vegetables. It aims to develop a digital public infrastructure, in partnership with state governments, for agriculture over 3 years, encompassing 400 districts. The initiative would integrate 6 crore farmers and their lands into a digital registry. 

The union government also looks forward to farmers' empowerment with the issuance of Jan Samarth-based Kisan Credit Cards, in 5 states. It also plans to promote shrimp farming, processing, and export, by financing the related activities through the National Bank for Agriculture and Rural Development [NABARD].  

The ‘employment and skilling’ would be enabled by the introduction of various employment-linked incentives. The government broadly focuses on the 3 key beneficiaries for the same, including- first-timers, the manufacturing sector, and the employers. 

The newly entering workforce would be provided with the 1 month's salary, upon entering any formal sectors. The DBT (Direct Benefit Transfer) would be subject to the upper limit of INR 15,000 ($180.0). The DBT would be credited to the beneficiary in 3 installments. The first timers with a minimum salary of INR 1, 00,000 ($12,000.0), would be eligible for leveraging the benefit. The government foresees to benefit of 210.0 lakh (21.0 million) youth with the scheme. 

The job creation in the manufacturing sector is to be incentivized, by linking it to the employment of first-time employees. The pursuit will benefit both the employees and the employers, as per their EPFO (Employees' Provident Fund Organisation) contributions for the first 4 years of employment. The initiative is anticipated to benefit 30.0 lakh (3.0 million) youth. 

The budget also proposes support to the employers, by reimbursing the employers up to INR 3,000 ($36.0) per month, for 2 years towards their EPFO contribution for each additional employee.  The initiative is estimated to support the additional employment of nearly 50.0 lakh (5.0 million) individuals.    

In addition, to increase women's participation in the workforce, the union minister proposed to set up hostels and crèches in collaboration with the industry. Additionally, she laid the proposal for the organization of women-specific skilling programs, and increased promotion and market access for women SHG (Self Help Groups) enterprises.  

The minister also proposed the revision of the 'Model Skill Loan Scheme', facilitating loans up to INR 7.5 lakh ($9.0 thousand), with a guarantee from a government-prompted fund. The scheme is set to benefit 25,000 students every year. The FM also proposed the introduction of e-vouchers for 1 lakh students, for loans up to INR 10.0 lakhs ($12,000). The loan would be subject to an annual interest subvention of 3.0% of the loan amount. A proposal for a novel centrally sponsored scheme for skilling under the Prime Minister's Package for 20 lakh (2.0 million) youth over 5 years, was also laid down during the discussion. 

The ‘inclusive human resource development and social justice’ is in line with the development aims laid down in the interim budget laid down previously this year (February 2024). The priority focuses on the growth of the all-around, all-pervasive, and all-inclusive development of people, particularly the farmers, youth, women, and poor. For instance, the union minister proposed the allocation of INR 3 lakh crore ($360.0 billion), to women-led development. 

The ‘Purvodaya' scheme will focus on the development of power projects, including a new 2400 MW power plant at Pirpainti. A budget of INR 21,400 crore ($2.5 billion) is allotted for the same. The budget also allocates special financial support, under the Andhra Pradesh Reorganization Act, through multilateral development agencies, in the current financial year. This financial support amounts to INR 15,000 crore ($1.8 billion).   

The third budget priority also encompasses infrastructure development (including, the industrial node at Gaya- Amritsar-Kolkata Industrial Corridor, the industrial node at Kopparthy- Vishakhapatnam-Chennai Industrial Corridor, and Orvakal -  Hyderabad-Bengaluru Industrial Corridor), socio-economic development of tribal families (covering 63,000 villages benefitting 5 crore tribal people). A fund outlay of INR 3.66 crore ($439.2 thousand) was proposed for the same.  Additionally, the setting up of 100 branches of India Post Payment Bank, in the North East region, was suggested.

The ‘manufacturing and services’ priority focuses on MSMEs. The initiative suggests the launch of a credit guarantee scheme without collateral or third-party guarantee to MSMEs, in term loans for the purchase of machinery and equipment. The budget will also continue bank credit to MSMEs during their stress period.  FM also suggested increasing the upper limit for Mudra loans for the 'Tarun’ category to INR 20.0 lakhs ($2.0 million), for those who have successfully repaid previous loans.

The turnover threshold of buyers for mandatory onboarding on the TReDS platform would be reduced from INR 500.0 crores ($60.0 million) to INR 250 crores ($30.0 million). The priority will also support to setting up 50 multi-product food irradiation units in the MSME sector and E-Commerce Export Hubs, under Public-Private-Partnership (PPP) mode for MSMEs and traditional artisans. This would empower the artisans to sell their products in international markets. Additionally, the priority also focuses on critical minerals and offshore mining of minerals. 

The FM also proposed the launch of a paid internship scheme, to grant 12-month internships to 1.0 crore (10.0 million) youth, in top 500 companies. The internship stipend would be INR 5,000 ($60.0) per month, with a one-time allotment of INR 6,000 ($72.0). The companies will bear training costs and 10.0% of internship costs from CSR (Corporate Social Responsibility) funds.

The union minister also highlighted the resolution of more than 1,000 companies, by the IBC (Insolvency & Bankruptcy Code). This has resulted in a direct recovery of over INR 3.3 lakh crore ($39.6 billion) to creditors. Additionally, 28,000 cases involving over INR 10 lakh crore ($120.0 billion) have been disposed of, prior to admission. The budget also proposes the reformation and strengthening of the debt recovery tribunals, to speed up the recovery process. 

The ‘urban development’ priority focuses on the formulation of Transit Oriented Development plans and strategies, across 14 large cities (cities above 30 lakh population).  Additionally, 1.0 crore (10 million) urban poor and middle-class families, would be entitled to an aid of INR 10.0 lakh crore ($120.0 billion), including the central assistance worth INR 2.2 lakh crore ($26.4 billion), under the PM Awas Yojana Urban 2.0.  Also, the government will support the development of new 100 weekly ‘haats' or street food hubs every year for the next 5 years in select cities. The government also foresees empowering women under this initiative by facilitating a lower stamp duty for the properties purchased by women. 

The government is preparing to transform the energy sector with ‘energy security’, by implementing policy measures on ‘Energy Transition Pathways' and 'Pumped Storage Projects'. It also looks forward to collaborating with the private sector for R&D, for the development of Bharat Small Modular Reactor and newer technologies for nuclear energy and setting up Bharat Small Reactors.  FM also proposed a joint venture between NTPC (National Thermal Power Corporation) and BHEL (Bharat Heavy Electricals Limited) to set up a full-scale 800 MW (megawatt) commercial plant using Advanced Ultra Super Critical (AUSC) technology.

The union minister also announced the PM Suryaghar Muft Bijli Yojana, to install solar panels in 1.0 crore (10.0 million) households and provide 300 units of free electricity. She also suggested the adoption of appropriate regulations for the transition of 'hard to abate' industries, from the current 'Perform, Achieve and Trade' mode to the 'Indian Carbon Market' mode to be put in place. 

In line with the ‘infrastructure’, the central government provided a capital expenditure of INR 11.1 lakh crore ($133.3 billion) (3.4 % of GDP), as proposed in the interim budget. Provisions worth INR 1.5 lakh crore ($18.0 billion), have been suggested for long-term interest-free loans, to support states in infrastructure investment. Also, 25,000 rural habitations would be provided with all-weather connectivity, with the launch of phase IV of PMGSY (Pradhan Mantri Gram SadakYojana). The government will render financial support of INR 11,500 crore ($1.3 billion) to projects such as the Kosi-Mechi intra-state link and other schemes in Bihar. It is also set to assist the flood-borne states of Assam, Himachal Pradesh, Uttarakhand, and Sikkim, against natural calamities. The budget also placed significant importance on the tourism sector, focusing on the comprehensive development of Vishnupad Temple Corridor, Mahabodhi Temple Corridor, and Rajgir. It would also assist in the development of temples, monuments, craftsmanship, wildlife sanctuaries, natural landscapes, and pristine beaches of Odisha.

The ‘innovation, R&D’ priority is set to operationalize the basic research and prototype development with the ‘Anusandhan National Research Fund’. It will also finance private sector-driven research and innovation, at commercial scale, and has allocated INR 1 lakh crore ($12.0 billion). It has also allotted a venture capital fund of INR 1,000 crore ($120.0 million), for expanding the space economy by 5 times in the next 10 years.

The ‘next-generation reforms’ include rural land-related actions, urban land-related actions, services to labor, and NPS-vatsalya. In accordance with these reforms, the land records in urban areas would be digitized with GIS (Geographic Information System) mapping. In addition, the e-ashram portal will be integrated with other portals, the development of open architecture databases, and the development of a mechanism to connect job-aspirants with potential employers and skill providers. The NPS- vatsalya would aid contribution by parents and guardians for minors.

The rural land-related actions include,

  • Allotment of Unique Land Parcel Identification Number (ULPIN) or Bhu-Aadhaar for all lands
  • Digitization of cadastral maps
  • Survey of map sub-divisions as per current ownership
  • Establishment of a land registry
  • Linking to the farmer's registry

Furthermore, FM Sitharaman presented some statistics on the performance of the Indian economy during her budget speech. The budget estimates for 2024-25, include,

  • Total receipts other than borrowings: INR 32.07 lakh crore ($384.8 billion)
  • Total expenditure: INR 48.21 lakh crore ($578.5 billion)
  • Net tax receipt: INR 25.83 lakh crore ($309.9 billion)
  • Fiscal deficit: 4.9% GDP

She added the government aims to reach a deficit below 4.5% next year. In addition, owing to the massive success of the Goods & Services Tax (GST), which has decreased the tax burden on the taxpayers, while significantly increasing the government's earnings, the tax structure will be further simplified and rationalized to expand GST to remaining sectors.

The budget also benefits various sectors by lowering the custom duty and fully exempting custom duty for various products. The highlights include exemption of custom duty from drugs (TrastuzumabDeruxtecan, Osimertinib, and Durvalumab ), ferro nickel and blister copper, ferrous scrap and nickel cathode, electronics (subject to the use of oxygen-free copper for manufacturing the resistors), 25 critical minerals, capital goods for use in manufacture of solar cells and panels, and various inputs for manufacture of shrimp and fish feed. 

The budget also simplified charities and TDS (Tax Deducted at Source). 20.0% TDS rate on repurchase of units by mutual funds or UTI (Unit Trust of India) withdrawn. TDS rates have been reduced on e-commerce operators from 1.0% to 0.1%. Additionally, delay for payment of TDS up to the due date of filing statement decriminalized.

The simplification of capital gains has also been proposed. The short-term gains on certain financial assets would be 20.0%. The long-term gains on all financial and non-financial assets would be taxed at 12.5%. Additionally, to the delight of investors, the exemption limit of capital gains on certain financial assets increased to INR 1.25 lakh ($125.0 thousand) per year. Also, all the tax-payer services would be digitized over the next two years. 

The corporate tax rate on foreign companies was reduced from 40.0% to 35.0%. Additionally, the Security Transactions Tax (STT) on futures and options of securities increased to 0.02% and 0.1% respectively. Also, the income received on the buyback of shares, in-hand, would be taxed. 

The deduction of expenditure by employers towards NPS is to be increased from 10.0% to 14.0% of the employee’s salary. Also, the non-reporting of small movable foreign assets, up to INR 20.0 lakhs ($24.0 thousand) would be de-penalized. The equalization levy of 2.0 is withdrawn.

The New Personal Income Tax Regime

  • The standard deduction for salaried employees increased from INR 50,000 ($600.0) to ?75,000 ($900.0).
  • The deduction on family pension for pensioners enhanced from INR 15,000 ($180.0) to INR 25,000 ($300.0)
Income Slab (lakh INR)
Tax Slab (%)
0-3
Nil
3-7
5.0
7-10
10.0
10-12
15.0
12-15
20.0
Above 15
30.0

FM quoted that the salaried employees in the new tax regime would save up to INR 17500 ($210.0) in income tax.  

Thus, it can be concluded that the union budget 2024-25, is set to bring development for the Indian economy. Also, it focuses on the inclusive growth of all. The government's efforts to reduce the custom duty and other taxes on various sectors and entities will promote standardization of simplification, which would make it easy for businesses, individuals, and various government organizations to move collaboratively in India's growth journey. However, the change in the income tax slab and the extension of GST to new sectors would result in potential disagreements during the internal phase of budget executions. The budget will witness wider acceptance among the masses, as they focus on the growth statistics of the domestic economy, in the international turbulence. In a nutshell, the Indian government is all set for inking another year of progressive trajectory in history. 

Note: The currency conversions in the article are rounded off.