Vikas Khemani: Budget 2024 Focuses on Growth and Targets Key Sectors

Union Budget 2024 Analysis: The government has outlined a clear vision for 'Viksit Bharat,' focusing on critical areas such as agricultural reforms, boosting manufacturing, and generating employment, among other initiatives.

By M Muzamil Shami

       Vikas Khemani

Union Budget 2024-25 Highlights: 

The Union Budget 2024 presents a balanced approach, with the new government emphasizing long-term schemes and benefits across various sectors. The government has articulated a clear vision for "Viksit Bharat," addressing key areas such as agricultural reforms, a manufacturing boost, employment generation, youth skilling, MSME support, and urban infrastructure development.

A notable aspect of the budget is its commitment to fiscal discipline. The fiscal deficit is maintained at 4.9% for the current year, with a target to reduce it to 4.5% next year. This balanced fiscal strategy ensures efficient allocation of resources while maintaining fiscal stability. Such stability is expected to attract liquidity flows into the country and result in a lower cost of capital for India, fostering a conducive environment for economic growth.

The budget has allocated Rs 11.11 lakh crore for infrastructure capital expenditure, representing 3.4 percent of GDP. This substantial investment highlights the government’s dedication to developing infrastructure and enhancing the manufacturing sector. Emphasizing infrastructure development is expected to have a multiplier effect, stimulating economic activities and creating employment opportunities across various industries.

Support for MSMEs is a prominent feature of the budget. By offering credit guarantees for MSME loans up to 100 crores and Mudra Loans, the budget aims to strengthen the growth of small and medium-sized enterprises. These initiatives will provide MSMEs with the financial backing needed to expand their operations, innovate, and make significant contributions to the economy.

The decrease in customs duties on mobile phones, gold, and silver is a significant positive development. This change will make consumer electronics and jewelry more affordable, thereby encouraging increased spending.

Salaried employees are set to benefit from the new tax regime, potentially saving up to Rs 17,500 in income tax. This financial relief is anticipated to boost small-ticket consumption, as individuals will have more disposable income to spend on goods and services. The resultant rise in consumption will drive demand and support overall economic growth.

The removal of the angel tax marks a pivotal step in nurturing a dynamic startup ecosystem in India. By eliminating this tax, the government aims to stimulate investment in startups, thereby promoting innovation and entrepreneurship. This initiative is anticipated to draw more investors into the startup landscape, offering the essential capital for new ventures to thrive and achieve success.

The government's dedication to social welfare is clear through its plan to allocate Rs 3 lakh crore to programs supporting women and girls. Increasing women's workforce participation is a key priority, and these initiatives are designed to empower women by equipping them with the skills and opportunities necessary to contribute to the economy.

To make higher education more accessible, the government offers education loans up to Rs 10 lakh for students enrolled in domestic institutions. This initiative is aimed at fostering talent development in the country. Additionally, students can benefit from a 3% interest subvention e-voucher, which helps reduce the overall cost of the loan.

Despite the budget's increase in long-term capital gains (LTCG) tax by 2.5% to 12.5% and short-term capital gains (STCG) tax by 5% to 20%, as well as the rise in STT on futures from 0.0125% to 0.02%, which is generally seen as unfavorable for financial markets, these changes are not anticipated to significantly affect market sentiment. Investors are likely to view these adjustments as manageable, given the overall positive initiatives in the budget.

In conclusion, the Union Budget 2024 establishes a solid foundation for India's growth trajectory during the Amritkaal period. With a balanced fiscal approach, substantial investments in infrastructure, support for MSMEs, and initiatives to boost consumption and entrepreneurship, the budget aligns with the vision of Viksit Bharat 2047. We remain confident in investing in India and believe that sectors such as manufacturing, infrastructure, MSME/mortgage credit, and consumption will greatly benefit from the measures outlined in this budget.