All of India was glued to their screens on July 23rd when Nirmala Sitharaman presented the much-anticipated Union Budget 2024-25. In her address, Sitharaman outlined a vision for Viksit Bharat (Developed India) by strategically allocating resources to drive growth while ensuring macroeconomic stability. This blog will discuss the key highlights of Budget 2024, focusing on its dual approach to fostering economic expansion and maintaining fiscal prudence.
The Budget 2024 focuses on sustainable and productive expenditure while maintaining fiscal prudence. It promotes manufacturing while making employment generation a priority. The budget outlines four key segments for focus — the poor, women, youth, and farmers — and nine priority areas for growth and development of the economy.
The fiscal deficit for the financial year 2024-25 is projected to be 4.9% of GDP, a substantial improvement from the revised estimate of 5.6% for the previous year. This reduction is attributed to a 15% growth in government revenue, which outpaces the 8.5% increase in expenditure.
The budget has made good use of the additional ₹1,23,000 crore dividend that the government received from the RBI this year. The assumption of growth in tax collections for the year also seems quite conservative, making the intended fiscal deficit figure credible and realistic.
The Budget 2024 sets a clear agenda for economic growth through targeted allocations across various sectors. Below are the key focus areas along with the budget allocations for each.
The capital expenditure (capex) for the fiscal year 2024-25 has been set at ₹11.11 lakh crore, representing an increase of 11% from the previous year. This allocation is approximately 3.4% of GDP and is aimed at stimulating economic growth through infrastructure development and public investment. The capex includes around ₹1.5 lakh crore earmarked for long-term interest-free loans to states, encouraging them to enhance their infrastructure spending as well.
Infrastructure remains a cornerstone of the budget, with a continued focus on improving connectivity and public services. The Ministry of Road Transport and Highways has received the largest share of this budget with an allocation of ₹2.72 lakh crore, which is a 3% increase from the revised estimates of the previous year. This funding will support the construction of 12,000 kilometres of national highways and the monetization of assets worth ₹30,000 crores.
Additionally, the government has committed to significant projects in states like Bihar and Andhra Pradesh, including road connectivity and irrigation projects to bolster regional development.
Job creation is a critical focus of the budget, with the government aiming to create new employment opportunities through various initiatives. The government has allocated ₹60,000 crore for skill development programs aimed at enhancing the employability of young people. The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) continues to receive funding to ensure rural employment, with an allocation of ₹73,000 crore for the upcoming fiscal year. Additionally, the introduction of the Credit Guarantee Scheme for MSMEs aims to boost entrepreneurship and job creation by providing easier access to credit for small businesses.
The Finance Minister emphasized the importance of employment generation in her speech, stating, "We particularly focus on employment, skilling, MSMEs, and the middle class." This holistic approach aims to address the employment challenges faced by the youth and underprivileged sections of society.
The micro, small, and medium enterprises (MSME) sector, which plays a vital role in job creation and economic growth, has received targeted support from the budget. The government has proposed measures to enhance access to credit for MSMEs, along with initiatives to promote entrepreneurship and innovation within this sector.
The Mudra loan limit for successful 'Tarun' category borrowers has been doubled to ₹20 lakh, providing a substantial boost to entrepreneurs. To help MSMEs access their working capital by converting trade receivables into cash, Smt. Sitharaman suggested lowering the turnover threshold for buyers required to join the TReDS platform from ₹500 crore to ₹250 crore. These initiatives, coupled with a focus on entrepreneurship and innovation, aim to propel the MSME sector forward, especially amid global economic challenges.
The fiscal deficit target for the financial year 2024-25 has been set at 4.9% of GDP, a reduction from the interim estimate of 5.1%. This marks a significant step towards achieving the government's long-term goal of reducing the fiscal deficit to below 4.5% by 2025-26. This disciplined approach is crucial for maintaining investor confidence and ensuring sustainable economic growth, especially in light of rising public debt levels.
The budget outlines a detailed revenue mobilization strategy to support the fiscal deficit target. This increase is expected to be complemented by a 6% rise in revenue spending, which is aimed at enhancing overall government revenues.
The government plans to enhance tax compliance and broaden the tax base, which includes measures to simplify tax structures and improve collection efficiency. The introduction of new tax incentives for sectors such as manufacturing and technology is also expected to boost revenue generation.
A robust debt management strategy is crucial for maintaining fiscal prudence. The government has committed to reducing the debt-to-GDP ratio from the current levels. Finance Secretary T. V. Somanathan explained after the presentation of the Budget: "Hereafter it is not the intention to focus on a deficit number but rather to look at what will keep reducing our debt-to-GDP ratio in normal years."
The government aims to ensure that the cost of borrowing remains low while maintaining a sustainable debt profile. By managing its debt effectively, the government can free up resources for productive investments that drive economic growth.
Budget 2024 has struck a delicate balance between fostering economic growth and maintaining fiscal prudence. The government's commitment to fiscal consolidation and macroeconomic stability is commendable, and the budget's focus on investment-led growth, employment generation, and sustainable development should help India navigate the challenges ahead.
As the country continues to thrive in the face of global uncertainties, this budget serves as a roadmap for a 'Viksit Bharat,' laying the foundation for transforming India into a developed nation.
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