Union Budget 2024-25- Analysis- Explained Pointwise

The Union Budget for 2024-25 was presented in the Parliament yesterday by the Union Finance Minister Nirmala Sitharaman. The Finance Minister asserted in her budget speech that the focus of the government remained on serving the four ‘castes‘- poor, women, youth and farmers. It was also stressed by the Finance Minister that this year’s Budget laid particular emphasis on ‘employment, skilling, MSMEs, and the middle class‘.

What are the Major announcements in the Budget?

What are the positives to come out of Budget 2024-25?

1. Delivering on the rising aspirations of the Youth- The incentives have been  provided to first time employees and employers with an outlay of ₹10,000 crore, incentivization of internships with an outlay of ₹2,000 crore and emphasis on Skill development with state government’s cooperation (Model Skill Loan Scheme).
These steps taken in the Budget 2024-25, deliver on the the rising aspirations of the Youth as recommended by the Economic Survey 2024-25.

2. Concerted Bid to address the Challenges Faced By MSMEs- The steps taken in the Budget 2024-25 like Credit Guarantee Scheme, New assessment model, Credit Support during Stress Period, are attempts to address the financial and working capital challenges faced by the MSMEs.

3. Tax relief for the salaried class- The standard deduction has been raised and the tax slabs with their relevant tax rates have been revised in the Budget 2024-25. This will leave a little more money in the hands of the salaried class, post taxes. Pensioners are also set to benefit by a marginal increase of ₹10,000 in the deduction allowed on family pensions.

4. Sticking to the Fiscal Consolidation Plan- Budget for 2024-25 sticks to the government’s fiscal consolidation path, with the Fiscal Deficit proposed to be pared to 4.9% of GDP. This increases the possibility of a sovereign rating upgrade of domestic bonds have embarked on a maiden journey of getting included in global bond indices. The Budget unveils the unequivocal focus on fiscal stability and continuity of sustainable growth impulses.

5. Support to the Annadata (Farmers)- The promotion of Atmanirbharta in pulses and oilseeds, focus on agriculture research (bearing in mind the realities of climate change), large-scale clusters for vegetable production, and Digital Public Infrastructure (DPI) in agriculture for coverage of farmers and their lands, are all likely measures to support the Annadata (i.e., farmer).
A thriving agriculture sector will allow the government to deliver on its promise of food grains under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), which has now been extended for five years.

6. Push towards Housing for all- The outlay for Pradhan Mantri Awas Yojana (PMAY)- Urban and Rural has seen a massive jump of 37% and 70% respectively. The Budget reaffirms that housing for all remains a key hallmark of the government.

7. Boost to PLI Scheme for Atmanirbhar Bharat- The outlay on Production Linked Incentive (PLI) was increased by 75% in the Budget for FY25. This increase accompanied by tweaks to sectoral custom duties is a bid to support domestic manufacturing and deepen local value addition.

What are the concerns with the Budget?

1. Cuts in the Social Sector Schemes- The Budget has cut the share of Social sector schemes outlays which includes school and higher education. The outlay for the rural job guarantee scheme- MGNREGA is at a nine-year low share of 1.78% of overall outlay.

2. Reduction in schemes for Minorities- The Budget has seen a reduction in the budget for education schemes for Madrasas and Minorities from ₹10 crore to ₹2 crore in 2024-25.

3. Removal of Indexation- The removal of indexation for calculating the value of the Long term asset (Real estate), is being viewed as an additional tax burden for the real estate property dealers.

4. No announcement on Indian Railways- The country’s largest employer, the Indian Railways, was a glaring absence in the Budget speech of the Finance Minister. There were no announcements on the Railway sector which continues to suffer from low freight and passenger capacity, low staff and manpower and safety issues.

5. No announcement regarding the indirect tax system of MSMEs- The budget has failed to address the demands of MSMEs for simplification and rationalization of the GST regime.

6. Obsession with fiscal consolidation- Some critics hold that government’s obsession with fiscal consolidation, which is visible in its bid to reduce the fiscal deficit to 4.9% of GDP in 2024-25 from 5.1% in the interim budget, may constrain government spending.

7. Lack of a clear economic strategy or vision to tackle the economic slowdown-  Critics have also pointed that the budget lacks the clear economic strategy and vision to tackle the slowdown in aggregate demand, private investment, exports and the resulting jobs crisis. The measures announced, like employment-linked incentives, seem too small to have a meaningful impact.

What should be the way Forward?

1. Measuring the performance of the employment schemes announced in the budget- All the employment schemes need to be measured against the backdrop of the fact that India needs to generate 78.5 lakh non-farm jobs annually until 2030, as per the Economic Survey, to largely to absorb the workforce exiting agriculture.

2. Achieving Fiscal Consolidation by raising revenues than compressing Expenditure- Our fiscal deficit reduction approach must target on raising revenues rather than reducing expenditure, as expenditure multipliers tend to be higher in an economy than revenue multipliers.

3. Strategic Asset sales Programme- Asset monetisation will help in raising govt. revenues as the market condition remains buoyant. This will help in bringing down fiscal deficit without the need of reducing government expenditure.

4. Increased expenditure on health and education- The social sector expenditures by the govt. must be increased for achieving the goal of Inclusive Development.

5. Passing the baton to the private sector- With its initial push by increasing the Capex, the government must pass on the baton of infrastructural development to the private sector by reducing the crowding out effect in the economy. Crowding out effect can be reduced when the govt. reduces its fiscal deficit and achieves its FRBM 2003 target of fiscal deficit being 3% of the GDP.

Conclusion

Most of these measures announced in the Budget dovetail handsomely with the macro focus of pushing a job-led growth in the medium term. Commendably, the government has succeeded in maintaining the fiscal discipline whilst extending a wide gamut of measures to stimulate the economy.