 "Budget 2024: Constructive welfare and not sops is the mantra for Viksit Bharat")
Is it a good budget? Yes. It has gone into a lot of detail to strengthen the base for its thrust areas. Is it a big-bang, pathbreaking budget? No. The government has fixed its eye on Viksit Bharat in 2047 and wants to grow steadily at 7 per cent year-on-year in order to get there. It also, therefore, needs to build strong and painstaking foundations.
The budget has tinkered with capital gains tax, which opens up the scope to continue doing so in future budgets under this government of Modi 3.0. This could be a source of worry, but for the moment, it is not substantial enough in a strong bull market.
The fiscal deficit, a key measure of a country’s financial health that was earlier expected to be at 5.1 per cent, is expected to end the year at 4.9 per cent of GDP. The government has used its additional revenues from the Reserve Bank of India (RBI), apparently to bring down the fiscal deficit rather than splurge it on other things.
According to Finance Minister Nirmala Sitharaman, the total budgeted expenditure is Rs 49.21 lakh crores. GST collections and other receipts, apart from borrowings, are at 32.07 lakh crores. Based on this solid performance, the next-year fiscal deficit target has been set at 4.5 per cent.
This fiscal deficit figure of 4.9 per cent is not only commendable but will be welcomed by foreign institutional investors, foreign direct investors, and international lending and rating agencies. The likelihood of greater foreign investment flows can now be anticipated.
The corporate tax on foreign companies has been brought down from 40 per cent to 35 per cent, on par with Indian domestic companies, for whom it was brought down earlier. This too will no doubt find favour and should attract further foreign investment.
Impact Shorts
More ShortsNo populist measures to speak of have been introduced, though there is a concentration on the rural sector with a view to reforming it. This shows great confidence on the part of the government in the first budget of its third term.
It has been careful to introduce a slew of investment measures for coalition partners in Bihar and Andhra Pradesh. The recently won state of Orissa has also received development proposals in the budget. All three plus Jharkhand are clubbed under the government’s new East development effort. Bank branches, meanwhile, are to be opened all over the North East.
Instead of give-aways and sops, there are a plethora of enabling measures to improve farm income, young person skilling, and a biggish internship programme to open up new employment avenues.
The infrastructure allocation of Rs 11.1 lakh crores, estimated at 3.4 per cent of GDP, has been maintained unchanged from the interim budget before the general elections in 2024. It hasn’t been increased, but there are only eight months left in this financial year. The fact that this number is kept steady underpins the continuity of policy, and the target of 7 per cent in GDP also going forward.
The slight enhancements to the contours of the personal income tax will please the middle class. The standard deduction has been enhanced from Rs 50,000 to Rs 75,000. The tax slabs have been tweaked a little, which will result in a reduction of under Rs 20,000 (Rs 17,500) in tax for some people.
On the stock markets, the short-term capital gains tax on equity has been increased from 15 per cent to 20 per cent. The long-term capital gains tax has been enhanced from 10 per cent to 12.5 per cent. The exemption on profit made has been increased from Rs 1,00,000 to Rs 1,25,000.
These moves are minor in nature, and the stock market will take them in its stride except for the worry of implied future hikes. Equity that is listed and products such as mutual funds continue to qualify as long-term after one year of holding. Unlisted stocks and other financial instruments will qualify as long-term after 2 years. These measures are unlikely to adversely impact the booming stock markets for now.
The indexation benefits applied to property have been discontinued going forward and replaced with a tax rate of 12.5 per cent, instead of the erstwhile indexed rate of 20 per cent. For property bought in 2001 or before, indexation will apply and reduce or eliminate capital gains tax, but newer properties will attract 12.5 per cent, probably the same or similar to the rate applicable after indexation. Again, the real estate companies trading in the stock market do not seem to be put out. It is in line with international practices and gets away from the complexities of indexation that occasion updating of the start year from time to time.
GST rates have been reduced in a number of instances and even exempted from items such as certain cancer drugs. Of course, there are no big additions or deletions in GST.
Customs duties on minerals used in nuclear power generation, renewable energy, space, defence, telecommunications, and high-tech electronics have been exempted.
Customs duties on gold, silver, and platinum have been reduced.
Terms for ships coming into India for maintenance have been liberalised.
Settled cases in income tax won’t be reopened unless the tax dodged is expected to be more than Rs 50 lakhs. There is also a limit of 5 years.
The problem areas of employment and rural income have received detailed attention. Natural farming will be encouraged. The pulses sector will be encouraged via production, storage, and marketing initiatives. Likewise, shrimp farming. A digital public infrastructure will be increased in conjunction with the states. Vegetable production will be promoted. New crop varieties researched by the government will be introduced. Rural development will receive Rs 2, 65, 808 crore. Agriculture and allied activities have been allocated Rs 1, 51, 851 crore.
Defence will receive a sum of Rs 4,54, 773 crore.
Industrial parks will be developed near 100 cities. For skilling, 1,000 ITIs will be upgraded. The MSME sector will receive more support in a variety of ways.
The writer is a Delhi-based political commentator. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost’s views.
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