India’s 2024-25 budget, presented on Tuesday, proposed increased spending of trillions of rupees to create new jobs and skilling, while agriculture, infrastructure, and rural development received a major push.
The seventh budget presented by Finance Minister Nirmala Sitharaman targets a smaller fiscal deficit of 4.9 per cent of gross domestic product versus 5.1 per cent announced in the interim budget as the fifth largest global economy expected to grow between 6.5 per cent and 7 per cent in the financial year ending March 2025
The first budget of the Modi 3.0 government, which is expected to lay the road map for transforming India into ‘Viksit Bharat’ (developed nation) by 2047, also indicates a shift in priorities for Prime Minister Narendra Modi’s spending policies, with ramped up allocations for rural development, skilling, jobs, and agriculture.
For the creation of jobs, Rs2 trillion was allocated for a program to address unemployment, education and skilling while the country’s vibrant start-up ecosystem will have something to cheer about, with an angel tax levied on capital raised by private companies now abolished.
Among a host of tax changes was an increased levy on equity investments to allay concerns of an overheating market, but also lower taxes for foreign companies, in a bid to lure investment.
Minor tweaks were also announced to personal income taxes, with expected savings of up to Rs17,500 in outgo for people who opt for the new tax regime.
Corporate tax on foreign companies has also been reduced from 40 per cent to 35 per cent to promote investments while FDI rules were simplified to facilitate more inflows, nudge prioritization and to promote the rupee usage.
The budget increased tax on long-term capital gains on all financial and non-financial assets to 12.5 per cent from 10 per cent. Assets held for over a year are considered long term. Short-term capital gains will now be taxed at 20 per cent instead of 15 per cent.
Customs duty on gold and silver was reduced to 6.0 per cent. Besides this, a cut on duty on mobile phones and other goods was announced.
The budget proposed increased standard deduction and revised tax rates for salaried individuals under the new tax regime.
The government will also maintain spending on long-term infrastructure projects at Rs11.11 trillion, offering long-term loans of Rs1.5 trillion to states to fund such expenditures.
Key proposals included five schemes to focus on 41 million youth over five years with a central outlay of Rs2 trillion and to provide a comprehensive internship scheme for 10 million youth in top companies over five years as well as employment-linked incentives, including one month’s wage support for first-time employees while promoting women-specific skilling programs and increased workforce participation.
The budget proposed a credit guarantee scheme and term loans for the MSME and manufacturing sector for machinery purchases.
The Mudra loan limit was increased to Rs 2 million from Rs1 million while financial support for higher education loans was increased to Rs1 million in domestic institutions.
The budget proposed Rs2.66 trillion provision for rural development through the transformation of agricultural research to focus on productivity and climate-resilient crop varieties. It also includes an initiative to introduce 10 million farmers to natural farming over two years. Thirty million additional houses in rural and urban areas have been announced for which necessary allocation has been made.
The states of Bihar and Andhra Pradesh, represented by Modi’s allies, got special treatment that includes funds for infrastructure. The finance minister proposed financial support of Rs150 billion for developing Andhra Pradesh’s capital, promising more money in the coming years. A slew of new airport, road, and power projects were sanctioned in Bihar.