The Finance Minister of India presented the Union Budget for the financial year 2024-25 (Budget) on 23 June 2024.
The Budget, particularly, focuses on employment, skilling, MSMEs, and the middle class along with all-around prosperity.
Some key highlights of the Budget are:
- India’s real GDP grew by 8.2% in FY 2023-24, exceeding the 8% mark in three out of four quarters of FY 2023-24. FY 2024-25 GDP growth is seen at 6.5% to 7% with the risks to FY 2024-25 GDP growth evenly balanced. Inflation has remained low and stabilized, moving towards the 4% target.
- The Budget details nine priorities for generating ample opportunities for all and suggests specific actions and reforms required to realise the goal of ‘Viksit Bharat’ (meaning ‘Developed India’) which are as follows:
- Agriculture: A comprehensive review of the agriculture research setup will be undertaken to bring the focus on raising productivity and developing climate-resilient varieties. The government has made a provision of INR 1.52 Trillion (approx. USD 18 billion) for agriculture and allied sectors. Further, the government will facilitate the implementation of the Digital Public Infrastructure (DPI) in agriculture in partnership with the States to cover farmers and their lands in 3 years. The details of 60 million farmers and their lands will be recorded in the farmer and land registries.
- Employment and Education: Government will implement 3 new schemes for ‘Employment Linked Incentive’ based on Employee Provident Fund Organisation (EPFO) enrolment wherein specifically, the schemes are for first timers, job creation in manufacturing and support to employers. The government has announced financial support for loans up to INR 1 million (approx. USD 12,000) for higher education of students in domestic institutions. Working women hostels are also to be established in collaboration with the industry.
- Inclusive Human Resource Development and Social Justice: Schemes supporting economic activities by craftsmen, artisans, self-help groups, scheduled caste, scheduled tribe and women entrepreneurs, and street vendors will be strengthened. The government will formulate a plan, for all-round development of the eastern region of India, covering Jharkhand, Bihar, Odisha, West Bengal, and Andhra Pradesh. The government has allocated more than INR 3 trillion (approx. USD 36 billion) to promote women-led development that would benefit women and girls.
- Manufacturing and Services: Government will introduce a credit guarantee scheme to facilitate term loans to MSMEs to purchase machinery and equipment without collateral or third-party guarantee. The limit of Mudra loans will be enhanced to INR 2 million (approx. USD 24,000) for those entrepreneurs who have successfully repaid previous loans under the same category. The government will launch a comprehensive scheme to provide internship opportunities to 10 million youth in 5 years in the top 500 companies. An internship allowance of INR 5,000 (approx. USD 60) per month and a one-time assistance of INR 6,000 (approx. USD 72) will be provided. The government plans to build 12 industrial parks under the National Industrial Corridor Development Program along with ‘plug and play’ industrial parks in partnership with the States and private sector across 100 cities.
- Urban Development: Government will formulate a Transit Oriented Development plan for 14 large cities with a population of above 3 million, along with an implementation and financing strategy. Under the PM Awas Yojana Urban 2.0, the housing needs of 10 million urban middle-class and poor families will be addressed with an investment of INR 10 trillion (approx. USD 120 billion). The government also plans to encourage States to rationalise stamp duty rates and reduce such rates for purchases being made by women.
- Energy Security: PM Surya Ghar Muft Bijli Yojana has been launched to achieve 300 units of free electricity per month for 10 million households through rooftop solar plants. A policy for promoting pumped storage projects will be drafted for electricity storage and facilitating smooth integration of the growing share of renewable energy. Nuclear energy is expected to form a significant part of the energy mix for Viksit Bharat.
- Infrastructure: Government has provided INR 11.11 trillion (approx. USD 134 billion) for capital expenditure. The government has provided INR 1.5 trillion (approx. USD 18 billion) for long-term interest-free loans to support the States in their resource allocation. Furthermore, private investments to be promoted through viability gap funding and enabling policies and regulations.
- Innovation, Research and Development: Government will set up a mechanism for boosting private sector-driven research and innovation at commercial scale with a finance pool of INR 1 trillion (approx. USD 12 billion). The government will operationalize the Anusandhan National Research Fund to be utilized for basic research and prototype development.
- Next Generation Reforms: Government will work with the States to initiate land-related reforms and actions both in rural and urban areas. The rules and regulations for Foreign Direct Investment and Overseas Investments will be simplified to nudge prioritisation, facilitate foreign direct investments, and promote opportunities for using Indian Rupee as a currency for overseas investments. The government will seek the required legislative approval for providing an efficient and flexible mode for financing leasing of aircrafts and ships, and pooled funds of private equity through a ‘variable company structure’.
- Certain other key highlights in the Budget include:
- Reduction of corporate tax rate on foreign companies from 40% to 35%.
- Abolishing angel tax for all classes of investors.
- Introduction of a revised income tax slab rate structure aiming to benefit the middle class.
- Increase in the long-term capital gains tax (LTCG) on all financial and non-financial assets to 12.5% from previous 10% and in the short-term capital gains tax (STCG) on specified assets to 20% from 15%.
- Reduction in customs duties on gold and silver to 6% and that on platinum to 6.4% to enhance domestic value addition in gold and precious metal jewellery in India.
- Proposed complete exemption of customs duties on 25 critical minerals and reduction of Basic Custom Duty (BCD) on two of them.
- Reduction of the BCD on mobile phones, mobile PCBA and mobile chargers to 15%.
- Proposed removal of the BCD on ferro- nickel and blister copper to reduce the cost of production of steel and copper. The nil BCD on ferrous scrap and nickel cathode and concessional BCD of 2.5% on copper scrap to continue.
- Exemption of 3 more cancer medicines from customs duties.
- Exemption of customs duty on various inputs for the manufacture of shrimp and fish feed.
- Increase in BCD to 15% on PCBA of specified telecom equipment. Increase in BCD to 25% on PVC flex banners to curb imports.
- To support existing and new capacities in the pipeline, an increase in the BCD on ammonium nitrate to 10%.
- To promote domestic aviation and boat and ship MRO, the period for exporting goods imported for repairs will be increased to one year. The time limit for re-import of goods for repairs under warranty is to be increased from three to five years for trade facilitation purposes.
- An Integrated Technology Platform will be set up for improving the outcomes under the Insolvency and Bankruptcy Code (IBC). Tribunals and appellate tribunals are proposed to be strengthened to speed up the insolvency resolution and additional tribunals will be established out of which some will be notified to decide cases exclusively under the Companies Act.
- Steps for reforming and strengthening debt recovery tribunals will be taken. Additional tribunals will be established to speed up recovery.
- Public sector banks will develop in-house capabilities to assess MSMEs for credit, instead of relying on external assessments, and will create a new credit assessment model based on the digital footprints of MSMEs in the economy.
- Pursuant to the earlier decision to open up the space sector, a venture capital fund of INR 10 billion (approx. USD 120 million) will be created to expand the space economy five times over the next decade.
- Monetary limits for filing appeals related to direct taxes, excise and service tax in the Tax Tribunals, High Courts and Supreme Court increased to INR 6 million (approx. USD 72,000), INR 20 million (approx. USD 239,000) and INR 50 million (approx. USD 600,000) respectively.
The Ministry of Finance, Government of India’s press release on the “Highlights of the Union Budget 2024-25” may be accessed at: https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2035609
Detailed particulars and key features regarding the Budget may be accessed at: https://www.indiabudget.gov.in/doc/bh1.pdf and https://pib.gov.in/PressReleasePage.aspx?PRID=2035618