Union Finance Minister Nirmala Sitharaman on July 23 announced income tax relief for the middle class, a Rs.2 lakh crore outlay for job creation schemes over the next five years, and a spending splurge for States run by her party’s new coalition partners, the Telugu Desam Party (TDP) in Andhra Pradesh and the Janata Dal (United) in Bihar, as she unveiled the Narendra Modi 3.0 government’s first Budget after the 2024 general election.
With rural distress and unemployment being blamed for the BJP losing its majority, Sitharaman in her seventh straight budget provided Rs.2.66 lakh crore for rural development and maintained spending on long-term infrastructure projects at Rs.11.11 lakh crore to boost economic growth.
She abolished the “angel tax” for all classes of investors in startups, cut customs duty on mobile phones and gold, and simplified capital gains tax. She, however, raised the securities transaction tax (STT) on futures and options of securities, which led to tanking of stock markets.
India’s economy, the fifth largest in the world, is projected to grow at an annual rate of 6.5-7 per cent in the fiscal year ending in March 2025. But experts say the benefits of its rapid growth are shared unequally, as wealth of already affluent Indians has risen steadily without reaching the the majority of Indians who toil in the country’s large informal sector, where the quality of jobs is poor and precarious.
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Subsidies to manufacturing worth crores of rupees have not led to the creation of enough jobs. Inequality has surged in India in the last decade. According to a report by World Inequality Lab, wealth concentrated in the richest 1 per cent of India’s population is at its highest in six decades.
“India’s economic growth continues to be the shining exception (in a world that is gripped by policy uncertainties) and will remain so in the years ahead,” she said. “In this Budget, we particularly focus on employment, skilling, MSMEs, and the middle class.” Besides Rs.2 lakh crore provided over a five-year period for schemes and initiatives to facilitate employment, skilling, and other opportunities for 4.1 crore youth, she said: “I have made a provision of Rs.1.48 lakh crore for education, employment, and skilling.”
Financial aid for Andhra Pradesh, Bihar
For Bihar, where the Assembly election is due next year, the Finance Minister announced spending of Rs.60,000 crore on infrastructure projects like expressways, a power plant, heritage corridors, and new airports. The support to Bihar, whose ruling party and BJP’s partner JD(U) has been demanding an economic package and Special Category Status for the State, is in the form of capital projects but not subsidy or cash dole.
Similarly, for Andhra Pradesh, whose ruling TDP recently joined the BJP-led National Democratic Alliance, she allocated Rs.15,000 crore in financial aid through multilateral agencies. A similar request for support to Bihar will be expedited, she said.
For the middle class, she raised the standard deduction—a flat deduction from the total salary earned by an employee in a year before calculating the applicable income tax rate—by 50 per cent to Rs.75,000 and tweaked tax slabs for taxpayers opting for the new income tax regime. This will lead to taxpayers under the new tax regime—which offers lower rates of taxes but permits limited deductions and exemptions—saving up to Rs.17,500 in tax annually, she said.
Employment generation
To spur employment, the Budget provided incentives for companies, including paying for one-month salary for first-time employees, incentives at specified scale to both employees and employers with respect to their retirement fund contribution in the first four years of employment, and reimbursing employers up to Rs.3,000 per month for 2 years towards contribution to the Employees’ Provident Fund Organisation of each additional employee. Also, a programme to improve skills as well as internship for students and subsidised loans for higher education will be provided, she said.
More than a decade after he first took office as Prime Minister, Narendra Modi is under pressure to generate more jobs to help sustain growth. India’s official unemployment rate in urban areas is pegged at 6.7 per cent but private agencies put it at much higher levels. According to the Centre for Monitoring Indian Economy, youth unemployment was at 9.2 per cent in early July, underscoring the challenge of delivering jobs in the world’s most populous country, where millions graduate every year.
Buoyed by robust tax collections and a higher-than-expected dividend receipt from the Reserve Bank of India, Sitharaman said the government’s fiscal deficit—the difference between the total revenue earned and total expenditure—will be trimmed to 4.9 per cent of the GDP in 2024-25, below the 5.1 per cent figure estimated in the interim Budget she presented in February. She reduced gross market borrowing marginally to Rs 14.01 lakh crore.
The Budget for 2024-25 fiscal (April 2024 to March 2025) allocated Rs.1.52 lakh crore for agriculture and allied sectors, aid for building 3 crore affordable housing units in urban and rural areas, provided credit support to small and medium businesses, raised small loans to Rs.20 lakh for small business, proposed setting up 12 industrial parks, and provided for setting up a Rs.1,000 crore venture capital fund for space sector.
The government allocated Rs.6.21 lakh crore for defence in 2024-25, up from last year’s outlay of Rs.5.94 lakh crore. The capital outlay has been pegged at Rs 1.72 lakh crore. The total allocation to the sector is 12.9 per cent of the total Budget. Defence Minister Rajnath Singh said the allocation of Rs.1.05 lakh crore for domestic capital procurement will provide further impetus to atmanirbharta in the defence sector.
India is one of the highest current sources of emissions that lead to global warming, but the government announced plans to set up a new 800-megawatt coal-fired thermal power plant. Sitharaman said the government will also support the development of small and modular nuclear reactors to help meet India’s future energy demand.
The Budget also allocated Rs.11,500 crore to address damage from floods. India, which is one of the countries most vulnerable to climate impacts, has suffered an increase in flooding due to extreme rains and glacier melt in the last few years.
Census, NPR unlikely in fiscal 2024-25
The Budget allocated Rs.1,309.46 crore for the Census, a significant reduction from 2021-22 when Rs.3,768 crore was allocated for the decadal exercise, an indication that it may not be carried out even after a significant delay.
A meeting of the Union Cabinet on December 24, 2019, approved the proposal for conducting the Census of India 2021 at a cost of Rs.8,754.23 crore and updating the National Population Register (NPR) at a cost of Rs.3,941.35 crore. The house listing phase of the Census and the exercise to update the NPR were scheduled to be carried out across the country from April 1 to September 30, 2020, but were postponed due to the COVID-19 outbreak.
The Census operation continues to be on hold and the government has not yet announced the new schedule. Officials said since the general election had taken place this year, the census exercise will not be able to be carried out in 2024. The entire Census and NPR exercise is likely to cost the government over Rs.12,000 crore, the officials said.
Reactions to the Budget
Prime Minister Narendra Modi said that the Union Budget 2024-25 will give new impetus to economic development in the country. He said that the Budget would empower all sections of society. “This is a Budget that will take the country’s villages, poor, and farmers on the path of prosperity.... This Budget is a Budget for the continuation of the empowerment of the newly emerged neo middle class,” Modi said in his remarks.
BJP’s allies from Bihar hailed Finance Minister Nirmala Sitharaman’s host of announcements for the State as the JD(U) asserted that these measures will put it on the path to development and help it become “aatmanirbhar” (self-reliant). Bihar Chief Minister Nitish Kumar said the “special help” announced in the Union Budget addressed the State’s concerns, which had previously led to demands for Special Category Status.
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The TDP also praised the Budget’s measures for Andhra Pradesh, with Chief Minister N. Chandrababu Naidu saying that it will go a long way towards building the State. In a post on X, Naidu thanked Prime Minister Modi and Finance Minister Sitharaman “for recognising the needs of our State and focusing on a Capital, Polavaram, industrial nodes and development of backward areas”.
Leader of Opposition in the Lok Sabha Rahul Gandhi, in a post on X, dubbed the Union Budget a “kursi bachao [save government] Budget” and claimed it makes “hollow promises” to BJP allies at the cost of other States. The former Congress chief also claimed that the Budget was a “copy and paste” job of the Congress manifesto for the 2024 election and previous Budgets.
Congress party president Mallikarjun Kharge termed the Budget “copycat” and alleged that it is not for the progress of the country but to “save the Modi government”. In a post in Hindi on X, Congress president Mallikarjun Kharge said, “The Modi government’s ‘copycat budget’ could not even copy the Congress’ Nyay Patra properly! The Modi government’s budget is distributing half-hearted ‘rewadis (freebies)‘ to dupe its coalition partners so that the the NDA survives.” He said after 10 years, limited announcements have been made for the youth who are bearing the brunt of the “slogan of two crore jobs per year”.
Samajwadi Party president Akhilesh Yadav slammed the Budget, claiming that it has ignored the interests of the youth and farmers. Speaking to reporters, Yadav linked Sitharaman’s announcements of several development measures for Bihar and Andhra Pradesh to the BJP’s political compulsion to “save” its government and asked if there was anything for Uttar Pradesh, India’s most populous State.
The Trinamool Congress launched a scathing attack on the BJP-led NDA government at the Centre and said the Union Budget reflected the fiscal and political bankruptcy of the regime. In a social media post, the party dismissed the term “Union Budget 2024”, renaming it as the “Andhra-Bihar Budget”.
Trinamool national general secretary Abhishek Banerjee told reporters in New Delhi that “the net result is zero because Bengal has been constantly tortured and deprived”. “You have seen how Bengal has been consistently deprived by this BJP government. Has there been a positive outcome of 12 BJP MPs elected from Bengal?,” Banerjee said outside the Parliament complex.
(with inputs from agencies)
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