Foreword
The Union Budget 2024 represents a pivotal moment in India's economic journey. The new government has presented a detailed roadmap for India's burgeoning future that would further solidify India's position on the global stage. This Union Budget uses the Interim Budget as a springboard and intends to stay on a growing economic trajectory, realizing its potential to be the 'shining exception.' Echoing a theme of an empowered and inclusive economy, the Union Budget steers an ambitious, people-centric agenda to address challenges and facilitate sustainable economic development towards the goal of Viksit Bharat by 2047.
The four castes 'Garib' (Poor), 'Mahilayen' (Women), 'Yuva' (Youth) and 'Annadata' (Farmer), which were emphasized in the Interim Budget, will continue to be a focus under the Union Budget. With the agenda to generate ample opportunities, the Union Budget has outlined nine priorities that include productivity and resilience in agriculture, employment and skilling, inclusive human resource development and social justice, manufacturing and services, urban development, energy security, infrastructure, innovation, research and development and next generation reforms.
While the fiscal deficit is estimated at 4.9% of GDP, the government plans to reach a deficit below 4.5% next year with an endeavor to be on a declining path as a percentage of GDP. India's inflation continues to be low and stable, moving towards the 4% target. The capex outlay is 3.4% of India's GDP, the same as it was earmarked for in the Interim Budget 2024.
There is a special focus on MSMEs and manufacturing, particularly labor-intensive manufacturing. The government intends to cover financing, regulatory changes and technology support for MSMEs to help them grow and compete globally, including the Credit Guarantee Scheme for MSMEs in the manufacturing sector, new assessment models, voluntary closure of LLPs, etc.
Central to the Union Budget's vision is promoting trade and creating an enabling environment for business, emphasizing ease of doing business in India. The rules and regulations for foreign direct investment and overseas investments will be simplified to facilitate foreign investments, nudge prioritization, and promote opportunities for using Indian Rupee as a currency for overseas investments. This strategic focus not only aims to attract global investments but also nurtures indigenous entrepreneurship, fostering a vibrant ecosystem of innovation and job creation.
The direct tax proposals focus on reducing the compliance burden, promoting entrepreneurial spirit and providing tax relief to citizens. These include rationalization of capital gains with short-term gains to attract a 20% tax rate, long-term gains to attract 12.5% and an increase in the limit of exemption of capital gains. Angel tax is abolished for all investors and the corporate tax rate on foreign companies is slashed from 40% to 35%. The new tax regime is further simplified and the standard deduction for salaried employees increased from INR 50,000 to INR 75,000.
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