AN ANALYSIS OF FINAL BUDGET, 2024: STRENGTHS AND CONCERNS
ABSTRACT
This Article attempts to analyze the Final Budget, 2024, which was presented by the Union Finance Minister Smt. Nirmala Sitharaman on 23rd July, 2024. The aim is to break down and simplify the nuances of the budget, to make it simple enough for everyone to comprehend. The Budget attracted plethora of reactions across the spectrum. Some hailed to for promoting MSME’s and primary focus on increasing the productivity and sustainability of the agricultural sector. Whereas, it was criticized by some for not favoring middle class. The Article attempts to simplify, consolidate and summarize all the relevant information and viewpoints regarding the Budget, that a citizen of India, or any stakeholder of the system should know.
Keywords: Budget, Agriculture, Employment, Skill, Tax, Allocation.
INTRODUCTION
Budget, which is referred in the Constitution of India as ‘Annual Financial Statement’ is basically an annual fiscal statement by which a government suggests the revenues and expenses of the government in a particular financial year. Article 112 of the Constitution of India defines the term ‘Annual Financial Statement’. It is passed by the legislature, approved by the President and presented by the finance minister. This year, due to elections, the final budget was presented on 23rd July, 2024 by the Finance Minister Smt. Nirmala Sitharaman before the Lok Sabha. The article will only ponder upon the crucial changes and aspects, which is important for every stakeholder to know.
FINAL BUDGET, 2024 – FOUR KEY AREAS OF FOCUS
The Final Budget, 2024 focused on five key areas:
In the next sections, each of these key areas will be discussed in details.
EMPLOYEMENT AND SKILLING
As per the finance minister, one of the main objectives of this year's budget is to increase employment, Skilling and job opportunities to 4.1 crore youth over a period of 5 years, with a central outlay of 2 lakh crores. To break this down, one scheme provides benefit to first timers, who are registered under EPFO (Employees Provident Fund Organization). This scheme will provide one month wage to all persons who are newly entering the workforce in all formal sectors. This will amount to a maximum of Rs. 15,000, which will be deposited by the government in three instalments. The eligibility limit will be a salary of Rs. 1 lakh. Incentive will be provided at specified scale directly to both employee and employer with respect to their EPFO contribution in the first 4 years of the employment. The government will reimburse to employer's up to Rs. 3,000 per month for two years towards their EPFO contribution for each additional employee. The government will also work towards establishing working women hostels in collaboration with industry. The union government in collaboration with the state governments and Industry will launch a Skilling program under which 20 lakh youth will be skilled over a period of 5 year. Further, more loans will be made available for educational purposes to students. Loans up to Rs. 7.5 lakh will be given to 25,000 students each year with a guarantee from a government promoted fund. Loans up to Rs. 10 lakhs will be given for higher education in domestic institutes. These students will get a 3% discount on their interest on repayment.
MICRO SMALL MEDIUM ENTERPRISES (MSME's)
The overall budget allocation for this sector remained at Rs. 22,137.95 crores. This sector forms the backbone of Indian economy apart from the agricultural sector. At present, there are more than 6 Crore MSMEs functional in the country, generating more than 11 crore jobs. This sector alone contributes to almost 30% to India's GDP. It is pertinent to mention that, out of the 6 Crore MSME's in India, a mere 14% of them has access to credit facilities, which is insufficient to cater to a market having a finance demand of close to 1,955 billion USD. Under the Credit guarantee scheme, MSME's in the manufacturing sector will get term loans for purchase of machinery and equipment without collateral or third-party guarantee. The limit for entrepreneurs who have paid back their previous loans have been increased to Rs. 20 lakhs under the Mudra Loan Scheme. To make credit assessment process streamlined, the finance minister has announced a new assessment model for Public Sector Banks. These banks are asked to build in house capabilities to assess MSME's, instead of relying upon third-party assessment. MSME's which are at a risk of default will get continued funding from the bank during stressed period. To reduce the turnover threshold of buyers for mandatory onboarding on the TReDS platform from Rs. 500 crores to Rs. 250 Crore. To enable MSME's to sell their products in international market, export hubs will be set up in PPP mode.
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FARMERS AND RURAL SECTOR DEVELOPMENT
This year, the budget allocation on agricultural and allied activities has been increased by 8%. Similarly, the Government is expected to spend 10% more on rural development. The Government's main focus is on R&D activities in the agricultural sector, with the intent of promoting agricultural productivity and to develop climate resilient varieties of crops. The FM announced that the Government will introduce 109 new HYV and Climate resilient varieties of 32 field and horticulture crops will be released for cultivation by farmers. What comes in as a timely move, in the next two years, 1 crore farmers across the country will be initiated into natural farming supported by certificate and branding. Further, 10,000 research centers will be established to provide necessary inputs for natural farming. As far as rural sector development is concerned, under the Pradhan Mantri Gram Sadak Yojna (PMGSY) 25,000 villages will be provided connectivity. It is pertinent to note that, both Rural development and Agriculture has received second and third highest funding respectively, after the defence sector.
INCOME TAX AND THE MIDDLE CLASS
As far as Income from salary is concerned, new tax regime has been introduced. Tax payers are at liberty to either follow the older regime or the new regime. Firstly, the standard deduction has been increased from Rs. 50,000 to Rs. 75,000. Secondly, the new tax regime will narrowly benefit the income taxpayers. The revised regime is likely to save up to Rs. 17,500 in income tax, excluding the 4% Cess, per year.
However, an area which is garnering widespread criticism is the increase on Capital Gains Tax. Short Term Capital Gain (STCG) tax has been increased from 15% to 20% and Long term Capital Gain (LTCG) tax has been increased to 12.5% from 10%. Further, indexation benefit has also been removed.
STATE ALLOCATION
Two states, namely, Bihar and Andhra Pradesh, as anticipated saw an increase in allocation. A budget of Rs. 15,000 crore is allocated for multilateral funding for Andhra Pradesh's new capital. Further, financing will be provided for Polavaram Irrigation Project which is important for the state of Andhra Pradesh. Further, Grants will be given to the backward regions of Andhra Pradesh to reduce disparities and promote balanced growth. Funds will be allocated for water, power, railways and roads and key industrial areas of Andhra Pradesh which will benefit the Vishakhapatnam - Chennai Industrial corridor and the Hyderabad - Bengaluru Industrial Corridor.
For Bihar, Rs. 26,000 Crores will be allocated for road projects. The Central Government also intends to support temple economies across the state of Bihar. Further, support will be provided for the development of an industrial node in Gaya, which is a part of the Amritsar-Kolkata Industrial Corridor. The Government will also speed up the requests made y the Bihar state government to arrange external assistance for Multilateral development Banks.
CONCLUSION
The Final Budget, 2024 has been a positive move with respect to the first three areas. Increasing the spending and focusing on skill development of youth, will likely hold positive results in bridging the gap between industry requirements and education imparted to students. However, the impact of spending on incentivizing employers to hire freshers is a matter of concern, and its impact will be interesting to look out for. As far as the MSME sector is concerned, the government has got the priorities right by focusing on two crucial areas i.e., increasing their cash flow and dealing with market disruptions and other similar contingencies. Spending more on rural sector development and agricultural sector has two important positives. Firstly, it will strengthen the sustainability of our agriculture sector by making a timely shift towards natural farming, which is the need of the hour, owing to factors such as climate change and over reliance on chemical farming. Secondly, this will, overtime increase the number of taxpayers in our economy, which will eventually reduce the burden faced by the middle class at present. However, there are concerns as far as middle class of India is concerned. The marginal benefit afforded to them under the new regime will be negated by the exponential increase in capital gains tax. Further, increases allocation and support for the states of Bihar and Andhra Pradesh is an important move, but ignoring states like Manipur raises question regarding priorities of the government.
REFERENCES
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WRITTEN BY: Anurag Das