Budget 2024-25 Paving the Way for Viksit Bharat
BY MANSI JHA/ JULY 30, 2024
Indian Budget 2024-25 is the new show stealer of Parliament, focusing on inclusive development it pushes all 'kursi bachao' claims to the background.
s we pivot from the outcomes of the general elections to budget speculations, India’s economic trajectory for the next five years is beginning to unfold. On 23rd July, Finance Minister Ms. Nirmala Sitharaman presented the 2024-25 budget in Parliament. This budget was highly anticipated, not only being the first of the Modi 3.0 government but also because it has been labelled the ‘Kursi Bachao’ budget by the opposition leaders.
A
From a Keynesian perspective, the very aim of any budget is that fiscal policy should be countercyclical—expansionary during a recession and contractionary during a boom. In the words of our Finance Minister:
The global economy, while performing better than expected, is still in the grip of policy uncertainties. Elevated asset prices, political uncertainties, and shipping disruptions continue to pose significant downside risks for growth and upside risks to inflation. In this context, India’s economic growth continues to be the shining exception and will remain so in the years ahead (Ministry of Finance, 2024, p. 5).
The 2024-25 Indian budget, therefore, aligns with Keynesian principles by addressing the persisting economic challenges.
The budget extends and adds to the interim budget presented in February 2024, which is prepared by a government in transition or in its final year before general elections. It envisions 'Viksit Bharat' by 2047, aiming for an all-round, all-pervasive, and all-inclusive development. Viksit Bharat translates to ‘Developed India,’ and this vision is intended to transform India into a developed nation by its 100th independence anniversary in 2047.
1
Prime Minister Narendra Modi has, therefore, emphasised that the core objective of this vision is to foster inclusive economic participation among all citizens. Focusing on four major pillars – 'Garib' (Poor), 'Mahilayen' (Women), 'Yuva' (Youth), and 'Annadata' (Farmer) – the budget prioritises employment, skilling, MSMEs, and the middle class. The Indian government has announced a package of five schemes for employment and skilling, allocating Rs 1.48 lakh crore
_JPG.jpg)
Pictured: Illustration by unknown via Pinterest
The figures and data mentioned in this article are directly cited from Nirmala Sitharaman's Budget Speech for the year 2024-25, published by the Ministry of Finance, Budget Division.https://www.indiabudget.gov.in/doc/budget_speech.pdf
for education, employment, and skills highlighting the major priorities of the Modi 3.0 government.
1
Expanding on these 4 key components, the budget further gives precedence to the following nine key areas in order to follow the Viksit Bharat roadmap:
Source: Anonymous. (2024, July 23). Nine Budget Priorities. [Infographic]. Network 18 Creative. https://images.news18.com/ibnlive/uploads/2024/07/priorities-2024-07-3c266cff5580a12670c518561e4672cd.jpg?impolicy=website&width=0&height=0
Productivity and Resilience in Agriculture: The union government has allocated INR 1.52 lakh crore for agriculture and allied sectors. A series of measures focusing on horticultural produce has been outlined, including the implementation of Digital Public Infrastructure (DPI) such as a 'digital crop survey' in 400 districts. The digital crop survey, starting from the current Kharif season, aims to provide more precise crop estimates. This precision is crucial for better planning and necessary interventions to assist both farmers and consumers, whether in situations of deficit or surplus. The DPI initiative involves releasing 109 high-yielding and climate-resilient varieties of 32 crops and expanding natural farming practices among one crore farmers over the next two years to sustain growth.
Employment & Skilling: The union government aims to implement three schemes for the 'Employment Linked Incentive' as part of the Prime Minister's package. These schemes will be based on enrolment in the Employees’ Provident Fund Organisation (EPFO) and focus on recognising first-time employees and supporting both employees and employers. The budget also encourages higher participation of women in the workforce by setting up working women hostels in collaboration with industry and establishing crèches. This partnership will organise women-centric skilling programs and promote market access for women-led Self Help Group (SHG) enterprises.
Pictured: Illustration by unknown via pinterest
Inclusive Human Resource Development and Social Justice: To achieve comprehensive social justice, an approach will be adopted to improve the capabilities of all eligible people through various programs, including education and health. Implementation of schemes such as PM Vishwakarma, PM SVANidhi, National Livelihood Missions, and Stand-Up India will support economic activities by craftsmen, artisans, self-help groups, SCs, STs, women entrepreneurs, and street vendors.
Manufacturing & Services: To harness the potential of the manufacturing sector, key initiatives include the development of investment-ready industrial parks and the expansion of the National Industrial Corridor Development Programme. These are crucial for creating a conducive environment for manufacturing, optimising supply chains, and reducing logistics costs to enhance India's global competitiveness.
Urban Development: As part of a housing for all initiative, the budget allocates INR 10 lakh crore for supporting 1 crore urban poor out of which INR 2.4 lakh crore will be contributed by the central government over the next five years. A Transit-oriented development (TOD) process will be implemented in 14 major cities with populations exceeding 30 lakh. It will focus on encouraging development along public transit routes, resulting in more efficient land use.
Energy Security: In the interim budget, the Finance Minister announced the PM Surya Ghar Yojana which received a budgetary allocation of INR 75,021 crore. The scheme aims to provide solar power to 10 million households, create 17 lakh direct jobs in the solar industry, add 30 GW of solar capacity, and cut 720 million tonnes of CO2 emissions. The budget highlighted that the scheme has so far received a strong response, with over 1.28 crore registrations and 14 lakh applications. It will also provide free electricity to up to 300 units to 1 crore households.
Infrastructure: A provision of INR 11,11,111 crore (3.4% of India’s GDP) has been allocated for capital expenditure, focusing primarily on infrastructure development. To encourage private sector investment in infrastructure, viability gap funding will be provided. This funding helps make projects commercially viable by offering grants or deferred payments under various schemes. The budget also includes launching Phase IV of the Pradhan Mantri Gram Sadak Yojana (PMGSY), which aims to ensure all-weather connectivity to 25,000 rural areas that have recently become eligible due to population growth.
Innovation, Research & Development: Operationalisation of the Anusandhan National Research Fund for basic research and prototype development will be initiated. Funding of INR 1 lakh crore will be provided to the private-led research groups to expand R&D initiatives. The space economy will also see a 5 times growth in the next 10 years, and a venture capital fund of INR 1,000 crore will be set up to support this rise.
Pictured: Illustration by unknown via pinterest
Next Generation Reforms: The Finance Minister highlighted that the upcoming reforms will cover all factors of production, including land, labour, and capital. This will require the collaboration of the Centre and States: The land reforms aim to address all aspects of land management. Including the improvements in land administration, planning, and management for both rural and urban areas. The government plans to enhance labour services, focusing on employment and skills development. A key initiative is the integration of the e-Shram portal (a national database for unorganised workers) with other platforms. As part of the reforms under capital and entrepreneurship, to boost the 'Ease of Doing Business,' the Jan Vishwas Bill 2.0 is in progress. The Jan Vishwas Bill, introduced by the Government of India, aims to simplify and decriminalise business regulations.
Assessing the Receipts of the government through direct and indirect taxes
The Union Budget has also provided the following breakup of the pie of “Where Rupee Comes From”, for every rupee in the government coffers, 36 paise will come from direct taxes (19 paise from personal income tax and 17 paise from corporate tax), indirect taxes sum up to 27 paise. Additionally, Borrowings and other liabilities will add up to 27 paise, non-tax revenue like disinvestment will contribute 9 paise, and non-debt capital receipts account for a meagre share of 1 paise.
Source: Budget Division. (2024, 23 July). Rupee Comes From. [Infographic]. Ministry of Finance | Budget Division. https://www.indiabudget.gov.in/doc/bh1.pdf
Direct Tax:
The revised income tax slabs introduced by Finance Minister Nirmala Sitharaman are expected to provide relief to salaried individuals and taxpayers by facilitating increased consumption and stimulating economic growth. Here’s a summary of the updated tax brackets for FY 2024-25 (AY 2025-26):
Source: Anonymous. (2024, July 23). New Tax Regime Comparison of 2-24-25 and 2023-24 tax slabs. [Table]. Income Tax Department. https://www.deccanherald.com/business/union-budget/union-budget-2024-income-tax-slabs-under-new-regime-revised-by-fm-sitharaman-check-out-the-new-tax-rates-here-3116640
Due to these new proposals, the government will forgo about INR 37,000 crore in revenue, with INR 29,000 crore from direct taxes and INR 8,000 crore from indirect taxes. However, about INR 30,000 crore will be generated through other means, resulting in a net revenue loss of around INR 7,000 crore annually.
The revised income tax rates will apply to taxable income earned during the financial year 2024-25, starting from April 1, 2024. These changes will likely place many individuals in lower tax brackets, allowing them to keep more of their earnings. A simplified tax regime with flat rates is expected to appeal to the younger generation, especially millennials, who tend to spend more rather than save. However, these lower rates in the new regime come at the price of the removal of certain deductions and exemptions available under the old system. For example, citizens lose access to deductions like the House Rent Allowance (HRA) which is the remittance given by an employer towards the employee’s house rent, travel expenses, etc. These deductions are crucial to reducing taxable income, but under the New Tax Regime, such scope has been restricted to a great extent.
Indirect taxes:​
The Finance Minister stated:
​
GST has decreased tax incidence on the common man; reduced compliance burden and logistics cost for trade and industry; and enhanced revenues of the central and state governments. It is a success of vast proportions. To multiply the benefits of GST, we will strive to further simplify and rationalise the tax structure and endeavour to expand it to the remaining sectors (Ministry of Finance, 2024, p. 26).
Further, the Finance Minister discussed sector-specific custom duties rationalisation: minerals like lithium, copper, cobalt, and rare earth elements are essential for industries such as nuclear energy, renewable energy, space, defence, etc. A full exemption of custom duties on 25 crucial minerals has been proposed to support their processing and refining. To promote domestic value addition in gold and precious metal jewellery, reducing customs duties on gold and silver to 6% and on platinum to 6.4% has been proposed. Various measures to support the growth and development of other key sectors including telecommunications, medicines and medical equipment, solar energy, leather and textiles, electronics, chemicals, and petrochemicals, were also addressed.
An analysis of the Expenditure pie of the Union government
For the fiscal year 2024-25, the total expenditures as a sum of revenue expenditure and capital expenditure are estimated to be INR 48.21 lakh crore. The breakup of total expenditure under revenue and capital expenditure heads is discussed below:
Revenue Expenditure
Revenue expenditure refers to the spending by the government that is intended for the normal functioning of government departments and various services, interest payments on debt, subsidies, and other recurring expenses.
As the year progresses, the revised estimates for 2023-24 show an increase in expected spending to INR 35.4 lakh crore. This adjustment indicates a mid-year revision based on actual spending patterns and updated economic conditions. Looking ahead to 2024-25, the budget estimates project a significant increase in revenue expenditure to INR 37.1 lakh crore. This anticipated rise suggests a planned expansion in government spending for the upcoming fiscal year.
The progression from actuals to budget estimates and revised estimates (shown through the bars) provides insight into the government's fiscal planning and adjustments in response to economic conditions.
Source: Budget Division. (2024, 23 July). Revenue Expenditure. [Graph]. Ministry of Finance |Budget division. https://www.indiabudget.gov.in/doc/bh1.pdf
Capital Expenditure
Capital expenditure in a budget refers to funds used by a government, business, or organisation to acquire, maintain, and upgrade physical assets such as buildings, machinery, equipment, and other infrastructure. These expenditures are typically substantial and long-term investments aimed at improving the productive capacity and efficiency of an entity.
Source: Budget Division. (2024, 23 July). Effective Capital Expenditure. [Graph]. Ministry of Finance | Budget division. https://www.indiabudget.gov.in/doc/bh1.pdf
The revised estimates for 2023-24 adjust the expected spending downwards to INR 12.7 lakh crore. This change suggests a mid-year revision based on actual spending trends and updated economic assessments. Further, for the fiscal year 2024-25, the budget estimates project a significant increase in effective capital expenditure to INR 15.0 lakh crore. This rise indicates a planned expansion in government investment for the upcoming year.
The height of the bars illustrates an overall upward trend in capital spending, with a noticeable increase projected for 2024-25.
Tracking India's Progress Through Key Economic Indicators
Capital expenditure in a budget refers to funds used by a government, business, or organisation to acquire, maintain, and upgrade physical assets such as buildings, machinery, equipment, and other infrastructure. These expenditures are typically substantial and long-term investments aimed at improving the productive capacity and efficiency of an entity.
Fiscal Deficit
A fiscal deficit represents the gap between the government's total revenue and spending, bridged through borrowing. This situation arises when the government spends more than it earns from its resources. For the fiscal year 2023 (FY23), the fiscal deficit is 6.4% of GDP. This indicates a reduction from the previous year's 6.7% in FY22 and a significant drop from 9.2% in FY21. For the fiscal year 2024 (FY24), the fiscal deficit further decreases to 5.6% of GDP. This continued decline suggests an improvement in the government's fiscal management and better compliance with the fiscal discipline rules laid out by the FRBM Act of 2003.
Source: Budget Division. (2024, 23 July). Decreasing Fiscal Deficit as % of GDP. [Graph]. Ministry of Finance | Budget division. https://www.indiabudget.gov.in/doc/bh1.pdf
Current Account Deficit
A current account deficit occurs when a country's total imports of goods, services, and transfers exceed its total exports. It indicates that a country is spending more on foreign trade than it is earning and is borrowing capital from foreign sources to make up the difference.
For FY23 there is significant improvement, reducing the deficit. In current times the trend continues with further improvement, moving closer to zero but still in deficit territory. The deficit increased again but remained relatively low at around -0.5%. This indicates a slight worsening of the trade balance compared to FY23 but still much improved compared to the earlier years.
Source: Budget Division. (2024, 23 July). Improvement in Current Account Deficit. [Graph]. Ministry of Finance | Budget division. https://www.indiabudget.gov.in/doc/bh1.pdf
Growth rate
The Real GDP growth rate measures the annual percentage increase in a country's Gross Domestic Product, adjusted for inflation. For 2023-24 The Real GDP growth rate significantly increases to 8.2%, indicating a robust economic recovery or expansion. The Real GDP (measured in INR lakh crores) also shows a noticeable increase, reflecting strong economic performance. The last two years show a positive trend with a substantial increase in the Real GDP growth rate in FY 2023-24, signalling a strong economic rebound.
Source: Budget Division. (2024, 23 July). India grew at 8.2 per cent in FY 2024. [Graph]. Ministry of Finance | Budget division. https://www.indiabudget.gov.in/doc/bh1.pdf
Inflation
Inflation refers to the rate at which the general level of prices for goods and services is rising, leading to a decrease in the purchasing power of money. In 2022, the inflation rate spiked to 6.7%, indicating a significant rise in prices compared to the previous year. In 2023, the inflation rate decreased to 5.4%, showing a trend of taming or controlling inflation after the high in 2022.
Several experts suggest that Budget 2024 sets a forward-looking perspective with initiatives aimed at positively impacting the nation’s economic landscape. Even though political uncertainties and supply chain disruptions posit challenges, the government's focus on youth employment and skill development aligns with the nation’s needs. Overall, the budget is progressive, as it rightly emphasises the four pillars: women, youth, the poor, and farmers, who are vulnerable sections of the Indian economy. However, it remains a long-term endeavour, requiring ongoing efforts and policy support, particularly in sectors like renewable energy, real estate, and health. With centre and state efforts aimed in the right direction, India can soon achieve the goal of Viksit Bharat.
Source: Budget Division. (2024, 23 July). Taming Inflation. [Graph]. Ministry of Finance | Budget division. https://www.indiabudget.gov.in/doc/bh1.pdf
Keywords
​
Viksit Bharat, Budget 2024-25, Inclusive development, Fiscal policy, Modi 3.0 government, Economic growth, Employment and skilling, Social justice, Manufacturing sector, Urban development, Energy security, Infrastructure development, Research and development, Next generation reforms, Direct taxes, Indirect taxes, Fiscal deficit, Current account deficit, GDP growth rate, Inflation, Revenue expenditure, Capital expenditure.
​
References
​
Agarwal, A. (2023, July 23). India's Union Budget 2024-25: Key Highlights. Invest India. https://www.investindia.gov.in/team-india-blogs/indias-union-budget-2024-25-key-highlights
Agarwal, S. & Bhushan, D. (2024, July 24). Union Budget 2024: A blueprint for India's manufacturing renaissance. The Economic Times. https://economictimes.indiatimes.com/news/economy/policy/union-budget-2024-a-blueprint-for-indias-manufacturing-renaissance/articleshow/111981526.cms?from=mdr
Bora, G. (2024, July 23). Budget 2024: From solar to thermal power, Sitharaman announces many measures for energy sector. The Economic Times. https://economictimes.indiatimes.com/small-biz/sustainability/budget-2024-from-solar-to-thermal-power-sitharaman-announces-many-measures-for-energy-sector/articleshow/111953489.cms?from=mdr
Budget 2024-25 Speech of Nirmala Sitharam Minister of Finance. (2024, July 23). Government of India.
https://www.indiabudget.gov.in/doc/budget_speech.pdf
Mohan, V. (2024, July 24). Budget 2024: Digital crop survey and climate-resilient farming set to revolutionise agriculture, new national cooperation policy for strengthening the farm sector. The Times of India.
Mukunth, V. (2024, July 24). Budget 2024: Urban, rural land reforms ‘welcome move’ by government. The Hindu.
Ojha, S. & Prasad, N. (2022, July 25). Income Tax Budget 2024 Highlights: Standard deduction extended, LTCG hike spooks market; Here's what you must know. Mint. https://shorturl.at/9TyFH
Sarkar, D. & Ghosh, A. K. (2024, July 24). Social priorities in the Union Budget 2024-25: A snapshot. Observer Research Foundation.
Union Budget 2024-25: Advancing Economic Growth through Infrastructure Initiatives. (2024, July 23). Press Information Bureau | Ministry of Finance.
https://shorturl.at/gviw9
What Budget 2024 Promised For Urban Development: Six Points. (2024, July 23). #Swarajya.
https://swarajyamag.com/infrastructure/what-budget-2024-promised-for-urban-development-six-points
DISCOVER MORE STORIES
Nostalgia's Market Influence:; From Retro Trends to Revenue
JULY 27
BY SHUBHANGI SINGH
Power, Prestige, and Politics: How India's Elite Shape Policy and Society
JULY 19
BY PREETHA MUKHERJEE
The Rise of Rice- State, Class and Caste in the Rice Bowls of India
JULY 8
BY ANNAPOORNA MARIAM FATHIMA
The views published in this journal are those of the individual author/s and do not necessarily reflect the position or policy of the team behind Beyond Margins, or the Department of Economics of Sophia College for Women (Autonomous), or Sophia College for Women (Autonomous) in general. The list of sources may not be exhaustive. If you’d like to have the complete list, email us at beyondmarginssophia@gmail.com