India's Economic Outlook and Union Budget 2024-25 Highlights

India continues to demonstrate robust economic growth amid global policy uncertainties, according to Finance Minister Nirmala Sitharaman, who presented the Union Budget 2024-25 in Parliament. Key points include low and stable inflation moving towards the 4% target, with core inflation (excluding food and fuel) at 3.1%. The government is taking steps to ensure adequate supply of perishable goods.

Interim Budget Focus

The interim budget emphasized four major demographic groups: the poor (Garib), women (Mahilayen), youth (Yuva), and farmers (Annadata).

Budget Theme

The budget prioritizes employment, skilling, MSMEs, and the middle class, with a central outlay of ?2 lakh crore over five years to create opportunities for 4.1 crore youth. This year, ?1.48 lakh crore has been allocated for education, employment, and skilling.

Budget Priorities

1. Productivity and Resilience in Agriculture:

Comprehensive review of agriculture research to boost productivity.

-Release of 109 high-yielding, climate-resilient crop varieties.

-Promotion of natural farming for 1 crore farmers over two years.

-Establishment of 10,000 bio-input resource centers.

-Strengthening production, storage, and marketing of pulses and oilseeds.

-Implementation of Digital Public Infrastructure in agriculture within three years.

-Allocation: ?1.52 lakh crore for agriculture and allied sectors.

2. Employment & Skilling:

-Three new Employment Linked Incentive schemes based on EPFO enrollment.

-Initiatives to boost female workforce participation, including hostels and crèches.

-New centrally sponsored skilling scheme in collaboration with states and industry, targeting 20 lakh youth over five years.

-Revised Model Skill Loan Scheme with loans up to ?7.5 lakh, expected to assist 25,000 students every year.

-Financial support for higher education loans up to ?10 lakh for 1 lakh students annually.

3. Inclusive Human Resource Development and Social Justice:

-Implementation of schemes for craftsmen, artisans, self-help groups, SC/ST and women entrepreneurs, and street vendors.

-Purvodaya plan for eastern region development.

-Pradhan Mantri Janjatiya Unnat Gram Abhiyan for tribal socio-economic improvement.

-Expansion of India Post Payment Bank branches in the North East.

-Allocation: ?2.66 lakh crore for rural development and infrastructure.

4. Manufacturing & Services:

-Focus on MSMEs and labor-intensive manufacturing.

-Self-financing guarantee fund for MSME credit up to ?100 crore.

-Enhanced Mudra loan limit to ?20 lakh.

-Financial support for MSME food irradiation units and quality testing labs.

-E-Commerce Export Hubs in PPP mode.

-Internship scheme in top companies for 1 crore youth over five years.

5. Urban Development:

-PM Awas Yojana Urban 2.0 for housing needs of 1 crore urban poor and middle-class families.

-Water supply, sewage treatment, and solid waste management projects for 100 large cities.

-Support for 100 weekly street food hubs annually under PM SVANidhi Scheme.

6. Energy Security:

-PM Surya Ghar Muft Bijli Yojana for free electricity up to 300 units monthly.

-Emphasis on nuclear energy.

7. Infrastructure:

-Continued fiscal support for infrastructure with ?11,11,111 crore allocated for capital expenditure.

-Launch of PMGSY Phase IV for rural connectivity.

-Financial support for irrigation and flood mitigation projects in Bihar, Assam, Himachal Pradesh, Uttarakhand, and Sikkim.

8. Innovation, Research & Development:

-Operationalization of Anusandhan National Research Fund.

-Venture capital fund of ?1,000 crore for the space economy.

9. Next Generation Reforms:

-Development of an Economic Policy Framework for future reforms.

-Integration of e-shram portal for labor services.

-Simplification of FDI and overseas investment regulations.

-Introduction of NPS Vatsalya for minor contributions, convertible to regular NPS accounts.

-Progress on New Pension Scheme (NPS) review.

The Union Budget 2024-25 outlines comprehensive measures to bolster India's economic resilience, with a strong focus on inclusive growth, innovation, and infrastructure development.

Budget Estimates for 2024-25

Finance Minister Nirmala Sitharaman announced that the total receipts (excluding borrowings) and total expenditure for 2024-25 are estimated at ?32.07 lakh crore and ?48.21 lakh crore, respectively. Net tax receipts are projected at ?25.83 lakh crore, with a fiscal deficit of 4.9% of GDP. The estimated gross and net market borrowings through dated securities are ?14.01 lakh crore and ?11.63 lakh crore, respectively. The government aims to reduce the deficit below 4.5% next year, continuing the fiscal consolidation path initiated in 2021.

Tax Reforms and Reliefs

The Union Budget 2024-25 includes significant tax reforms and relief measures:

1. Direct and Indirect Taxes:

-A comprehensive review of direct and indirect taxes is planned within the next six months to simplify, reduce tax incidence and compliance burdens, and broaden tax nets.

-GST structure will be rationalized, and the Custom Duty rate structure will be reviewed to enhance the tax base and support domestic manufacturing.

-A review of the Income Tax Act aims to reduce disputes and litigation and make the act more concise and user-friendly.

2. Personal and Corporate Income Tax:

-Standard deduction for salaried employees opting for the new tax regime increased from ?50,000 to ?75,000.

-Deduction on family pension for pensioners increased from ?15,000 to ?25,000.

-Revised tax rates for salaried employees providing benefits up to ?17,500.

New Income Tax Slabs:

i) 0 – 3 Lakh - NIL

ii) 3 – 7 Lakh - 5%

iii) 7 – 10 Lakh - 10%

iv) 10 – 12 Lakh - 15%

v) 12 – 15 Lakh - 20%

vi) Above 15 Lakh - 30%

? -Abolition of angel tax for all investor classes.

-Simplified tax regime for foreign shipping companies operating domestic cruises.

-Safe harbor rates for foreign mining companies selling raw diamonds in India.

-Corporate tax rate for foreign companies reduced from 40% to 35%.

3. Capital Gains Tax:

-Short-term gains taxed at 20% on certain financial assets.

-Long-term gains on all financial and non-financial assets taxed at 12.5%.

-Exemption limit for capital gains increased to ?1.25 lakh annually.

-Listed financial assets held for more than a year and unlisted assets held for more than two years classified as long-term assets.

4. Charities and TDS:

-Merging of two tax exemption regimes for charities into one.

-Reduction of TDS rates on various payments, including from 1% to 0.1% on e-commerce operators.

-Decriminalization of TDS payment delays up to the due date of filing the TDS statement.

Customs Duty Revisions:

-Exemptions for three cancer treatment medicines (Trastuzumab Deruxtecan, Osimertinib, and Durvalumab).

-Reduction of Basic Customs Duty (BCD) on X-ray machine tubes, flat panel detectors, mobile phones, PCBAs, and mobile chargers to 15%.

-Full exemption of customs duties on 25 rare earth minerals like lithium and on capital goods for manufacturing solar panels.

-Reduction of BCD on seafood-related products to 5%.

-Reduction of BCD on Methylene Diphenyl Diisocyanate (MDI) used in spandex yarn to 5%.

-Custom duties on gold and silver reduced to 6% and on platinum to 6.4%.

-Removal of BCD on ferro nickel and blister copper, and increase on ammonium nitrate from 7.5% to 10%.

-Increase in BCD on PVC flex banners from 10% to 25% due to environmental concerns.

-Increase in BCD on PCBA for specific telecom equipment from 10% to 15%.

Dispute Resolution and Litigation Reduction:

-Introduction of the Vivad se Vishwas Scheme, 2024 for resolving income tax disputes pending in appeal.

-Increased monetary limits for filing appeals related to direct taxes, excise, and service tax in High Courts, Supreme Courts, and tribunals to ?60 lakh, ?2 crore, and ?5 crore, respectively.

-Expansion of safe harbor rules and streamlining of transfer pricing assessment procedures to reduce litigation and provide certainty in international taxation.

-The Union Budget 2024-25 aims to foster economic growth by implementing comprehensive tax reforms, promoting investment, and simplifying compliance, while maintaining fiscal prudence.