By Rashesh Shah
The Union Budget 2024, presented by finance minister Nirmala Sitharaman, signifies a crucial juncture in India’s economic trajectory. Characterised by fiscal prudence, structural reforms and social welfare initiatives, it promises to propel India towards a $4-trillion economy. It lays foundation for long-term growth, addressing immediate economic concerns and maybe with a potential real growth rate of 7-7.5%, while positioning India for sustained prosperity.
The government’s commitment to fiscal discipline, targeting a fiscal deficit of 4.9% of GDP, is commendable. This approach is essential for maintaining macroeconomic stability and attracting foreign investment. The significant increase in capital expenditure by 33% to Rs 11.11 lakh crore underscores the government’s focus on infrastructure development, job creation and economic stimulation, and will catalyse growth across sectors.
The government’s plan to borrow Rs 14.01 lakh crore, as outlined in the Interim Budget, can provide an impetus to the bond markets. This move, coupled with targeted investments in infrastructure, sets the stage for a robust economic revival.
There is a specific emphasis on the housing sector. PMAY Urban 2.0 aims to provide housing for 1 crore poor and middle-class families, with an investment of Rs 10 lakh crore aligning with the goal of “Housing for All” by 2030. This initiative is projected to significantly contribute to GDP growth, with the housing sector expected to account for 13% of GDP by 2030.
The proposed Rs 1.5 lakh crore long-term interest-free loan for state governments will empower them to enhance infrastructure spending and implement critical reforms. It is expected to stimulate economic activity at the grassroots level.
The Budget introduces three Employment-Linked Incentive (ELI) schemes, which incentivise job creation in manufacturing, provide wage subsidies for new workforce entrants, and support employers in hiring additional employees. The government’s commitment to skilling is evident in the planned upgrade of 1,000 ITIs, skill loans up to Rs 5 lakh, and financial support for higher education loans. By fostering a skilled workforce, India can leverage its demographic dividend.
The Budget recognises the pivotal role of MSMEs in India’s economic landscape. Measures to enhance credit access and simplify regulatory processes for MSMEs are timely. Initiatives such as the Rs 100 crore credit guarantee scheme, increase in the MUDRA Yojna loan limit, and the opening of 24 SIDBI branches are expected to provide substantial support to this sector.
MSMEs are the backbone of the economy, contributing significantly to employment and GDP. By empowering them, the Budget aims to foster entrepreneurship, innovation and regional economic development.
There are various measures to stimulate consumption, such as reducing personal income tax rates, increasing the standard deduction to Rs 75,000, and implementing direct cash transfers. These are aimed at enhancing disposable income, driving both rural and urban consumption.
The emphasis on R&D in green technologies and AI positions India as a frontrunner in innovation. These investments are crucial for fostering a sustainable and technologically-advanced economy.
While the Budget lays a strong foundation for growth, challenges remain. Private investment needs to pick up pace, and interest rates need to decline, for sustained growth. Addressing the current sluggishness in consumption is also critical.
The Budget is reassuring on the India growth story. It addresses immediate concerns while laying the groundwork for long-term sustainable growth. The focus on fiscal discipline, infrastructure development, employment generation, MSME empowerment, and digital transformation is essential for enhancing India’s economic resilience. As we move forward, it’s crucial to monitor the implementation of these measures. By fostering a conducive environment for growth and innovation, India can continue to thrive on the global stage.
(The author is the Chairman at Edelweiss. Views are personal.)