Top Six Highlights from PM Modi's 2024 Budget: What You Need to Know

Los Angeles/July 23, 2024
NRIpress.club/Ramesh/A.Gary Singh

India’s Finance Minister, Nirmala Sitharaman, presented the coalition government’s inaugural budget following a slim election victory that saw the Bharatiya Janata Party (BJP) lose its outright parliamentary majority. This budget replaces the interim budget effective from 1 April, signaling new priorities under Prime Minister Narendra Modi’s leadership with increased funding for rural development, skilling, employment, and agriculture.

Six Key Points from India’s Budget:

1. Higher Taxes on Capital Gains: The budget has raised the tax on long-term capital gains from 10% to 12.5% for all assets held over a year. Short-term capital gains tax has also increased from 15% to 20%. Additionally, the securities transaction tax on derivatives trading has been elevated. This move was anticipated following the Economic Survey's caution about rising speculation and the growing number of retail investors in Indian markets.

2. $24 Billion Employment Initiative: Sitharaman announced three new schemes to address chronic unemployment, totaling 2 trillion rupees ($24bn) over five years. First-time formal sector employees will receive a direct cash transfer equal to their first month's salary (up to 15,000 rupees). Two additional programs will boost manufacturing jobs through employment-linked incentives for both employees and employers.

3. Tax Breaks for Start-ups, Middle Classes, and Foreign Corporations: The budget abolishes the angel tax on capital raised by private companies, benefiting the start-up sector. Minor adjustments in personal income tax will save taxpayers up to 17,500 rupees ($209). Corporate tax on foreign companies has been reduced from 40% to 35% to encourage investment.

4. Allocations for Regional Allies: The budget includes significant allocations to meet the demands of the BJP's key regional allies: Janata Dal (United) in Bihar and the Telugu Desam Party in Andhra Pradesh. Andhra Pradesh will receive 150 billion rupees for capital development, with more funds promised in the future. Bihar will see new projects for airports, roads, and power infrastructure.

5. Reduced Fiscal Deficit: The budget sets a new fiscal deficit target at 4.9% for this financial year, down from the previous 5.1%. A significant dividend payout of over $25bn from the central bank allows the government to reduce the deficit without major spending cuts.

6. Steady Capital Expenditure: State-led capital expenditure on infrastructure remains at $134bn, unchanged from the interim budget. However, the focus has shifted to employment, small businesses, and social welfare. Shubhada Rao, economist and founder of QuantEco Research, notes that the budget is more redistributive, potentially increasing disposable incomes through salary credits for new employees and minor tax adjustments.

The finance ministry projects economic growth between 6.5% and 7% for the financial year ending March 2025, lower than last year's 8.2% and below the forecasts from the central bank and international bodies like the IMF and ADB.

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