Union Budget 2024-25 – A Transformational Budget

Nirmala Sitharaman’s seventh budget in a row is truly a transformational budget targeting the $5trn economy by 2027. It has tread a new path in tackling all the factors of production for the industry. They are covered in nine priority areas encompassing agriculture, employment, social justice, manufacturing, urban development, energy security, infrastructure, innovation, Research and Development, and Nextgen reforms policy.

For the first time ever, land, that largely falls in the state domain, has been given a new policy thrust with cadastral survey, GIS in urban areas, digitalization of land titles after taking the state governments also into confidence. Targeting 4 percent inflation, she unleashed the inclusive agenda.

Transforming Agriculture: A New Era Begins

She laid a firm foundation for Digital Agriculture, coupled with higher-yielding, climate-resilient seed varieties and ensuring MSP at 50 percent of the cost of more crops than just food crops, push to the oil seeds and millets crops for diversification by the farmers. These will ensure food security and sustainability amidst evolving global challenges. Transforming Agricultural Research through experts’ oversight, fillip to natural farming adoption by one crore farmers, allocation of Rs.10cr for infotech research centres, storage, marketing facilities, Atma Nirbharata for oil seeds, vegetable production, Farmer producers’ organisations and strengthening the agricultural supply chains will make the agricultural sector strong. She promised that the cooperatives at the grassroots will get support through the National Policy on Cooperatives.

MSMEs: The Backbone of Economic Resilience

Approach to MSME development has considered the lifecycle of the enterprises. Facilitating term loans to the manufacturing MSMEs through a separate credit guarantee mechanism of Rs.100crore fund with graded slabs of premium payment and a separate policy for the medium term on the agenda should be welcome. The most significant aspect of the budget are: the coverage of credit risks sans the usual rating mechanism adopted by the banks, adopting specific transparent criteria for accelerating credit to MSMEs, financial institutions to view the machinery and other assets created as collateral security, providing exit routes for the LLPs, enhancing the number of Debt Recovery Tribunals with speedy redress, recognising the stress of the enterprises at the special mention account stage itself (SMA) and relieve the stress prior to declaring the asset as non-performing through a separate guarantee fund, employment and skill development incentive at Rs.5000 per employee for all the startup manufacturing enterprises for three consecutive years to the micro and small enterprises evidenced by the payment of ESI/EPF. All these will bolster entrepreneurship and foster economic sustainability and resilience. Women entrepreneurship will be given additional benefits and SHGs will be the conduits for public procurement.

Empowering Youth and Women: A Vision for the Future

Allocation of Rs.2lakh crore towards schemes targeting benefit to 4.1crore youth over the next five years demonstrates the commitment of the government to Employment growth. The introduction of wage subsidies and EPFO-linked benefits to employers and employees under three new schemes, and internship allowance of Rs.5000 per employee in the manufacturing micro and small enterprises through the 500 identified companies CSR fund is a novel approach that places the Indian MSMEs on a competitive agenda globally are significant in themselves.

Higher education loans up to Rs.10lakhs within domestic institutions of repute, alongside interest subvention scheme of 3 percent per individual will enhance their accessibility and adaptability to the industry.

Fiscal Discipline and Economic Growth: Striking the Balance

FM has satisfied the three states, Andhra Pradesh, Bihar, and Odisha. Andhra Pradesh with a commitment to honour the AP State Reorganization Act 2014 commitments, Rs.15000cr for the development of the capital city Amaravati, funds for the Polavaram Project, Chennai-Hyderabad and Hyderabad- Bengaluru industrial corridor are a few of the promises laid out in the Budget. Gaya and Bodh Gaya tourist projects, important bridges that inundate Bihar every year as part of central funding are bonanzas for Bihar State and the promises far exceed the Special Status those Chief Ministers have been otherwise asking the Union government to consider.

Coming to taxes and revenues, she ensured that the fiscal deficit will be brought down to 4.9% of GDP. Security transaction tax against futures and options has been increased and this will be a shot in the arm for the resources of the government to meet the other fiscal challenges.

All said and done, no budget can please all. There will be some states that will be disappointed and some corporates feeling the need for more. Overall, the Budget has proved that Viksit Bharat agenda will be pursued with all seriousness.

By Dr Yerram Raju. The Author is an economist and risk management specialist. He is the Former Dean of Studies, ASCI and Founder Director of Telangana Industrial Health Clinic Ltd. The views are personal.

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