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For any new government, life actually begins with the first budget. The NDA government’s first full Budget for 2024-25, too, started off with a rather belated but sincere effort to address the collective woes of the youth, smaller enterprises and, to an extent, the middle class. It also gave in to the special demands of coalition partners, the TDP and the JD(U), as the BJP can no longer govern alone. The good news, though, is it does all this and more without setting off fiscal alarms. Notwithstanding the pulls and pressures of populism, Finance Minister Nirmala Sitharaman set herself a daring challenge of debt reduction from 2026-27, as against the norm of reducing fiscal deficit alone.
This is a first and underscores the substance and symbolism of all NDA budgets—better a rupee earned than two borrowed. The proposed move should help improve expenditure quality, reduce borrowing costs and lower interest outgo. Tax collections are on a tear; yet Sitharaman pegged a modest 10.65 percent growth target for 2024-25 to Rs 38.31 lakh crore. Be it tax collections, expenditure outlays or nominal GDP estimates, the government’s mantra has been the same—set expectations so low that it would not take much to exceed. As Chief Economic Adviser V Anantha Nageswaran quipped on Monday, it’s better to be prudent and be pleasantly surprised than get caught on the wrong foot.
That said, this Budget has some notable firsts. The supreme focus on employment, coming after a space-time tear five years late, involves three distinct incentive schemes together bucketing out Rs 1.48 lakh crore to help boost jobs with a special focus on the manufacturing sector. The initiatives, based on provident fund enrolments, are targeted at first-time employees who will get direct transfers. In another first, employers too will receive incentives for job creation, with the government reimbursing provident fund contributions for two years for each new employee.
To improve the factors of production, including labour, Sitharaman played smart. While increasing the allocation of interest-free infrastructure loans to states by 15 percent to Rs 1.5 lakh crore, she laid down a caveat for states to first undertake land and labour reforms. In 2023-24, only 80-85 percent of the budgeted amount was granted as states failed to meet the conditions; now, one would expect them to be on the reform path.
Like in most budgets, changes in direct taxes stirred up a storm. For the second time in two years, Sitharaman reduced the overall personal income tax rate, besides increasing the standard deduction limit. But it did not enthuse taxpayers at all. Instead, they got somewhat riled up, thanks to the unexpected increase in both short-term and long-term capital gains taxation that came at a time when we were expecting the taxman to tread lightly on our lives. Overall, Budget 2024-25 strikes a balance between fiscal consolidation and social sector demands, yet focuses on structural improvements, including incremental steps to boost job creation and equitable growth.