Well-focused Budget 2024 with special development thrust: Madan Sabnavis

Union Budget 2024-25 news: There has been some comfort provided to individuals who opt for the new income tax scheme as there is some rationalisation across the slabs

Union Budget 2024-25 news highlights: The Union Budget 2024 may be termed as one with a special development thrust that addresses two major pressing challenges in the economy – employment and MSMEs. There is a direct thrust on channeling funds to first-time employees with commensurate benefits to companies, too, which will ensure there is an incentive to hire more people. This is in line with the flag raised by the Economic Survey on the issue. The collateral effect will be in a limited way on consumption as more jobs creates consuming capacity.

The MSME interests have been addressed through the credit route with a guarantee scheme being launched, besides asking banks to have their own models for lending that is not linked with collateral. This would also feed into creating jobs, which is progressive. There will be backward linkages to job creation, too, as well as a positive impulse for exports given that these units contribute to around 40 per cent of outward trade.

The funding being provided for balanced development that covers assistance to states like Andhra Pradesh, Bihar, Odisha and Jharkhand would be an indirect push given to investment in the economy.

Also Read: Budget 2024 hikes LTCG tax rate to 12.5%, STCG to 20%, STT on F&O also up

The push to housing in both urban and rural areas is another nudge being given to investment in the country. The interest subvention-cum-subsidy approach to encourage the lower income groups to buy their homes will keep the real estate sector ticking.

It is not surprising that the direct expenditure through capex has not been changed by the government with the amount being capped to the Interim Budget level. This sounds practical since with just 8 months left for the year, the capacity to implement higher levels of projects would always be a challenge.

These measures will provide a stimulus for the infra-related industries like cement, steel, machinery with the real estate sector witnessing a revival at the level of affordable housing. There are opportunities for lending for the banking sector, especially for MSMEs, besides housing. At the micro level, education loans would also see an uptick in demand.

Fiscal deficit

The overall fiscal deficit has been lowered to 4.9 per cent compared to 5.1 per cent targeted in the interim budget and 5.2 per cent, which was a result of lower denominator when the gross domestic product (GDP) numbers were announced in May. Hence, a large part of the surplus received from the Reserve Bank of India (RBI), has been used to buttress fiscal prudence.

The size of the budget has gone up only marginally by around Rs 60,000 crore. These numbers also mean that the overall borrowing programme of the government is almost unchanged – in fact it has come down marginally. This should placate the market as it is virtual status quo from the point of view of liquidity.

Income tax changes in Budget 2024

As was expected there has been some comfort provided to individuals who opt for the new tax scheme as there is some rationalisation across the slabs which gives a net benefit to every tax payer and can be combined with the standard deduction that has been raised.

This should increase spending power or preserve real purchasing power. There appears to be nothing for those who have opted for the old tax scheme, which can be taken to be an indication for migration to the ‘no frills’ option.

The stock market, however, has not been enthused with the Sensex falling below 80,000 as the speech ended. But then one can never tell about markets.

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Disclaimer: Madan Sabnavis is the chief economist at Bank of Baroda and author of: Corporate Quirks: The darker side of the sun. Views are personal