 "FM Nirmala Sitharaman's Budget 2024 for growth, continuity, and steadiness")
Three key elements emerge from the Budget presented by Finance Minister Nirmala Sitharaman which are crucial indications for India’s economic trajectory in the coming years.
The first one is that Prime Minister Modi and his cabinet have fully heard and understood the message from the outcome of the last elections, i.e. the frustration from segments of the population that the country GDP growth in the last few years, as commendable as it has been, has to some extent, left them on the sidelines. Hence, a number of measures have been proposed reflecting more attention to those at the bottom of the pyramid such as additional resources allocated to rural development, to improving the condition of women, and to create more employment opportunities for the unemployed people.
The schemes to incentivize job creation, five million new job opportunities for adults and three million for young people, along with additional effort on education, skilling and employability should, if well implemented, kill two birds with one stone. It should help address the plight of the country’s unemployed and contribute to expanding the manufacturing base of the country, in line with the “Make in India” priority policies of the government.
This would also contribute to another objective of PM Modi, which is the expansion of domestic consumption as the measures dedicated to the bottom of the measures should translate in immediate additional spending. The same can be said about the tax reform aimed at lessening the tax burden of the lower middle class.
The second element to note about the Budget is the continuity with respect to the overall economic strategy and objectives set by Prime Minister Modi since 2014.
There is no relenting on the infrastructure development effort. The focus on attracting more foreign investment and incentivizing more foreign companies to set operations in the country remains the same as illustrated by the reduction from 40 per cent to 35 per cent in the corporate tax rate for foreign companies. The attention devoted over the years to the expansion of India’s startup ecosystem is manifested by the abolition of the Angel tax on all investor categories, a major relief for startups as it has often kept away potential investors. And the ₹35,000 crore (about US$ 4.3 billion) financing for the Production Linked Incentive (PLI) scheme is an additional contribution to the government policy to boost domestic innovation and manufacturing.
In the same way, the various measures aimed at supporting micro, small and medium-sized enterprises (MSMEs) will provide the much needed support to local suppliers and subcontractors across the country. This will not only contribute to the strengthening and expansion of India’s manufacturing base but is also a recognition of the fact that this strengthening and expansion is a prerequisite for the country to develop its role and place in global supply chains. The same can be said with respect to the provision in the Budget for twelve new industrial parks to be set up under the National Industrial Corridor Development Programme.
The third element is the steadiness of the effort towards fiscal and financial sustainability which has been a constant factor in the policy of Finance Minister Nirmala Sitharaman, who has achieved the feat of presenting her seventh consecutive Budget. The reduction of the fiscal deficit target from 5.1 per cent of GDP to 4.9 per cent with the objective of getting at or below 4.5 per cent in 2026, along with the reduction of Rs 12,000 crore in planned gross market borrowing are reassuring signals for the international and domestic financial markets.
This Budget is consistent with policy and – if fully implemented - will definitely be a major tool in ensuring a sustainable GDP growth rate of 7-8 per cent over the next few years, barring negative developments in the global geopolitical and economic landscape. It will also be a significant contribution in reinforcing the increasing perception of the international business community of India as a destination of choice for investment and economic partnerships.
The writer is Chairman of Smadja & Smadja Strategic Advisory and Founder of the India Global Innovation Connect