India’s Budget Prioritizes Infrastructure, Innovation, and Sustainability

India’s budget 2024:

Finance Minister Nirmala Sitharaman recently delivered a significant speech, representing the India’s budget announcement before the upcoming Lok Sabha elections.

In her address, Ms. Sitharaman painted a vivid picture of India’s economy undergoing a “profound transformation.” She emphasized the government’s commitment to uplifting vulnerable segments of society, such as the poor, women, youth, and farmers.

This year’s budget presentation goes far beyond mere numbers and policy pronouncements. It represents a deliberate shift in focus, prioritizing the well-being of those who haven’t always benefited from India’s economic growth.

For millions of people living in poverty, struggling for economic parity, or facing limited opportunities, India’s Budget 2024 serves as a beacon of hope. It promises concrete measures to address their specific needs and aspirations, providing a much-needed ray of sunshine in an otherwise challenging and uncertain world.

Key themes emerged throughout the speech:

The country is focusing on areas such as infrastructure development, digitalization, and green initiatives. The government has promised to uplift the poor, women, youth, and farmers with a range of schemes.

This shows that they are committed to social development and inclusive growth. The government is prioritizing these groups by mentioning them specifically, suggesting that they will take targeted measures to address their unique challenges and unlock their potential.

Here are the key takeaways from Nirmala Sitharaman’s Budget 2024:

Support towards women, MSME, Agriculture sector

The India’s budget has been balanced by the Finance Minister by adhering to fiscal prudence, boosting infrastructure growth, and prioritizing the poor, women, youth, and farmers.

By increasing focus on infrastructure, the broader economy is expected to get a boost, which will lead to increased investment activity in the long term. The government’s support to MSMEs, women entrepreneurs, and the agricultural sector aligns with our aim to provide credit support to MSMEs, small business owners, farmers, and women entrepreneurs, thus addressing their economic needs.

This statement was made by George Alexander Muthoot, MD of Muthoot Finance.

Less GOI Borrowing Might Ease Lender Funding Costs

The Indian government’s borrowing plan could help control lenders’ funding costs. A smaller borrowing program in the next fiscal year might benefit lenders by keeping funding costs in check. This could be good news for housing finance companies, as the government plans to build an additional 2 crore houses under the PMAY (Grameen) scheme in the next five years.

Additionally, there are plans to launch a housing scheme for the middle class which would increase demand for affordable housing. Housing finance companies have played a key role in providing credit to these segments in recent years.

Empower every section of the society

The recently announced India’s budget 2024 is a step towards creating a prosperous and inclusive India, aligned with the vision of ‘Viksit Bharat’.
The goal of empowering every section of society, particularly the ‘Garib’, ‘Mahilayen’, ‘Yuva’, and ‘Annadata’ is intertwined with the nation’s growth, and it’s encouraging to see the Government prioritizing it.

Budget focuses on growth through inclusive policies

The India’s budget prioritizes inclusive policies to promote growth. Although it doesn’t contain any major announcements, the Finance Minister has laid out a clear roadmap to achieve the 4.5% fiscal deficit to GDP target by FY26.

The target for FY25 of 5.1% is a significant step towards achieving this goal. The Finance Minister will continue to lead capital expenditures. This suggests that if the government is re-elected, we can expect continuity in their approach.

Positive impact for the startup’s economy

The tax breaks for early-stage companies will be extended until March 2025. This move will provide more time for these companies to reap the benefits of the tax breaks, which include a lower tax burden and easier access to funding from sovereign wealth funds and pension funds. Additionally, there is a possibility of tax exemptions for IFSC units.

Although the full details of this initiative are yet to be released, it is a clear indication of the government’s continued support for the thriving startup ecosystem in India.

Lowers fertiliser subsidy allocation by 13% to Rs 1.64 crore

India has decided to reduce its fertilizer subsidy budget by 13% for the upcoming year. This means that the government will spend less money on making fertilizers cheaper for farmers. As a result, farmers will have to pay more for fertilizers. The new subsidy allocation for fertilizers is Rs 1.64 crore.

Budget Boosts Infrastructure Spending, Fueling India’s Growth Engine

While there were no major surprises, the fact that the deficit has been lowered and there is an increase in spending on infrastructure (capital expenditure) are both excellent signs. This move is expected to encourage businesses to invest more, thereby giving an overall boost to the economy. All in all, the India’s budget seems to be a step in the right direction for economic development.

India Cuts FAME Subsidy Budget by 44%

In India’s budget , the government’s decision to significantly reduce funding for its electric vehicle (EV) incentive program has raised concerns about the rate of EV adoption in the country.

The FAME subsidy scheme, which was introduced to encourage EV sales, will now receive only Rs 2,671 crore for the next fiscal year, marking a 44% decrease from the previous allocation of Rs 4,723 crore. This India’s budget cut could make EVs less affordable for consumers, potentially discouraging potential buyers and having a negative impact on the growth of the EV industry in India.

No major tax changes announced

The latest India’s budget announcement has brought some good news to the table. The government has decided not to introduce any new tax breaks or increases, which means the tax rates will remain the same.

However, the government has allocated a significant amount of money, 1.1 trillion rupees to be exact, to be spent on infrastructure development. This investment will focus on building new roads, bridges, and other crucial projects. This will not only help drive economic growth but also make it easier and cheaper to transport goods across the country.

Rooftop solar installation a great investment for everyone

If we install solar panels on 10 million homes, it would create a lot of clean energy. Homes with solar panels could receive up to 300 units of free electricity per month. This would help reduce the financial burden on power companies and make them less reliant on subsidies.

Budget boosts Infrastructure sector

The government has increased the infrastructure budget by 11% to Rs 11.11 lakh crore. As part of the Gati Shakti master plan, state governments will receive 50-year interest-free loans for another year.

To reduce congestion and logistics costs in India, three economic railway corridor programs will be established, including corridors for energy, mineral, and cement, another to improve port connectivity, and a third to reduce high traffic density corridors.

The much-awaited viability gap funding for offshore wind has been announced, without specifying the allocation. Upgrades to Vande Bharat standards will be made to 40,000 normal trains, and more cities will have NAMO trains and metro rail services.

Budget updates on Banking Sector

The India’s Budget 2024 did not have much impact on the banking sector. The Finance Minister’s speech did not address key issues such as bank privatisation, recapitalisation of state-run banks, and regulations on Crypto. However, the India’s budget did propose some measures to boost funding for small firms.

In India’s budget, the government plans to establish a fund of Rs 1 lakh crore with 50-year interest-free loans to encourage the private sector to innovate and expand.

The Finance Minister emphasized the government’s commitment to fiscal consolidation, which is important since the Reserve Bank of India has been seeking fiscal commitment for effective monetary policy.

Additionally, the tourism sector received some good news as the government plans to provide long-term interest-free loans to promote iconic tourist centers.

The bond market also received some relief as the lower gross borrowing and fiscal deficit numbers led to Indian bond yields falling by 8 basis points, while the rupee remained stable.

Key takeaways for investors after Budget 2024

The government’s fiscal deficit for the year is better than expected, with net borrowing at Rs 11.75 lakh crore. This positive development should be good for the bond markets. Capital spending growth is expected to be around 12%, which is in line with expectations. This should support growth until private capital expenditure comes into full force.

The government will continue to support key infrastructure segments, such as railways, metros, power, and capital goods.

There will be no change in long-term or short-term capital gains tax, direct or indirect taxes.
The post-tax return economics for local investors remain the same across asset classes. Overall, this is a positive development for the markets and should attract foreign investors once global liquidity flows back to EM.

Conclusion

India’s budget plan outlines a roadmap for inclusive growth and infrastructure development. While it did not have any major announcements, it offers a few important takeaways. Startups will continue to get tax benefits, and more money will be spent on infrastructure.

Also, in India’s budget, there will be a focus on empowering vulnerable sections of society. While there are some concerns about reduced EV subsidies and fertilizer allocations, the overall direction of the India’s budget seems positive for economic growth and market stability. Investors can expect continuity in policies and support for key sectors like railways, metros, and power.

This India’s budget sets on track for its 2047 vision of being a prosperous and inclusive nation.