Union Budget 2024-25

Context (PIB): The Finance Minister outlined a balanced fiscal strategy in the budget, emphasising both growth targets and fiscal discipline.

Basics

Article 112 requires an annual financial statement of India to be laid before Parliament in every financial year, which runs from 1^st April to 31^st March.
Annual Financial Statement is the main budget document commonly referred to as Budget Statement.
It is essentially a financial plan outlining the government’s expected income (revenue) and expenses (expenditure) for a specific period, typically a fiscal year.
The other budget documents include:
- Annual Financial Statement (AFS)
- Demands for Grants (DG)
- Finance Bill
- Statements mandated under the FRBM Act:
- Expenditure Budget
- Receipt Budget
- Expenditure Profile
- Budget at a Glance
- Macro-Economic Framework Statement
- Medium-Term Fiscal Policy cum Fiscal Policy Strategy Statement

Objectives of Government Budgeting

Resource Allocation: Deciding how government funds are distributed among different sectors.
Economic Stabilization: Using fiscal policy to manage economic fluctuations (inflation, recession).
Income Redistribution: Reducing income disparities through taxation and spending programs.
Public Welfare: Providing essential services like healthcare, education, and social security.
Economic Growth: Investing in infrastructure and creating a conducive business environment.

Components of a Government Budget

Revenue: This includes all the income sources for the government.
- Tax Revenue: Income tax, corporate tax, sales tax, excise duty, etc.
- Non-tax revenue: Fees, licenses, profits from public enterprises, etc.
- Borrowings: Loans from domestic and international sources.
Expenditure: This covers all the government’s planned spending.
- Revenue Expenditure: Day-to-day expenses like salaries, subsidies, and interest payments.
- Capital Expenditure: Investment in assets like infrastructure, education, and defence.

Types of Budgets

Balanced Budget: Revenue equals expenditure.
Surplus Budget: Revenue exceeds expenditure.
Deficit Budget: Expenditure exceeds revenue.

Process of Budgeting

Planning and Forecasting:
- Economic Analysis: Assessing the current economic situation, growth projections, inflation rates, and other macroeconomic indicators.
- Revenue Estimation: Predicting government income from taxes, fees, and other sources.
- Expenditure Planning: Identifying government spending priorities based on policy goals and societal needs.
Budget Preparation:
- Departmental Requests: Govt. departments submit proposals outlining expenditure requirements.
- Budget Formulation: The finance ministry consolidates departmental requests and prepares a comprehensive budget document.
- Fiscal Targets: Setting fiscal deficit, revenue, and expenditure targets.
Budget Presentation:
- Announcement: The FM presents the budget to the legislature, outlining the government’s fiscal policies, expenditure priorities, and revenue measures.
- Public Scrutiny: The budget is subjected to public debate and scrutiny.
Budget Approval:
- Legislative Approval: Legislature debates & approves the budget, making necessary amendments.
- Enactment: The approved budget becomes law.
Budget Implementation:
- Fund Allocation: Government departments receive allocated funds.
- Expenditure Management: Departments manage their budgets to achieve program objectives.
- Monitoring and Evaluation: Tracking spending, performance, and financial outcomes.
Budget Review and Adjustment:
- Performance Assessment: Evaluating budget implementation and achievements.
- Budget Revision: Making adjustments to budget based on economic conditions and performance.

Read more > Budget Archives.

Budget 2024-25: Part A – Policy and Allocation

Viksit Bharat: A Developed India

Viksit Bharat is the Hindi translation for Developed India.
It’s a vision for India to become a developed nation by its 100^th year of independence in 2047.
Priorities outlined in the budget for Viksit Bharat:
- Productivity and resilience in Agriculture
- Employment & Skilling
- Inclusive Human Resource Development and Social Justice
- Manufacturing & Services
- Urban Development
- Energy Security
- Infrastructure and Tourism
- Irrigation and Flood Mitigation
- Innovation, Research & Development
- Next Generation Reforms
Budget will focus on four demographic sectors of India:

Source: indiabudget.gov

Agriculture

Emphasis on increasing productivity and resilience in the agricultural sector.

Source: indiabudget.gov

Natural farming: In the next two years, 1 crore farmers nationwide will be initiated into natural farming, supported by certification and branding. 10,000 need-based bio-input resource centres to be established.
Digital Public Infrastructure (DPI) DPI for coverage of farmers and their lands in 3 years. Digital crop survey in 400 districts and issuance of Jan Samarth based Kisan Credit Cards.
Shrimp Production & Export: Financing for Shrimp farming, processing and export through NABARD.

Employment and Skilling

PM’s Package (3 schemes for Employment Linked Incentive):

Source: indiabudget.gov
PM’s Package (4^th scheme): Twenty lakh youth will be skilled over five years. 1,000 Industrial Training Institutes (ITIs) will be upgraded in hub-and-spoke arrangements with outcome orientation.
PM’s Package (5^th scheme): Internship opportunities in 500 top companies to 1 crore youth in 5 years with an allowance of ₹5,000 per month with a one-time assistance of ₹6,000 through the CSR funds.
Improve participation of women in the workforce by setting up working women hostels in collaboration with industry and establishing creches.
Student loans: Loans up to ₹7.5 lakh with a guarantee from a government-promoted fund to help 25,000 students every year.
Financial support for education: Loans up to ₹10 lakh for higher education in domestic institutions through direct e-vouchers to 1 lakh students every year for annual interest subvention of 3%.

Purvodaya: Vikas bhi Virasat bhi:
- Plan for endowment-rich states in the eastern parts, covering Bihar, Jharkhand, West Bengal, Odisha, and Andhra Pradesh, to generate economic opportunities and attain Viksit Bharat.
- Amritsar Kolkata Industrial Corridor with developing an industrial node at Gaya.

Pradhan Mantri Janjatiya Unnat Gram Abhiyan:
- To improve the socio-economic condition of tribal communities, saturation coverage for tribal families in tribal-majority villages and aspirational districts, covering 63,000 villages and benefiting 5 crore tribal people, should be adopted.
Andhra Pradesh Reorganization Act:
- Financial support of ₹15,000 crores will be arranged in FY 24- 25.
- Completion of the Polavaram Irrigation Project, ensuring the nation’s food security.
- Essential infrastructure in the Kopparthy node on the Vishakhapatnam-Chennai Industrial Corridor and the Orvakal node on the Hyderabad-Bengaluru Industrial Corridor.

Manufacturing and Services

Source: indiabudget.gov

Make in India: The budget reinforced the government’s commitment to the Make in India initiative.
Development of 12 industrial parks under the National Industrial Corridor Development Programme.
Focus on Critical Minerals Mission for domestic production, recycling, and overseas acquisition.
Strengthening the tribunal and appellate tribunals to speed up insolvency resolution and establish additional tribunals.

Urban Development

PM Awas Yojana (PMAY) Urban 2.0: A significant allocation of ₹2.2 lakh crore over the next five years to build one crore affordable houses for the urban poor and middle-income groups.
Rental housing: Dormitory accommodation for industrial workers in PPP mode with VGF support. Enabling policies and regulations for efficient and transparent rental housing markets with enhanced availability will also be put in place.
Smart Cities Mission: Continued support for the Smart Cities Mission to create sustainable and citizen-friendly urban spaces.
Brownfield Redevelopment: Encouragement for brownfield redevelopment to optimise land use and promote urban renewal.

Source: indiabudget.gov

Energy Security

Prioritizing clean energy and energy independence.
PM Surya Ghar Muft Bijli Yojana: Expanded to cover one crore households for free electricity up to 300 units per month through rooftop solar installations.

Source: indiabudget.gov

Infrastructure

Substantial allocations for developing transportation, digital connectivity & other infrastructure.

Source: indiabudget.gov

Railways: Increased allocation for modernisation, electrification, and high-speed rail projects.
Roadways: Emphasis on expanding the national highway network and improving rural connectivity.
Urban Transport: Focus on metro rail, bus rapid transit systems, and multimodal transport solutions.
Airports and Waterways: Investments in airport infrastructure and inland waterways.
Broadband Expansion: Continued focus on expanding broadband access to rural areas.
Digital Infrastructure: Investments in optical fibre networks, data centres & emerging technologies.
Digital Payments: Promotion of digital payments and financial inclusion.

Irrigation and Flood Mitigation

Financial support for projects estimated to cost ₹11,500 crore, such as the Kosi-Mechi intra-state link and 20 other ongoing and new schemes.
Assistance for flood management and related projects in Assam, Sikkim & Uttarakhand.
Assistance for reconstruction and rehabilitation in Himachal Pradesh.

Tourism

Vishnupad Temple Corridor and Mahabodhi Temple Corridor will be developed modelled on Kashi Vishwanath Temple Corridor.
Development initiative for Rajgir, which is religiously significant to Hindus, Buddhists, and Jains.
The development of Nalanda as a tourist centre, along with the revival of Nalanda University.
Assistance developing Odisha’s scenic beauty, temples, monuments, craftsmanship, wildlife sanctuaries, natural landscapes, and pristine beaches makes it an ultimate tourism destination.

Innovation and Research

Source: indiabudget.gov

Start-up Ecosystem: Continued support for startups, including abolishing angel tax.
Technology Adoption: Emphasis on emerging technologies such as AI and quantum computing.
Space sector: Emphasis on expanding the space economy by five times in the next ten years with a venture capital fund of ₹ 1,000 crore.

Next-Generation Reforms

FDI and Overseas Investments: Simplified to facilitate FDIs and promote opportunities for using Indian Rupee as a currency for overseas investments.
NPS Vatsalya: A plan for contribution by parents and guardians for minors. On attaining the age of majority, the plan can be converted seamlessly into a normal NPS account.
New Pension Scheme (NPS): A solution that addresses the relevant issues, protects the common citizen and maintains fiscal prudence will be formed.

Source: indiabudget.gov

Budget estimates: 2024-25

For the year 2024-25, the total receipts other than borrowings and the total expenditure are estimated at ₹32.07 lakh crore and ₹48.21 lakh crore, respectively.
Net tax receipts are estimated at ₹25.83 lakh crore. Fiscal deficit is estimated at 4.9 percent of GDP.
The government will aim to reach a deficit below 4.5 per cent next year.

Source: indiabudget.gov

Receipts	Expenditure

Fiscal Deficit: The government narrowed the fiscal deficit to 4.9 per cent of GDP for the current fiscal year. Capital Expenditure: Increased capital expenditure to boost economic growth.

How can reducing the Deficit Lead to More Spending?

Enhanced Creditworthiness: Lower deficits improve fiscal health, lowering borrowing costs and freeing up funds for development.
Boosted Investor Confidence: Signals of fiscal discipline attract investment, stimulating economic growth and tax revenue.
Stable Economic Environment: Reduced deficits mitigate economic instability risks, supporting sustainable growth and efficient resource allocation.
Savings on Interest Payments: Less spent on interest allows redirection to crucial sectors like education and healthcare.
Policy Flexibility: Lower deficits allow effective policy responses during economic challenges.

Budget 2024-25: Part B Taxation

Indirect Tax Proposals

Review of the rate structure for ease of trade, removal of duty inversion and reduction of disputes.

Source: indiabudget.gov

Direct Tax Proposals

Government plans Review of Income Tax Act 1961, Simplification of charities & TDS.
Rationalisation of capital gains
- Short-term gains of financial assets to attract a 20% tax rate.
- Long-term gains on all financial and non-financial assets to attract a tax rate of 12.5%.
- Increase the exemption limit of capital gains on financial assets to ₹1.25 lakh per year.
Employment and Investment
- Abolished Angel tax for all classes of investors.
- A simpler tax regime for operating domestic cruises.
- Provide for safe harbour rates for foreign mining companies (Selling raw diamonds).
- The corporate tax rate on foreign companies was reduced from 40% to 35%.
Simplifying New Tax Regime
- Over 58 per cent of corporate tax receipts were collected under the new regime.
- Two-thirds of individual income taxpayers switched to the new tax regime.
- Standard Deduction for salaried employees increased from ₹50,000 to ₹75,000.
- Deduction on family pension for pensioners increased from ₹15,000 to ₹25,000.
- New income tax slabs for individuals: