Union Budget 2024: Key Allocations and Strategic Moves by Finance Minister Nirmala Sitharaman
Union Budget 2024: Key Allocations and Strategic Moves by Finance Minister Nirmala Sitharaman
New Delhi, 23rd July 2024 — In a pivotal move aimed at steering the Indian economy towards sustainable growth and stability, Finance Minister Nirmala Sitharaman unveiled the Union Budget for the year today at 11 AM in Parliament. This budget highlights significant allocations for key states governed by the National Democratic Alliance (NDA) and sets forth a fiscal roadmap aimed at reducing the fiscal deficit to 4.5% by 2025-26.
Key Highlights of the Union Budget 2024
Fiscal Prudence and Economic Stability
The budget adheres to a strategic fiscal plan designed to reduce the deficit to 4.5% by 2025-26. This is a critical move to ensure long-term economic stability and maintain investor confidence in the Indian market.
Tax Reforms: Addressing Market Bubbles
In response to the concerns raised in the Economic Survey, the budget proposes an increase in taxes on capital gains and securities transactions. The Long-Term Capital Gains (LTCG) tax has been increased from 10% to 12.5%. This decision aims to curb the potential formation of market bubbles, as the recent surge in equity investments has raised alarms about market instability rather than resilience.
Support for MSMEs
Recognizing the vital role of Micro, Small, and Medium Enterprises (MSMEs) in the Indian economy, the budget introduces robust support mechanisms for these sectors. MSMEs contribute approximately 30% to the GDP and 48% to exports while employing over 110 million people. The proposed measures are expected to bolster their growth and stability, ensuring their continued contribution to the economy.
Political and Economic Implications
Strategic Allocations to NDA-Governed States
The budget includes special financial packages for Bihar and Andhra Pradesh, reflecting a strategic move to solidify support from crucial allies like JD(U) and TDP over the next five years. These allocations are aimed at fostering development and ensuring political stability in these regions.
Absence of Specific Packages for Maharashtra and Haryana
Interestingly, the budget does not feature specific packages for Maharashtra and Haryana. This could suggest the government’s confidence in its political standing in these states, particularly with upcoming state elections on the horizon. The broader focus appears to be on securing a stable five-year term, potentially leveraging the overall economic stability to maintain support.
Economic Survey Insights and Market Impact
Yesterday’s Economic Survey highlighted concerns about the high claims of equity markets on the real economy, indicating potential market instability. The budget’s measures to increase LTCG tax and securities transaction taxes align with these insights, aiming to mitigate risks and ensure a more resilient market environment.