Current American establishment's quest for control and "teaching countries lessons" is pushing the geostrategic chessboard in a certain direction. The resultant Indo-China rapprochement may be a watershed moment in this century. A detailed analysis.
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India's Union Budget 2024-25: What did it bring for all?
The Indian budget every year has always been an eagerly awaited event. For many decades, the best minds in economics, finance, tax, business and industry throng the media house to analyze the provisions shared by the Financial Minister.
“If you can't explain it to a six-year-old, you don't understand it yourself.” ― Albert Einstein
The Budget time is here now.
The most significant economic event unfolded in India on July 23rd, 2024 - the Annual Indian Union Budget. The Indian budget is a cornerstone event that shapes the nation's economic direction for the coming fiscal year. It not only outlines government revenue and expenditure but also reflects the country's priorities in sectors like healthcare, infrastructure, and defense.
Ideally, the budget should serve as a blueprint for economic policies and reforms for growth, stability, and social welfare. But does it always? That is questionable.
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The Union Finance Minister Nirmala Sitharaman took a digital tablet wrapped in a traditional bahi-khata style pouch this year to the Parliament as she arrived to present the full Budget 2024-25. It signified two things - tradition (of how accounts have been kept in bahi-khata) and a tablet for future progress.
Let us get to the provisions of the budget now.
First, let us go through the top highlights:
Tax Reforms
The government continues its trend of expanding lower tax rates with fewer deductions. Significant changes include:
Standard Deduction Increase:
The standard deduction for salaried employees has been raised from ₹50,000 to ₹75,000. So, for all you hard-working, tax-paying citizens out there, this means you'll have a bit more money in your pockets.
New Tax Slabs:
The tax rates for the new tax regime have been revised as follows:
Income up to ₹3 lakh is tax-free.
Income between ₹3-7 lakh will be taxed at 5%
Income between ₹7-10 lakh will be taxed at 10%
Income between ₹10-12 lakh will be taxed at 15%
Income between ₹12-15 lakh will be taxed at 20%
Income above ₹15 lakh will be taxed at 30%.
It's like a game of "guess the tax rate" - the higher your income, the higher the stakes!
Long-Term Capital Gains (LTCG) Tax:
The LTCG tax rate has been increased from 10% to 12.5%. So, if you're a long-term investor, you might want to hold onto your assets a bit longer to avoid paying more taxes.
Short-Term Capital Gains (STCG) Tax:
The STCG tax rate has been increased from 15% to 20%. Short-term traders, you might want to hold your horses - or your stocks - for a bit longer to avoid this increase.
Angel Tax:
The Angel Tax has been abolished! This is great news for startups and investors, as it removes a significant tax burden. Now, you can invest in startups without worrying about the taxman knocking on your door.
Securities Transaction Tax (STT):
The STT on futures and options has been increased to 0.02% and 0.1%, respectively. This might affect those who love to trade in the stock market, so be prepared for a slightly higher cost of doing business. Obviously, daily trading is not the way the government wants people to indulge their earning time. And it is understandable in some ways.
Overall, the tax reforms in India's Union Budget 2024 seem to be a mixed bag - some changes are beneficial for taxpayers, while others might require some adjustments.
What is sorely lacking in the budget is a bold announcement to the middle-class voter who pays most of the taxes in India that we acknowledge your existing and work.
How one wishes the government had someone with a Punjabi mind to do the immediately needed things loudly... with a splash.
Rajiv Mantri, the popular Venture Capitalist has this to say.
We will go into more detail later below. But for starters, let us get a quick recap.
Infrastructure and Development
Capital Expenditure: Maintained at Rs 11.11 lakh crore, focusing on infrastructure projects.
Rural Development: Rs 2.66 lakh crore allocated for rural development initiatives.
Support for Key Sectors
Agriculture: Rs 1.52 lakh crore allocated for agriculture and allied sectors, including financial support for irrigation and flood mitigation projects in Bihar and Andhra Pradesh.
Healthcare: Full customs duty exemption on three critical cancer drugs and reduced duties on medical devices.
Digital and FinTech: Incentives for setting up FinTech hubs and promoting digital payments.
Employment and Skilling
The coming years and the changes from Artificial Intelligence (AI) will take down a lot of coveted professions. For example - Software engineering.
In the not-so-distant future, it might be a better idea to become a plumber as opposed to being a software engineer.
As ridiculous and counter-intuitive it may seem today, in the coming years skill-based training will serve kids most.
Job Creation: Rs 2 lakh crore allocated for employment-linked skilling schemes as part of the PM's package.
Higher Education: Financial support for loans up to Rs 10 lakh for higher education. This will be a very welcome step for the middle-class families whose kids are yet to go to college.
Fiscal Policies
Fiscal Deficit: Targeted at 4.9% of GDP for FY25, with plans to reduce it further below 4.5% the following year.
Revenue and Expenditure: Total receipts (excluding borrowings) estimated at Rs 32.07 lakh crore, with total expenditure at Rs 48.21 lakh crore.
Social Welfare and Inclusive Development
PM-KISAN: Direct financial assistance to 11.8 crore farmers under the PM-KISAN scheme.
Skill India Mission: 1.4 crore youth trained under the Skill India Mission.
Environmental Initiatives
National Green Hydrogen Mission: Allocation increased to Rs 600 crore to promote green hydrogen production.
Solar Power: Allocation increased to Rs 8,500 crore for solar power grid projects.
Regional Allocations
Special Financial Support: Rs 15,000 crore for Andhra Pradesh and Rs 11,500 crore for irrigation and flood mitigation projects in Bihar.
These highlights reflect the government's focus on infrastructure development, tax reforms, support for key sectors, and inclusive growth, aiming to drive India's economic trajectory towards becoming a $5 trillion economy by 2027.
Foreign Policy Investments
India has been making significant investments in its neighbors. This is good geopolitics because such investments were the ones which ensured Afghanistan remained aligned with India and not Pakistan.
Here is the allocation for the Foreign Ministry.
The breakup by the different countries is as below. Bhutan is the biggest winner followed by Nepal. The goal may be clear - to counter China.
So the biggest increases were for Nepal, Sri Lanka and Seychelles.
Nepal stands out as a significant beneficiary with an allocation of Rs 700 crore, marking a substantial increase of Rs 150 crore from the previous year's budget of Rs 550 crore, which was later revised to Rs 650 crore. (Source: "India’s budget sees increased allocation for Nepal, Sri Lanka, Seychelles" / WION)
Why is Seychelles so important? Because for its "Necklace of Diamonds", India
India's attempts at creating a solid base on Assumption Island in Seychelles have been pushed back by the Chinese. That is why the focus on that small island nation is so critical.
So you see the "method in the madness"?
Support for Key Sectors
Let us go through the provisions to boost five critical sectors in India via this budget.
Agriculture
Healthcare
Fintech and Digital Payments
Infrastructure
Defense
Agriculture
Total Allocation: The budget has allocated Rs 1.52 lakh crore for agriculture and allied sectors to boost productivity and resilience. Special financial support for irrigation and flood mitigation projects in states like Bihar and Andhra Pradesh. (Deccan Chronicle).
PM-Kisan Scheme: The allocation for the PM Kisan Samman Nidhi remains at Rs 60,000 crore, providing direct financial support to 11.8 crore marginal and small farmers (Cropin).
Crop Insurance: The Pradhan Mantri Fasal Bima Yojana (PMFBY) continues with funding to cover four crore farmers, protecting them against adverse weather conditions and other unforeseen events (Cropin).
Digital Public Infrastructure (DPI): The government plans to implement DPI in agriculture to cover farmers and their lands over the next three years. This includes a digital crop survey for Kharif in 400 districts (Deccan Chronicle).
E-NAM Integration: The budget aims to integrate 1,361 mandis into the electronic National Agricultural Market (e-NAM) platform, enhancing transparency and efficiency in agricultural trading (Cropin).
Post-Harvest Infrastructure: Emphasis is placed on public-private partnerships to improve post-harvest infrastructure and storage facilities, aiming to reduce significant post-harvest losses (Cropin).
Atmanirbhar Oil Seeds Abhiyan: This initiative aims to reduce dependence on edible oil imports by promoting the development and adoption of high-yielding oilseed varieties (Cropin).
Nano DAP Adoption: The budget promotes the adoption of Nano DAP across all climatic zones, expected to reduce import dependence on traditional fertilizers (Cropin).
Dairy Development: The government has allocated Rs 29,610.25 crore for the Animal Husbandry Infrastructure Development Fund to support dairy processing, breed multiplication, and other dairy-related activities (Cropin).
Aquaculture: The budget aims to boost aquaculture productivity and double exports through the establishment of five integrated aquaparks under the PM-Matsya Sampada Yojana (Cropin).
Crop Varieties: Plans to disburse 109 high-yielding climate-resilient varieties of 32 crops will be released for cultivation.
Natural Farming: The government proposed to shift 10 million farmers into natural farming practices in the next two years. 10,000 bio-input resource centers will be set up to promote natural farming.
Digital Infrastructure: The government aims to set up a Digital Public Infrastructure (DPI) in agriculture and plans to survey 400 districts.
Healthcare
Increased Allocation: The Union Budget for 2024-25 has allocated Rs 90,958.63 crore to the Health Ministry. This allocation represents a 12.9% increase from the revised estimate of Rs 80,517.62 crore for the 2023-2024 fiscal year. The Department of Health and Family Welfare will get Rs 87,656.90 crore, and the Department of Health Research will get Rs 3,301.73 crore.
PM Ayushman Bharat Health Infrastructure Mission (PMABHIM): Funding for PMABHIM has been increased from Rs 2,100 crore to Rs 4,108 crore to enhance health infrastructure across the country
Ayushman Bharat-PMJAY: The allocation for the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (PMJAY) has been increased from Rs 7,200 crore to Rs 7,500 crore. This scheme provides health coverage to millions of families
Livestock Health and Disease Control: The budget has allocated Rs 2,465 crore for the Livestock Health and Disease Control Program, up from Rs 1,500 crore .
Biotechnology Research and Development: Funding for biotechnology research has been increased from Rs 500 crore to Rs 1,100 crore, supporting advancements in health-related biotechnology
Cervical Cancer Vaccination: The government will encourage vaccination for girls aged 9 to 14 years to prevent cervical cancer
Medical Colleges: The budget includes provisions to set up more medical colleges by utilizing existing hospital infrastructure to address the shortage of healthcare professionals
Digital Health Initiatives: The U-WIN platform will be rolled out to manage immunization efforts nationwide, complementing the intensified efforts under Mission Indradhanush
Sustainable Manufacturing in Healthcare: A new scheme for bio-manufacturing and bio-foundry aims to provide environmentally friendly alternatives such as biodegradable polymers and bio-pharmaceuticals
Maternal and Child Health: Comprehensive programs will be implemented to improve maternal and child health, with a focus on integrating various existing schemes for better synergy .
Affordable Cancer Medicines: Removal of customs duties for these medicines, Trastuzumab Deruxtecan, Osimertinib, and Durvalumab, from 10 percent to nil.
Fintech and Digital Payments
The digital payments industry in India is experiencing an exceptional surge in growth, expanding at a quick pace.
This is evident from the whopping number of retail payment transactions processed on the National Payments Corporation of India (NPCI) platform.
For the period spanning from April 2023 to February 2024, the total number of transactions has surpassed an impressive 139 billion, amounting to a monumental INR 3,59,408 billion.
This reflects a compound annual growth rate (CAGR) of over 31% when compared to the fiscal year 2022–2023, demonstrating the robust expansion of the sector.
A significant portion of these transactions is driven by the UPI-based payment methods.
BHIM-UPI and RuPay card transactions together account for a staggering 85% of the total retail payment transactions in terms of volume. In terms of value, these methods contribute to 51% of the overall retail payment transactions.
The budget aims to foster innovation in the FinTech sector by providing incentives for setting up FinTech hubs and promoting digital payments.
Investment in Digital Infrastructure: The budget emphasizes the importance of digital infrastructure investment, which includes strengthening cybersecurity and promoting financial literacy. This is expected to improve lending processes and support advanced technologies like AI and blockchain in financial services (Newsx) (Forbes India).
Support for MSMEs and Digital Lending: The government plans to enhance credit flow to micro, small, and medium enterprises (MSMEs) through digital lending platforms. Initiatives like the Open Credit Enablement Network (OCEN) are aimed at improving access to credit for businesses in remote areas, helping them grow and become more competitive (Forbes India) (IBS Intelligence).
Tax Incentives and Regulatory Support: The budget includes potential tax exemptions for fintech services, such as GST exemptions for business correspondent outlets, which would reduce operational costs and expand financial services in rural areas. There is also a focus on simplifying regulatory frameworks to encourage fintech innovation and secure digital transactions (Newsx) (IBS Intelligence).
Promotion of Digital Payments: Measures to promote digital payments, especially in Tier-II and beyond regions, are a key focus. The budget may introduce fees for UPI transactions to create monetization opportunities, supporting banks in developing robust payment infrastructure (Newsx) (MoneyControl).
Public-Private Partnerships: The government encourages partnerships between fintech companies, public institutions, banks, and NBFCs to enhance the digital financial ecosystem. This includes developing a cloud payments platform for banks and fostering collaborations to support financial inclusion and innovation (Newsx) (Business Today).
Dedicated Fintech Funds: The establishment of an India Fintech Credit Fund (IFCF) is proposed to provide affordable finance to fintech companies, particularly those extending their reach to underserved areas and supporting women-led enterprises (MoneyControl).
Infrastructure
There are important provisions for the infrastructure sector in the budget as well.
Increased Capital Expenditure: The budget has allocated Rs 11.11 lakh crore for infrastructure, which is 3.4% of GDP. This represents an 11.1% increase from the previous year and marks the fourth consecutive year of increased capital investment outlay. This increase is expected to stimulate private capital expenditure, drive economic growth, and boost consumption. (Business Today) (Forbes India).
Road and Railway Development: The Ministry of Road Transport and Highways has been allocated Rs 2.78 lakh crore, while the Indian Railways received Rs 2.55 lakh crore. Funds for the railways will be used to create three major economic corridors to improve logistics efficiency, reduce costs, and enhance the operations of passenger trains. (Business Today) (Forbes India). (Source: "Budget 2024 live updates: Haven't left out any state in this Budget, says FM Sitharaman" / Money Control)
PM Gati Shakti Initiative: This initiative aims to enhance multi-modal connectivity and improve the logistics infrastructure. It includes the development of dedicated freight corridors and high-traffic density corridors, which will help decongest the railways and improve travel speeds for passenger trains. (Forbes India).
Vande Bharat Trains: The budget includes plans to convert 40,000 rail bogies to Vande Bharat standards to enhance passenger safety, convenience, and comfort. This is part of a broader effort to modernize the railway infrastructure and improve the overall travel experience. (Forbes India).
Urban Infrastructure and Development: The budget also focuses on urban infrastructure development, including the expansion of metro networks, improvement of urban transport systems, and the development of smart cities to enhance the quality of life in urban areas. (Business Today).
Defense
Total Allocation: The Ministry of Defence has been allocated Rs 6.21 lakh crore for FY 2024-25, which is 4.72% higher than the previous year. This constitutes 13.04% of the total Union Budget.
Capital Expenditure: A significant portion of the budget, Rs 1.72 lakh crore, is earmarked for capital expenditure. This is aimed at modernizing the armed forces with state-of-the-art technology, including new weapons, fighter aircraft, ships, unmanned aerial vehicles, and specialist vehicles .
Border Infrastructure: The Border Roads Organisation has received an allocation of Rs 6,500 crore, marking a 30% increase from the previous year. This funding will support strategic projects such as the development of the Nyoma Airfield in Ladakh, the construction of the Shinku La tunnel in Himachal Pradesh, and other critical infrastructure in border areas.
Indian Coast Guard: The Indian Coast Guard has been allocated Rs 7,651.80 crore, with a substantial portion dedicated to capital expenditure. This funding will enhance the Coast Guard’s capabilities with new patrolling vehicles, advanced surveillance systems, and weapons .
Defence Research and Development: The budget for the Defence Research and Development Organisation (DRDO) has been increased to Rs 23,855 crore, with a focus on developing new technologies and fostering innovation through partnerships with startups, MSMEs, and academia.
Deep Tech and Innovation: The budget introduces a Rs 1 lakh crore corpus for long-term loans to tech-savvy youth and companies in the deep tech sector. This initiative aims to boost innovation in defense technology and support startups through tax advantages and financial incentives.
Fiscal Policies
The fiscal deficit is targeted at 4.9% of GDP for FY25, with plans to reduce it further below 4.5% the following year. This is supported by a substantial dividend from the Reserve Bank of India, which will aid in fiscal consolidation and reduce the debt-to-GDP ratio.
Expert Insights from Accounting Firms
Let us see some insights shared by the Big 4 accounting firms.
KPMG
KPMG highlights the budget's role in setting the stage for continued growth and reform.
Key areas of focus include:
Infrastructure Development: Both physical and financial infrastructure are prioritized to support steady economic growth.
Tax Certainty: Emphasis on providing a stable and predictable business environment, with specific attention to the development of financial hubs like GIFT City.
Here is the analysis by Rajeev Dimri, the National Head of Tax at KPMG, India.
PwC
PwC's analysis underscores the government's strategic focus on Atmanirbharta (self-reliance) and sustainable development.
Key insights from PWC Budget report shares include:
The budget introduces several policy proposals, including the establishment of a Venture Capital Fund (VCF) for the space economy, simplification of FDI and overseas investment rules, and the promotion of the INR for overseas investment. Reforms are planned for the Insolvency and Bankruptcy Code (IBC), real estate, and infrastructure sectors, with a focus on developing industrial parks, digital public infrastructure, and efficient rental markets.
Direct tax proposals in the budget include rationalizing the capital gains tax regime, with uniform rates and holding periods for assets, and the abolition of the Angel Tax from April 2024. The tax rate for foreign companies is proposed to be reduced to 35% from April 2024. Other measures include changes to TDS on salaries, taxation of buyback of shares, and provisions for insurance and real estate sectors.
Indirect tax proposals focus on the Goods and Services Tax (GST), with specific provisions for insurance premiums and reinsurance commissions. An amnesty scheme is proposed for waiving interest and penalties for tax payments for certain financial years.
Bottomline from PwC India: The Union Budget presents a forward-looking strategy to enhance India's economic competitiveness, promote investment, and ensure fiscal prudence, while also addressing social welfare and infrastructure development.
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