Economic growth reduces poverty and raises incomes only if it has linkages to the masses. Of late, growth was linked only to a narrow segment resulting in unemployment, low wages and stagnant incomes for the farmers and MSMEs. With this budget, FM Nirmala Sitharaman has tried to reestablish the linkage of economic growth with the masses and has avoided the easy way out of providing freebies and dole-outs.
There is a clear intent to make the growth more inclusive by casting the net of economic growth wider. In other words, government has clearly responded to the distress of the masses, conveyed through the unexpected election results. Here are some highlights:
Through this budget, the FM conveys that government will be there as a facilitator to boost economic activity and opportunities to be a part of economic growth will be open to all
The FM is pushing taxpayers away from the old regime by offering both a higher standard deduction and widening of tax slabs under 5% to 15% only to those paying taxes under the new regime. Maximum gains due to these changes will be Rs 17,500.
For investors in capital markets, it was a mixed bag. Short-term capital gains tax was hiked from 15% to 20%. The long-term capital gains tax rate was hiked from 10% to 12.50% while the tax-free limit has been hiked from Rs 1 lakh to Rs 1.25 lakh. To discourage retail investors from speculating in the futures and options section of the stock exchanges, the securities taxation tax has been hiked.
The FM has taken away indexation benefits from capital gains on landed property. In plain language, this means that you cannot deduct inflation from the capital gains and tax has to be paid for the entire gain.
Moving away from schemes like Production-Linked Incentives, this budget has put the focus on growth through creating jobs by providing employment-linked incentives for both employees and employers through a number of measures
India is facing a crisis of employability. Even when job seekers' resumes show a lot of educational credentials, they lack the skills the industry needs. This is sought to be addressed through schemes and allocations for skilling and internships
There was some apprehension about whether capital expenditure would be scaled down to accommodate revenue expenditure. But FM has gone for the same figure of Rs 11.11 lakh crore proposed in the interim Budget and thus infrastructure building tempo will continue
Fiscal deficit, which is the excess of expenditure over income met through borrowings is estimated at 4.9% as against 5.1% of GDP estimated in the interim Budget. A lower borrowing by the government means more savings are available to non-government borrowers such as individuals and firms.
Credit flow to the MSME sector is sought to be increased by hiking the Mudra Yojana loan limit to Rs 20 lakhs and also through credit guarantee schemes, which enables even those who do not have collateral security to offer avail loans.
Low-cost housing will be promoted through PM Awas Yojana – Rural and also through PMAY-Urban which has an allocation of Rs 10 lakh crore.
Allocation is also there for enhancing farm productivity and women-centric schemes.
Key NDA ally states Bihar and Andhra Pradesh are rewarded through infrastructure projects and loans from multilateral lenders.
When Nirmala Sitharaman presented the last full budget in Feb 2023, the years leading up to the 100th anniversary of independence was termed as ‘Amrit Kaal’. But now not many in the Union Government talk about it and the focus is on becoming ‘Vikasit Bharat by 2047’. ‘Amrit Kaal’ is an abstract concept just like ‘achche din’, but Vikasit Bharat is a lot more specific. It means becoming a high-income economy (from the current lower middle-income status) on a per capita income basis, achieving all the sustainable development goals and scoring high on all the Human Development Indicators – something all from the left to right will have no objection to.
This is something not just for the current government, but also for all the future governments after it in the following two decades can focus on. And it is something which the citizens of India can make the governments accountable for. And the first Union Budget of Modi 3.0 seems to be the first right step in that journey of a thousand miles.
(The writer is an ex-banker and currently teaches economics & finance.)
