With less than two months of the 2024 Lok Sabha mandate, Finance Minister Nirmala Sitharaman’s first budget of the Modi 3.0 reflected the government’s intent. The major thrust of the budget was on the jobs creation, rural sector, agriculture, providing tweaks in the tax slabs to give relief to the salaried class, push towards affordable housing. The budget appears to have middle class on its mind, especially those who the government say has come out of the poverty in the last 10 years.
The budget made mobile phones and gold cheaper, the two of the biggest acquisitions of the middle class, which has over the decades had supported the BJP.
Sitharaman said that this budget focuses on nine priority areas with potential for “transformative” changes. Some of the these areas were: Agriculture, Employment Social Justice, Manufacturing, Urban Development, Energy Security, Infrastructure, Innovation, Research & Development, next generation reforms.
The finance minister said that as mentioned in the interim budget, the focus is on four major castes, poor, women youth and farmers. This time intense focus has been put on employment, skilling, MSMEs and the middle class.
THE WEEK looks at the five big takeaways from the budget.
Political allies
The political message of the budget was not limited to the middle class as the government acceded to the demands of the allies, particularly the Bihar Chief Minister Nitish Kumar-led JDU and Andhra Pradesh CM Chandrababu Naidu-led TDP as Sitharaman announced package for the two states in the form of new projects, tourism upgradation and additional funds for building a new capital for Andhra Pradesh, Naidu’s pet project. Happy allies means trouble free tenure for the Narendra Modi-led NDA government.
For Andhra Pradesh, Sitharaman announced support for Pollavaram irrigation projects, Rs 15,000 crore from banks for developing Andhra’s new capital in Amrawati, a project which went into limbo after Naidu was voted after power. This will be revived now.
Sitharaman announced that tree Andhra Pradesh district will be brought under the purview of backward region grants. Additional support for Visakhapatnam-Chennai and Hyderabad-Bengaluru Industrial Corridors will also be provided.
Similarly, Bihar, which goes to polls next year, was recipient of the finance minister’s munificence. Rs 26,000 crore was proposed for several road projects in the state. Sitharaman announced that the government will formulate Purvodaya plan for all round development of Bihar, Jharkhand, West Bengal, Odisha and Andhra Pradesh.
On the Amritsar-Kolkata industrial corridor, Gaya will be developed of an industrial nod, while developing Vishnupad temple and Mahabodhi temple on the lines of Kashi Vishwanath corridor. Rajgir in Nitish Kumar’s home district will too be developed as tourism spot.
She added that the government will also set up airports, medical colleges and sports infrastructure in Bihar.
The minister also announced a financial support of Rs 11,500 crore for flood control measures in the state.
Employment generation
The government felt the pinch of big undercurrent during the polls. It was generated by the lack of employment opportunities for the youth. The finance minister devoted significant part of her budget talking about jobs creation.
“We particularly focus on employment, skilling, MSMEs and the middle class,” Nirmala Sitharaman said as she presented her seventh budget. She labelled it as the Prime Minister’s package of five schemes and initiatives. The package aims to facilitate employment, skilling and other opportunities for 4.1 crore youth over a five-year period with a central outlay of Rs. 2 lakh crores. “This year, I have made a provision of Rs.1.48 lakh crores for education, employment and skilling”, she added.
The government will implement three schemes for ‘Employment Linked Incentive’, as part of the Prime Minister’s package. These will be based on enrolment in the EPFO, and focus on recognition of first-time employees, and support to employees and employers. The government will provide one-month wage to all persons newly entering the workforce in all formal sectors. The eligibility limit will be a salary of Rs 1 lakh per month. Direct benefit transfer of one-month salary will be up to Rs 15,000 in three installments to first-time employees, as registered in the EPFO. This scheme, which is expected to benefit 2.1 crore youth over two years.
Another new scheme with outlay of Rs 60,000 crore, aims at skilling 20 lakh youth over a five-year period. Another scheme of internship opportunities in 500 top companies to one crore youth in five years. The joinees will gain exposure for 12 months to real-life business environment, varied professions and employment opportunities”. An internship allowance of Rs 5,000 per month, along with a one-time assistance of Rs 6,000 will be provided.
Tax benefits
Sitharaman could not have presented the budget without announcing some tax relief for the salaried as the middle class has been impacted by the price rise. She announced benefits to provide tax relief to salaried individuals and pensioners opting for the new tax regime. The minister proposed to increase the standard deduction for salaried employees from Rs 50,000 to Rs 75,000. Also, deduction on family pension for pensioners is proposed to be enhanced from Rs 15,000 to Rs 25,000 under the new tax regime. This will provide relief to about four crore salaried individuals and pensioners. The tax slabs were also revised to give benefits to the middle income employees.
The minister proposed that the long term gains on all financial and non-financial assets will attract a tax rate of 12.5 per cent. For the benefit of the lower and middle-income classes, she proposed to increase the limit of exemption of capital gains on certain financial assets from Rs 1 lakh to Rs 1.25 lakh per year.
Boosting rural economy
As the agriculture sector faced distress and the farmers preparing for another round of agitation around MSP, while assembly elections in agriculture dominated states of Haryana and Maharashtra in three months, Sitharaman talked about increasing productivity and resilience in agriculture.
A provision of Rs 1.52 lakh crore has been made for the agriculture and allied sectors with an aim to enhance productivity and resilience. Sitharaman announced several measures including Digital Public Infrastructure, ‘atmanirbharta’ through missions for oil seeds, large scale clusters for vegetable production and financial support for network of nucleus breeding centres for shrimp broodstocks.
Sitharaman said land-related reforms and actions, both in rural and urban areas, will be incentivised for completion within the next three years through appropriate fiscal support. The reforms will cover land administration, planning and management, urban planning, usage and building bylaws.
Infrastructure
Acknowledging the strong multiplier effect of building and improving infrastructure on economy, Sitharaman announced the provisioning of Rs 11,11,111 crore for capital expenditure. It will be 3.4 per cent of country’s GDP. The finance minister said the Centre will try to maintain strong fiscal support for infrastructure over the next five years.
To provide all-weather connectivity to 25,000 rural habitations which have become eligible in view of their population increase, she proposed the launch of Phase IV of Pradhan Mantri Gram SadakYojana (PMGSY).
Building infrastructure has been NDA government’s main plank for building a developed nation by 2047 as it also boosts employment and growth in the economy.
