Introduction

Budget day in India is a high-stakes political spectacle as much as an economic policy announcement. Finance Ministers, skilled orators and political strategists leverage this annual event to shape public perception of the government’s performance. Through a careful orchestration of figures and promises, they aim to create a compelling narrative of progress and prosperity. While the budget ostensibly outlines the government’s financial roadmap for the coming year, it is equally a tool for public relations. Tax breaks, new welfare schemes, and infrastructure projects are often packaged as populist measures designed to garner popular support. However, beneath the veneer of well-intentioned policies lies a complex interplay of economic constraints, political priorities, and electoral calculus. Following are some of the top hits and misses of Union Budget 2024.

Budget proposals that we admire

1. Fiscal Discipline – The fiscal deficit target for FY25 is revised down to 4.9% of GDP, a reduction from the previously set 5.1%, aimed at enhancing macroeconomic stability and boosting investor confidence.
2. Employment and Skilling Initiatives – Allocation of 2 trillion over five years for employment schemes benefiting 4.1 crore youth, including incentives for manufacturing job creation and new skilling initiatives.
3. Support for MSMEs – Introduction of a credit guarantee scheme, revamped credit assessment models, and financial support mechanisms for MSMEs, including mandatory onboarding in TReDS to improve liquidity.
4. Energy Security Strategies – Launch of the PM Surya Ghar Muft Bijli Yojana for rooftop solar installations and investments in R&D for nuclear energy and pumped storage projects to diversify the energy mix and reduce dependence on fossil fuels.
5. Next-Generation Reforms – Introduction of measures for structural reforms in land, labour, capital, and entrepreneurship to enhance productivity and competitiveness, including improved land digitization and regulatory streamlining.
6. Increased Allocation for Renewable Energy – 46% increase in funding for renewable energy, including significant investments in solar energy and green hydrogen, with a focus on achieving 500 GW of non-fossil fuel capacity by 2030.
7. Promotion of Domestic Solar Manufacturing – Expansion of exempted capital goods for solar panel manufacturing and establishment of a Critical Mineral Mission to secure essential minerals for energy transition.
8. Pumped Storage Policy – Introduction of a policy to promote pumped storage projects, addressing renewable energy intermittency and enhancing grid stability.
9. Electric Vehicle (EV) Push – Emphasis on expanding EV manufacturing capabilities and charging infrastructure to reduce greenhouse gas emissions and promote sustainable mobility.
10. Research and Development in Nuclear Energy – Commitment to nuclear energy with proposed partnerships to develop Bharat Small Reactors and focus on new nuclear technologies.

Budget proposals that we criticise

1. Hike in LTCG Tax – Increase in long-term capital gains (LTCG) tax rate from 10% to 12.5%, potentially deterring long-term investments and impacting investor sentiment.
2. Withdrawal of Indexation Benefit for Property Sales – Reduction in LTCG tax on property sales from 20% to 12.5% but withdrawal of indexation benefits, increasing net tax liability for property sellers.
3. Continuation of New Coal Plants – Ongoing plans for 80 GW of new coal-based power capacity despite advancements in renewable energy technologies that offer quicker and more economical alternatives.
4. Training Programs for Labor Transition – Lack of training programs for workers transitioning from coal-based power sectors to renewable energy, which could hinder a smooth transition and address employment concerns.
5. Insufficient Support for Battery Storage – No significant incentives or subsidies for battery storage technologies, which are crucial for stabilizing renewable energy sources and supporting the EV sector.
6. Lack of Incentives for Green Behavior – The absence of direct tax incentives for individuals adopting green behaviours such as purchasing electric vehicles or installing solar panels, missing an opportunity to further promote climate-conscious consumption.
7. Education and Health Allocation Concerns – Decrease in education allocation and only a small increase in health expenditure, potentially inadequate for addressing cognitive skills deficiencies and health sector needs.
8. Slow Implementation of Next-Generation Reforms – Delays in the implementation of next-generation reforms due to incomplete outlines and funding allocations, could slow down anticipated productivity improvements.
9. Agri Productivity and Policy Challenges – Limited success in improving agricultural productivity and ineffective previous missions, with ongoing issues like low productivity in certain regions and reliance on outdated crop patterns.
10. Urban Housing and Savings Issues – The shift in affordable housing concepts and a decline in household financial savings, with insufficient adaptation in housing schemes to current urban realities.
11. Missed Opportunities in Labour Market Reforms – Lack of focus on actualizing labour codes at the state level and addressing failures in private sector-run ITIs, which could impact the effectiveness of employment and skilling initiatives.
12. Impact of Free Cereals – The marginal impact of free cereals on consumption and food prices, not adequately addressing the needs of the lower-income population whose real incomes are falling.