India’s finance minister reveals $576 billion budget

Prime Minister Narendra Modi on Tuesday hailed the Union Budget 2024-25 as ‘holistic and all-inclusive’ and said that it will empower every section of the society while paving the way for ‘Viksit Bharat’.

India's finance minister Nirmala Sithraman unveiled $576 billion in spending plans in the current fiscal year on Tuesday, marginally higher than interim budget estimates, aiming to boost manufacturing and jobs in the world's fastest growing major economy. It was the first Budget of Modi 3.0, showcasing nine priorities of the government.

"This budget will empower all sections of the society. It will take the farmers on a path to prosperity. It will unveil new opportunities for the youth. Thrust on Education and skills training will open these sectors for the next level of growth,” said the Prime Minister, in his first reaction to the Union Budget.

"It will give strength to the middle class. Backward classes will also be strengthened while women’s economic participation in the country’s growth will also be ensured. Small traders as well as MSMEs will find adequate support for fast-paced growth,” he added.

A man watches a screen displaying the budget presentation at a railway station in Mumbai. Reuters  

The government will spend 2.66 trillion rupees ($32 billion) on rural development, Finance Minister Nirmala Sitharaman said, while unveiling new programmes in the annual budget for states led by two key allies who shore up Prime Minister Narendra Modi's coalition government.

The budget spending estimate of 48.21 trillion rupees is 1.2% higher than the 47.66 trillion rupees estimate in the interim budget presented in February, helped by a bumper transfer of dividends from the central bank, while the fiscal deficit target was reduced to 4.9% of GDP.

The government will allocate 2 trillion rupees ($24 billion) for job creation over the next five years, Sitharaman said.

PM Modi further said that the Budget will give an unprecedented push to job generation and self-employment in the country.

"NDA government in last 10 years ensured that those in the lower and middle-income tax category get relief. Revision in tax slabs and increase in Standard deduction is a step in this direction. Every taxpayer stands to benefit from this,” PM modi said.

A worker operates a machine inside a small-scale manufacturing unit in Mumbai, India. Reuters

He said that the Budget will act as a catalyst in taking forward the India growth story and make India the third largest country in next few years.

"It will lay a strong foundation for the emergence of Viksit Bharat,” PM Modi stated.

It also would raise spending, to $133 billion, on construction of 30 million homes for the poor, schools, airports, highways and other infrastructure. The budget would cut taxes on big corporations and allocate more funds to two states, Andhra Pradesh and Bihar, that are governed by the Modi government’s biggest coalition partners.

The government plans to build new airports, medical colleges and sports and tourism facilities in eastern India's Bihar state, which is ruled by the Janata Dal (United) party.

It will allocate 150 billion rupees as special financial support through multilateral development agencies to Andhra Pradesh.

Here are the highlights of the budget:

ECONOMIC GROWTH

•2024/25 nominal GDP growth seen at 10.5% y/y vs 9.6% in 23/24

•Government to focus on infrastructure investments to promote private investments

FISCAL DEFICIT

•2024/25 fiscal deficit target lowered to 4.9% of GDP from 5.1% in February's interim budget

•To reduce fiscal deficit to below 4.5% by FY26

•Record surplus of 2.11 trillion rupees ($25.3 billion) from central bank helps narrow fiscal deficit

TAX CHANGES

•No income tax on those earning up to Rs3 lakh

•Corporate tax rate for foreign companies cut to 35% from 40%, to attract investments

•Import tax on gold and silver reduced to 6% from 15%

•Tax rate raised for equity investments held for less than one year to 20% from 15% and for shares held for more than 12 months to 12.5% from 10%

•Import tax cut on mobile phones and some key parts from 20% to 15%

Workers erect a scaffolding to build a pillar at a rail line construction site in Kolkata, India, on Tuesday. Reuters

•Customs duty on 3 cancer drugs waived

•To review import duties structure in next six months

JOB CREATION

•Budget proposes to allocate 2 trillion rupees for job creation over 5 years

•Allocates 1.52 trillion rupees for agriculture and allied sectors

•To launch 3 schemes for employment-linked incentives

INFLATION

•Finance minister says inflation remains low, moving toward 4% target

* Proposes to take supply-side measures to contain food inflation

INFRASTRUCTURE INVESTMENTS

•Capex outlay for infrastructure retained at the interim budget target of 11.1 trillion rupees ($133 billion) or 3.4% of GDP

•Proposes 1.5 trillion rupees for long-term loans to states for infrastructure investments

EXPENDITURE PLANS

•Allocation for major subsidies including food, fertiliser estimated at 3.81 trillion rupees, 1.2% of GDP

•Spending on interest payment services estimated at 11.63 trillion rupees, 3.6% of GDP

•To allocate 150 billion rupees as special financial support through multilateral development agencies to Andhra Pradesh state, ruled by Modi's biggest ally TDP

•Credit support to small and medium businesses during the stress period

•Proposes to support setting up of 12 industrial parks

•Proposes to enhance small loans to 2 million rupees for small and medium businesses

•To set up a venture capital fund of 10 billion rupees for space

RURAL DEVELOPMENT

•Provision of 2.66 trillion rupees ($32 billion) for rural development

A farmer sprinkles fertiliser over crops at a rice field on the outskirts of Amritsar, India, on Tuesday. AFP

•Proposes state aid for 30 million affordable housing units in urban and rural areas

•One crore farmers to be initiated into rural farming over next two years

URBAN DEVELOPMENT

•Proposes 2.2 trillion rupees ($26 billion) federal government assistance for affordable urban housing over the next five years

•Government will partner with private players to develop small nuclear reactors

Agencies