Budget: Big on jobs, reward for allies; minor relief for taxpayers

GOLD, SILVER, IMPORTED MOBILES, CANCER DRUGS TO BECOME CHEAPER; IMPORTED GARDEN UMBRELLA, SOLAR GLASS DEARER

24/07/2024

NEW DELHI, Jul 23: Facing flak from the Opposition over unemployment, the Modi 3.0 government's first Budget on Tuesday announced a Rs 2 lakh crore package to create more jobs while making the tax regime attractive for foreign companies and providing marginal income tax relief to the salaried class.
The Budget presented by Finance Minister Nirmala Sitharaman in Parliament maintained higher Capex to support growth and loosened purse strings for projects in Andhra Pradesh and Bihar to appease crucial National Democratic Alliance (NDA) allies Telugu Desam Party (TDP) and Janata Dal (United).
"I am happy to announce the Prime Minister's package of 5 schemes and initiatives to facilitate employment, skilling and other opportunities for 4.1 crore youth over a 5-year period with a central outlay of Rs 2 lakh crore," Sitharaman said while presenting the seventh successive Budget.
The Minister said that one crore youth will be skilled by top companies in five years. A 12-month internship program with a monthly allowance of Rs 5,000 was also announced.
The stock market response to the Budget was lukewarm with the BSE Sensex shedding 73 points.
Hailing the Budget, Prime Minister Narendra Modi said that it ensures inclusive growth, benefiting every segment of society and paving the way for a developed India.
Leader of Opposition (LoP) Rahul Gandhi, who has been aggressive in cornering the government over a host of issues, termed the Budget as 'Kursi Bachao' Budget - indirectly referring to the government's compulsion to keep the allies happy.
Earlier, Sitharaman announced a special financial package of Rs 15,000 crore for Andhra Pradesh and said that concerted efforts would be made to fulfill the commitments under the Andhra Pradesh Reorganisation Act. The Finance Minister said that the special financial package will be arranged in the current financial year to develop the capital of Andhra Pradesh.
In the case of Bihar, Sitharaman announced that the Centre will support development of an industrial node at Gaya on Amritsar-Kolkata Industrial Corridor. Road connectivity projects worth Rs 26,000 crore would also be taken up in the state. The road projects include Patna-Purnea Expressway, Buxar-Bhagalpur Expressway and additional two-lane bridge over the Ganga at Buxar.
Despite unveiling several populist schemes, Sitharaman stuck to fiscal prudence and pegged the fiscal deficit at 4.9% of the GDP for FY25 from the earlier estimate of 5.1% projected in the interim Budget this year. She emphasized that the fiscal consolidation path announced by her in 2021 has served the economy very well, and the government will aim to reach a deficit below 4.5% next year.
Tax buoyancy and record dividend transfer by Reserve Bank of India (RBI) have contributed to the government's lower fiscal deficit target.
Ahead of three state elections, the Budget has made an all-out attempt to woo voters, especially the youth and salaried middle class. In the new tax regime, it has enhanced standard deduction to Rs 75,000 from Rs 50,000, resulting in a saving Rs 17,500. As a result, no income tax will be payable for income up to Rs 3 lakh annually.
The Budget also provided impetus to manufacturing by proposing 12 "Plug and Play" industrial parks, reducing compliance burden for MSMEs and setting up e-commerce export hubs. It also exempted nearly two dozen critical minerals from custom duties.
Looking to take forward the success in local manufacturing of electronics, the Budget 2024-25 has also proposed to cut basic custom duty (BCD) on mobile phones, mobile PCBA (printed circuit board assembly) and mobile chargers to 15% from 20%.
In order to enhance domestic value addition in gold and precious metal jewellery in the country, the Finance Minister proposed to reduce customs duties on gold and silver to 6% and that on platinum to 6.4%. The lower custom duty would mean prices of these items going down.
At the same time, Sitharaman also provided relief to cancer patients exempting three more cancer drugs from customs duties.
For boosting foreign capital inflows, the Budget also proposed to reduce the corporate tax rate on foreign companies from 40 to 35 per cent. Seeking to bolster the Indian start-up ecosystem, Sitharaman announced to abolish angel tax for all classes of investors.
Top industry body CII hailed the Union Budget saying it provides continuity to India's successful holistic economic strategy to drive growth with inclusion.
"The Union Budget 2024-25 takes forward the government's successful economic strategy of the previous two terms, led by investments and reforms and focused on inclusion and empowerment. The announcement on collaboration with States to take forward the next gen reforms with the twin objectives of employment generation and growth, is a welcome step," CII director general Chandrajit Banerjee said.
Infrastructure boost remained the cornerstone of the Budget as in the previous year with the Finance Minister provisioning Rs 11.11 lakh crore for capital expenditure (capex) during FY25. Housing for the poor under PM Awas scheme and expansion of rural road network were some of the key highlights of the Budget.
Another key focus area of the Budget was energy security with the Minister promising to bring out a policy document on appropriate energy transition pathways that balances the imperatives of employment, growth and environmental sustainability. Solar energy also got a special boost in the Budget.
Gold, silver and other precious metals along with imported mobile phones, certain cancer drugs and medical devices are set to become cheaper with Finance Minister Nirmala Sitharaman announcing cuts in customs duty in the Union Budget 2024-25.
However, certain items such as imported garden umbrellas and laboratory chemicals are set to become costlier due to an increase in basic customs duty.
Sitharaman in her Budget speech on Tuesday proposed reducing “customs duties on gold and silver to 6 per cent and that on platinum to 6.4 per cent” to enhance domestic value addition for jewellery in the country.
Moreover, to provide relief to cancer patients, the finance minister proposed to fully exempt three more medicines from customs duties — Trastuzumab Deruxtecan, Osimertinib and Durvalumab.
She also proposed “changes in the BCD (basic customs duty) on x-ray tubes & flat panel detectors for use in medical x-ray machines under the Phased Manufacturing Programme, so as to synchronise them with domestic capacity addition.”
Earlier X-ray tubes used in manufacturing of X-ray machines for medical, surgical, dental or veterinary use attracted 15 per cent BCD, which has been proposed to reduce to 5 per cent.
The government also proposed slashing import duty on mobile phones, chargers and some components that are used for manufacturing of handsets.
Sitharaman said with a three-fold increase in domestic production and almost 100-fold jump in exports of mobile phones over the last six years, the Indian mobile phone industry has matured.
“In the interest of consumers, I now propose to reduce the BCD (basic customs duty) on mobile phone, mobile PCBA and mobile charger to 15 per cent,” Sitharaman said.
Earlier BCD on mobile phones, chargers and motherboard was 20 per cent.
The government has proposed to exempt specified goods for use in manufacturing of connectors in mobile phones and oxygen-free copper for use in manufacturing of resistors (an electronic component) from BCD levy.
The BCD on specified goods for use in manufacturing of connectors was in the range of 5 to 7.5 per cent and oxygen-free copper for use in manufacturing of resistors attracted 5 per cent BCD.
Similarly, customs duty on 25 critical minerals such as lithium, copper, cobalt and rare earth elements, which are critical for sectors like nuclear energy, renewable energy, space, defence, telecommunications, and high-tech electronics either got fully exemption or reduced.
“This will provide a major fillip to the processing and refining of such minerals and help secure their availability for these strategic and important sectors,” she said.
The finance minister also proposed removing BCD on specified capital goods for use in manufacturing of solar cells or solar modules and said this will “support energy transition”.
However, she withdrew customs duty exemption on import of solar glass and tinned copper interconnect “in view of sufficient domestic manufacturing capacity”.
Similarly, Sitharaman also proposed reducing BCD on certain broodstock, polychaete worms, shrimp and fish feed to 5 per cent to promote India’s seafood exports, which has touched an all-time high of more than Rs 60,000 crore in the last financial year.
After the successful completion of the Chandrayaan-3 mission, Finance Minister Nirmala Sitharaman on Tuesday announced the setup of a venture capital fund of Rs 1,000 crore for expanding the space economy by five times in the next 10 years.
In 2023, in a stellar display of prowess, India soared to new heights with the successful soft landing of Chandrayaan-3 on the South Pole of the Moon and the successful launch of Aditya-L1, India's first solar mission.
These milestones not only secured India's standing in the global space economy but also fueled the engines for the private space sector in India. Among other feats, India now aims to set up 'Bharatiya Antariksha Station' by 2035, and send the first Indian to the Moon by 2040.
Earlier this year, the Ministry of Commerce and Industry has announced a review of the Foreign Direct Investment (FDI) Policy on the space sector in India.
Indian space startups have become a strong pillar for the private space industry in the last decade, especially after the landmark move to open the Indian space sector to private companies in 2020.
Along with this, Anusandhan National Research Fund for basic research and prototype development to be operationalized.
"Financing pool of Rs one lakh crore for spurring private sector-driven research and innovation at commercial scale," Sitharaman announced.
Ensuring next-generation reforms, Sitharaman said, "We will formulate an economic policy framework to delineate an overarching approach to economic development and set the scope of next-generation reforms for facilitating employment opportunities and for sustaining high growth."
In the Union Budget 2024-25, the gross revenue expenditure for Indian Railways has been estimated to be Rs 2,78,500 crore, which includes a capital outlay of Rs 2,65,200 crore.
Finance Minister Nirmala Sitharaman made these proposals in the Lok Sabha on Tuesday.
According to the document of grant demands, the net revenue expenditure of Railways for the current financial year has been kept at Rs 2,78,500 crore, while in the revised estimate for the year 2023-24, it was Rs 2,58,600 crore.
Reimbursement of losses on operating strategic lines has been put at Rs 2,648 crore in Budget Estimates 2024-25 as against Rs 2,491.84 crore in Revised Estimates 2023-24.
An amount of Rs 745 crore has been allocated in Budget 2024-25 for servicing market loans for national projects.
As per the Budget provisions, the total outlay of Rs 2,65,200 crore provided for capital expenditure in the General Budget 2024-25 includes Rs 2,52,000 crore from general revenue, Rs 200 crore from Nirbhaya Fund, Rs 3,000 crore from internal resources and Rs 10,000 crore from extra budgetary resources.
The capital expenditure in the year 2024-25 was Rs 2,40,000 crore.

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