Watch: Budget 2024 | What is in store for West Bengal?

Updated – July 24, 2024 08:55 pm IST

Published – July 24, 2024 08:05 pm IST

The Chief Minister raised questions on Centre’s proposal to provide flood assistance to neighbouring Sikkim. In her Budget speech, Ms. Sitharaman referred to devastating flash floods and landslides that wreaked havoc in Sikkim and added that the government will provide assistance to the State. The BJP had won most of seats in north Bengal including Darjeeling Lok Sabha seat.

The Finance Minister in the Budget also referred to West Bengal while stressing on a plan, Purvodaya, “for the all-round development of the eastern region of the country covering Bihar, Jharkhand, West Bengal, Odisha and Andhra Pradesh”.

Reporting: Shiv Sahay Singh

Production: Yuvasree S

Watch: Union Budget 2024-25 | Key Highlights

Union Finance Minister Nirmala Sitharman on July 23 announced her seventh consecutive budget. The presentation on July 23 was the first Budget by the BJP-led NDA government since it was re-elected in June.

Ms. Sitharaman said that the Budget will focus on employment, skilling, MSME and middle class. An allocation of ₹1.48 lakh crore for education, employment and skill development was announced.

Two key measures were announced for the insurance sector in the budget. One was reducing the TDS or tax deducted at source on payouts (payments by the life insurer concerned) in respect of life insurance policies from 5% to 2%. This amendment will come into force on October 1, 2024.

Likewise, the Budget has proposed to reduce TDS from 5% – 2% on the Payment of insurance commission. The amendment will take effect from April 1, 2025.

Watch: Budget 2024 | What’s in it for health sector??

The Union government has continued its emphasis on tackling non-communicable diseases and allocating funds for research in the healthcare sector, with Finance Minister Nirmala Sitharaman on July 23 announcing customs duty exemptions on three cancer treatment drugs — Trastuzumab Deruxtecan, Osimertinib, and Durvalumab.

The total outlay for the health sector was ₹89,287 crore, amounting to 1.85% of the budget expenditure, marginally up from 1.76%, and ₹79,221 crore in the revised estimate for budget 2023-24. This remains below the 2% mark for health outlays from FY18 to FY22.

The Health Ministry has been allocated ₹90,958.63 crore in the 2024-2025 budget, an increase from ₹80,517.62 crore in the 2023-24 revised estimates. The budget allocation for the AYUSH Ministry has been increased from ₹3,000 crore to ₹3,712.49 crore.

Watch: Budget 2024 | What’s in it for energy sector?

Finance Minister Nirmala Sitharaman’s Budget speech has for the first time signalled that polluting industries, such as iron, steel, and aluminium will have to conform to emission targets.

Currently, the industry in India has no curbs on emissions instead of carbon credits but is incentivised to achieve energy efficiency targets via a scheme called Perform, Achieve, Trade that has been operational since 2015.

Caps on emissions also tie in with new international norms, such as the Carbon Border Adjustment Mechanism, to be imposed by the European Union (EU) in 2026. This will entail a tax on iron, steel, and aluminium goods imported into the EU that are produced by looser emission standards that that imposed on similar industries in the EU.

Watch: Budget 2024: What’s in it for defence sector?

The allocation to the Ministry of Defence for FY25 is higher by approximately Rs 1 lakh crore (18.43 per cent) than the allocation for FY23 and 4.79 per cent more than the allocation of FY24, the MoD stated.

While maintaining the allocation made to the Ministry of Defence (MoD) during the interim budget presented on February 1, the Government has made an additional allocation to the tune of ₹400 crores on innovation in defence through the Acing Development of Innovative Technologies with iDEX (ADITI) scheme.

Watch: Budget 2024 | What’s in it for women and children?

Finance Nirmala Sitharaman said that the Union Budget 2024-25 carried an allocation of more than Rs 3 lakh crore for schemes benefitting women and girls and promoting women-led development, during her presentation of the Budget in the Lok Sabha on July 23.

To encourage the participation of women in the workforce, the government will tie up with industry to set up working women hostels as well as creche-facilities, she said. Further, this industry-government partnership is also expected to launch women-specific skilling programmes and promote market access to women-led SHG enterprises.

Under urban development, the government has encouraged the moderation of high stamp duty by all States for urban-related development. It has asked for a further lowering of duties for properties purchased by women.

Watch: Budget 2024 | What’s in it for MSMEs and manufacturing sector?

The MSMEs and labour-intensive manufacturing sector have a reason to cheer as the budget presented by the Finance Minister on Tuesday has a special focus on these units. The sector is going through a crisis phase for multiple reasons. The export market is just reviving for sectors such as textiles, and MSMEs in the manufacturing space have been asking for various support measures. 

The incentives announced for new jobs are expected to bring down the labour cost by 2% or so. Changes in customs duty for copper and ferrous scrap will give a 10%–12% cost advantage across the supply chain, say foundry owners. The government has proposed a credit guarantee scheme to facilitate term loans to MSMEs for the purchase of machinery and equipment without collateral or a third-party guarantee. The limit of Mudra loans will be enhanced to ₹20 lakh from the current ₹10 lakh, and MSMEs will get access to credit during the stress period through a guarantee from a government promoted fund.

Watch: Budget 2024: What’s in it for agriculture?

Union Finance Minister Nirmala Sitharaman said she has allocated about ₹ 1.50 lakh crore to the agriculture sector.

Almost all major schemes for farmers have seen an increase in allocation compared to her previous budgets. However, the fertilisers subsidy is down by about ₹1 lakh crore when compared to the actual expenditure in 2022-23. To address the price rise, the Finance Ministry has also provided ₹ 10,000 crore to the price stabilisation fund. Farmers are supposed to get a benefit of this fund. In the last budget, the allocation for this fund was just ₹ 10 lakh.

The fertilisers ministry will get about ₹1.64 lakh crore in this financial year. In 2022-23, the Ministry spent about ₹2.51 lakh crore to ensure fertilisers for farmers. It has to be seen how farmers’ organisations such as the Samyukt Kisan Morcha will look into these suggestions especially when their demand for a statutory minimum support price did not find place in the this budget too.

The story so far: The 2024 Union Budget, presented by Finance Minister Nirmala Sitharaman on Tuesday, includes developing a taxonomy for climate finance to enhance the availability of capital for climate adaptation and mitigation.

“This will support achievement of the country’s climate commitments and green transition,” Ms. Sitharaman said in her speech.

What is taxonomy for climate finance?

Climate finance taxonomy refers to a set of standardised regulations and guidelines to inform companies and investors on making impactful investments towards environmental conservation and combating the climate crisis.

The term taxonomy originally comes from the field of biology. It is the scientific method of naming and classifying organisms, including plants, animals, and microorganisms.

According to the International Finance Corporation (IFC), a member of the World Bank Group, “diverse interpretations fragment markets and confuse investors. What seems ‘green’ in one country may appear ‘brown’ elsewhere, stalling environmental progress,”

Taxonomies for sustainable climate financing, in general, include a detailed list of economic sectors and activities and corresponding criteria that determine if it aligns with larger climate goals.

“There are two dimensions to a taxonomy: the system itself in all its complexity, and the final product (boiled down to its pragmatic essentials) as it will be used by financial market participants and other users. Users of taxonomies and definitions are not necessarily interested in understanding why a given metric or threshold must be used for an activity. Rather, they will use the taxonomies and definitions as a final product and screen activities to determine eligibility under the taxonomy,” according to the Organisation for Economic Cooperation and Development (OECD).

Also read: Boost financing for green projects

Climate finance taxonomies are known as ‘green’ taxonomies.

Why is climate finance taxonomy important?

Climate financing forms a core area of combating the climate crisis. According to the U.N. Framework Convention on Climate Change’s (UNFCCC’s) first ‘Needs Determination Report’, financing of around $5.8-5.9 trillion is required to implement developing countries’ climate action plans by 2030, and this does not fully include adaptation costs.

Climate finance taxonomies can facilitate financing for investors, credit institutions etc. based on how climate-aligned an entity or an activity is. It can therefore direct financial resources towards projects that support climate change mitigation and adaptation.

Green taxonomies help investors compare investment opportunities and measure their environmental impact.  A localised climate finance taxonomy can also help align a country’s climate goals with the Paris Agreement and other international climate commitments while accounting for regional factors that influence localised transition pathways.

For example, different regions will have to adopt different pathways to reach the goal of limiting global warming to under 1.5 degrees C, as required under the Paris Agreement. A one-size-fits-all approach won’t work here, and where localised taxonomies on climate finance can help. Science-based targets at the regional level can help define metrics, based on which experts can develop standards and investors can determine their financial commitments, all without compromising on global climate goals.

Climate finance taxonomies can also help prevent greenwashing by companies by setting common standards based on scientific assessments.

“The development of a taxonomy for climate finance is crucial for establishing clear standards. It ensures that investments are transparently and efficiently directed towards genuine green projects, driving innovation and supporting India’s ambitious climate goals,” Harjeet Singh, Global Engagement Director for the Fossil Fuel Non-Proliferation Treaty Initiative, told The Hindu.

Many countries like China, Malaysia, and Sri Lanka have already issued green taxonomies to facilitate climate-sensitive investments.

Editorial | Towards a green growth: On the RBI and a green taxonomy

What has India done to set up a green taxonomy?

In January 2021, India established a task force on sustainable finance under the Department of Economic Affairs, Ministry of Finance, to create a framework for sustainable finance in India, establish the pillars for a sustainable finance roadmap, suggest draft taxonomy of sustainable activities, and create a framework of risk assessment by the financial sector.

In April that year, the Reserve Bank of India (RBI) joined the Central Banks and Supervisors Network for Greening the Financial System (NGFS) as a member. RBI is also a member of a task force on climate-related financial risks set up by the Basel Committee on Banking Supervision, and the International Platform on Sustainable Finance.

Why does India need a green taxonomy?

According to the IFC, India needs an estimated $10.1 trillion to achieve net-zero by 2070. Public investments alone can’t match this goal, which calls for standardisation in investments.

“A green taxonomy framework could significantly help India attract both domestic and international investments, aligning these funds with its national and global commitments to a green transition and enhanced climate resilience,” Mr. Singh said.

“Investors and industry have been demanding a taxonomy and transition pathway as guidance for flow of finance and reorientation of economic activity. The Budget announcements that clearly mention the establishment of a carbon market, taxonomy and transition pathways mark significant progress in planning towards net zero in 2070,” Suranjali Tandon, an associate professor at the National Institute of Public Finance and Policy, said.