Finance Minister Nirmala Sitharaman replies to the debate on the Finance Bill in the Lok Sabha on August 7, 2024. Photo: SansadTV via ANI

The Finance Bill 2024 was passed in the Lok Sabha on Wednesday (August 7, 2024) with an amendment relaxing the recently introduced new capital gains tax on real estate. It allows tax payers an option to switch to a new lower tax rate or stick to the old regime that had higher rate with indexation benefit.

The amendment comes after a proposal to remove indexation benefit in calculation of long-term capital gains on sale of immovable properties in the Budget 2024-25 had evoked criticism from various corners, including Opposition parties and tax professionals. The Budget had proposed a lower 12.5% rate of LTCG tax, down from 20%, while doing away with the indexation benefit.

With this amendment, individuals or Hindu Undivided Families (HUFs) who bought houses before July 23, 2024, can opt to pay LTCG tax under the new scheme at the rate of 12.5% without indexation or claim the indexation benefit and pay 20% tax.

The Finance Bill 2024 was passed by a voice vote in the Lok Sabha with a total of 45 official amendments.

Replying to the debate before the passage of the Bill, Finance Minister Nirmala Sitharaman, rejected criticism from Opposition parties that the middle class was heavily taxed. She said that the Budget proposals were aimed at promoting investment and benefiting the middle class.

She said that the Narendra Modi government had brought in a simplified taxation regime and eased compliance without drastically increasing taxes.

Among the various measures taken to help the middle class, Ms. Sitharaman mentioned the reduction in customs duty on various goods that would promote trade and investment and generate employment. She also referred to the hike in tax exemption limit on long-term capital gains in listed equities and bonds to ₹1.25 lakh from ₹1 lakh, a move that she said would benefit those investing in the stock market.

The Finance Minister said that simplification of the tax regime was the primary objective of the Modi government , highlighting that 72% of those who had paid income tax had opted for the new regime while filing returns this year.

“We have made transformational changes in tax governance. In 2023, the tax slabs were significantly reduced. Again, this has been done this year,” Ms. Sitharaman said, adding that the standard deduction for the salaried class had been increased.

On the Opposition’s demand for removal of Goods and Services Tax on health and life insurance premiums, the Union Minister said that 75% of the GST collected goes to States.

“Prior to levying 18% GST on health insurance [premium], all States used to levy tax on insurance premiums. So when GST was rolled out, the tax automatically got subsumed into GST,” she said.

Opposition MPs staged a walkout after a furore over the government not taking up an amendment in the Finance Bill to withdraw the 18% GST levy on medical and life insurance premiums. The amendment had been moved by N.K. Premachandran of the Revolutionary Socialist Party.

The Finance Minister said any amendment in GST had to be approved by the GST Council.

Budget 2024-25 promised that “a policy for promoting pumped storage projects will be brought out for electricity storage and facilitating smooth integration of the growing share of renewable energy with its variable and intermittent nature.”

Why pumped storage

India has planned to create an ambitious 500 GW of non-fossil power by 2030. In around two years, from 2021 to 2023, it created some 23 GW of non-fossil generation capacity. Out of 10 GW added in eight months in 2023-24, 7.5 GW were wind and solar, pointing to how renewables will account for most of the new power generation that will be added in India.

Actual renewable power generation has crossed 10% of the total generation and its share will only increase many times. This power will necessarily vary and is “infirm.”

Indian policies have laid down that all the power that renewable sources generate should be used and their curtailment should be the last priority. State-of-the-art forecasting techniques have helped to predict more accurately how much will renewable power generation vary in the course of a day. This has helped grid operators plan in advance how to increase or decrease power generation from other sources to provide steady power to the consumer.

Hydro power generation can quickly ramp up or ramp down in a matter of seconds. Hydro helped to ensure there were no blackouts during the lights-off campaign during the pandemic, for instance. Gas turbines come next. Coal and nuclear need hours of notice.

When the world’s attention turned to renewables and the problem of variable power generation, many solutions were proposed for storing energy and releasing it when wind and solar are down. Until then, no electricity generated was stored in large scale.

Among energy storage methods thought of were scaling up batteries and pumping in compressed air into large caverns and then drawing on them to generate power when required. But, much of the energy storage adopted across the world today is pumped storage that uses water. These are like super large batteries but natural and use water.

India’s experience

India has 3.3 GW of pumped storage. Main ones are Nagarjunasagar, Kadana, Kadamparai, Panchet and Bhira. Some four are under construction and two in advanced levels of planning.

China leads the world with 44 GW of pumped storage supporting 1,300 GW of wind and solar. India would therefore need to ramp up its pumped storage capacity by several times if it wants to meet its renewable power generation targets.

Pumped storage is of two types: on river and off river. On-river is like any hydroelectric project supplied by a river. Existing hydro projects could become pumped storage. Off-river projects are those that have two reservoirs at two different levels to which the water is pumped up or falls down to under gravity in a closed loop. Abandoned mines can, for instance, be converted to such reservoirs. When there is surplus power, water is pumped up from lower to upper reservoir and when power is needed the water can fall down under gravity to turn the turbines and generate power.

How Kadamparai operates

In Tamil Nadu, at noon on a typical day in July, wind and solar can generate half of all power. This is among the highest in the country.

While the State was an early starter and leader in wind power capacity, more recent renewables have been solar.

On a summer day, solar plants in Tamil Nadu produce some 5,000 MW at noon. But that power dwindles as the day progresses and drops to zero when the sun sets. Wind has its own vagaries too. The wind season is May-September.

Tamil Nadu has peaks of around 17,000 MW to 20,000 MW on a daily basis. This year in July, maximum wind power generated reached 5,499 MW and maximum solar reached 5,512 MW. Wind and solar have Must Run Status in the State which means whatever they produce must be taken.

The Kadamparai plant near Valparai in Coimbatore district came up some 37 years ago before wind and solar of any scale was there. The purpose was to help balance the grid and the plan has come in handy when Tamil Nadu took the lead in renewable power generation.

The plant has a higher reservoir that is at a height of around 380 m above a lower reservoir. Each unit is a turbine generator set producing electric power when the water flows from the upper reservoir to the lower. The same unit can function as a pump consuming electric power when it pumps water from lower to higher reservoir.

The previous day morning, power managers in Tamil Nadu plan for the next day how much and when to operate each power plant in the State based on several factors such as demand expected as well as a forecast of wind blowing and sun shining. Typically, when the sun shines brightest, there is a power surplus coming from solar. That power is used to pump up the water at Kadamparai. Each unit needs 20% more power to operate as pump than what it can produce as generator. But this is solar power and no fuel is burned to produce that electric power.

When the Kadamparai plant is operating as a pump to store energy, it would need about an hour and half to switch to generating mode. When stopped, it would need about half hour to start and generating at full load.

When solar generation stops and the evening peak load begins after 6pm, Kadamparai plant becomes a generator. It can produce 400 MW of full power for three to four hours and help support the evening peak loads. Sometimes the plant is operated at less than full load late into the night depending on the conditions.

The upper reservoir has around 1 TMC feet of water. Leakages are marginal and are often replenished by natural rainfall.

When the solar is coming in full, power managers in the State stop drawing power from hydro of which the State has around 1,000 MW. Hydro can be quickly turned on if there is a sudden drop in power generation, such as in the case of an outage. Barring water for irrigation and drinking, hydro is used for power generation when demand peaks.

Union Finance Minister Nirmala Sitharaman speaks in the Rajya Sabha during the Monsoon session of Parliament on July 31, 2024.
| Photo Credit: PTI

Replying to the debate on the Union Budget in Rajya Sabha on Wednesday where more than 80 elders participated, Union Finance Minister Nirmala Sitharaman said the transfer of resources to the States is going unhindered and the inferences that she mentioned just two States in the budget was a propaganda created by the INDIA bloc to mislead the people.

Comparing the allocation to various social sectors and the devolution of taxes to the States under the UPA and NDA regimes, she said the Narendra Modi-led government implemented the concept of cooperative federalism by giving due share to all States.

Countering the allegation that the Budget mentions just two States, Andhra Pradesh and Bihar, Ms. Sitharaman said the Opposition created a propaganda to mislead people. “The Budget is for all States,” she said adding that the practice of mentioning the names of all States was not there during the UPA regime too. “If a State has not been mentioned in the speech, it does not mean there is no allocation for it,” she said.

She said it was wrong to calculate devolution based on gross tax receipts, and then allege that the Centre is devolving less than what is suggested by the Finance Commission. “I would like to underline our unflinching commitment to cooperative federalism. The total resources proposed to be transferred to the States in 2024-25 are estimated at ₹22.91 lakh crore. This actually entails an increase of ₹2.49 lakh crore over 2023-24,” she said.

Ms. Sitharaman said the capital expenditure too increased manifold during the last 10 years. The capital expenditure, she said, is estimated at ₹11.11 lakh crore. “This is the biggest ever allocation for capital expenditure and it shows increase of about 17% over the revised estimates and provisional actuals of 2023-24,” she said and added that during the 10 years of the UPA, it was ₹13.19 lakh crore. “Whereas during our tenure from 2014 to 2024, the allocation for capex has been ₹43.82 lakh crore from 2014-15 to 2023-24,” she said.

Replying to the discussion on the Budget of Jammu and Kashmir, she said the financial condition of the Union Territory has improved in the last two years. Earlier practices of running ‘hundis’ and overdrafts from J&K Bank have been discontinued and the day-to-day cash management is much healthier than the past, she said. “During the last four years, J&K Bank has made a remarkable turnaround. From a loss of ₹ 1,139 crore in 2019-20, the bank had a profit of ₹1,700 crore in the year 2023-24,” she added.

On the conduct of NEET medical entrance tests, she said the entrance examination has ensured cost-effective medical education for families. “Certainly, it has hurt some vested interests, particularly those in the medical education field because no longer selling medical seats is possible. Therefore, it has hurt a lot of people. That is why a particular lobby was actively against NEET even before this NEET leak issue has come up,” she said.

On the Agnipath military recruitment scheme, the Minister said the scheme will ensure that India has younger soldiers who are on the frontline. “One of the expected outcome of the scheme is that armed forces will have a much younger force by recruiting those in the age group of 17.5-21 years,” she said. “And I don’t think there is a need for us to unnecessarily worry that this is causing some kind of distortion. Not at all. It is with the acceptance of the armed forces that it has been brought in,” Ms. Sitharaman added.

Amid criticism of Budget 2024 from several quarters, Union Minister and senior BJP leader Nitin Gadkari has written to Finance Minister Nirmala Sitharaman, requesting her to withdraw the GST imposed on premiums for life and medical insurance plans.

Mr Gadkari has said in his letter that he is writing to the Finance Minister following a memorandum from the Nagpur Divisional Life Insurance Corporation Employees Union.

“Main issue raised by the Union is related to withdrawal of GST on Life and Medical Insurance Premium. Both life insurance and medical insurance premiums attract a GST rate of 18 per cent. Levying GST on life insurance premium amounts to levying tax on the uncertainties of life,” the Road Transport and Highways Minister has written.

“The Union feels that the person who covers the risk of life’s uncertainties to give some protection to the family should not be levied tax on the premium to purchase cover against this risk. Similarly, the 18% GST on medical insurance premium is proving to be a deterrent for the growth of this segment of business, which is socially necessary. Therefore, they have urged withdrawal of GST as mentioned above,” he has added.

Mr Gadkari said the union that met him also raised points related to differential treatment to savings by way of life insurance, re-introduction of IT deduction for health insurance premium and consolidation of public and sector general insurance companies.

“In view of the above, you are requested to consider the suggestion of Withdrawal of GST on Life and Medical Insurance Premium on priority as it becomes cumbersome for the senior citizens as per rules with due verification along with other relevant points raised,” the former BJP has said in his letter to Ms Sitharaman.

Mr Gadkari’s letter to the Finance Minister comes amid criticism from several quarters over the first Budget of the third Narendra Modi government, presented last week. While the Opposition has accused the Centre of being generous only to states ruled by its key allies TDP and JDU, a section of social media users have pointed to high tax rates for the salaried class.

The Finance Minister has trashed the Opposition’s charge, saying the Centre has provided funds to all states. She has said that if the name of a state is not mentioned in the Budget speech, it does not mean it is not covered. The BJP has said policy priorities of the Budget suggest that it has a long-term goal of ‘Viksit Bharat’ — making India a developed nation — by 2047.

The government has sustained its expenditure as a share of the total budget on infrastructure.
| Photo Credit: Getty Images/iStockphoto

The story so far: In her Budget proposals for 2024-25, Finance Minister Nirmala Sitharaman has set aside ₹11 lakh crore for capital expenditure, comprising 3.4% of the GDP. With the aim to push States to spend on infrastructure, she said ₹1.5 lakh crore was being made available to them in the form of long-term interest free loans.

Which are the sectors on the radar?

According to an analysis by The Hindu’s data team, the government has sustained its expenditure as a share of the total Budget on infrastructure which was at 13.9% (as compared to 14.3% in FY2024 RE). The transport sector formed the bulk of the expenditure in FY25BE (Budget estimates) at 11.29%. However, transport’s share in the total Budget has come down by 0.4% points from last year. Allocations to the power sector has improved marginally from last year. The Ministry of Roads, Transport and Highways received an allocation of ₹2.78 lakh crore for 2024-25. In FY25BE, the outlay for the Railways continues to be over the 5% mark. It received a record allocation of over ₹2.55 lakh crore. Allocations for signalling and telecom work, under which the KAVACH (automatic train protection system) is included, has increased compared with FY24RE (revised estimates). The allocation for the Ministry of Civil Aviation at ₹2,357 crore saw a decline of 20% from last year. With an allocation of ₹2,377 crore, the outlay for shipping has stagnated. The regional connectivity scheme will receive ₹502 crore.

What is the progress on roads?

According to the Economic Survey 2024, national highways have grown by 1.6 times from 2014 to 2024. The Bharatmala Pariyojana has significantly expanded the national highway network, increasing the length of high-speed corridors by 12 times and 4-lane roads by 2.6 times between 2014 and 2024. The government is developing 11 industrial corridor projects in a phased manner. In order to attract private investment, the Ministry of Road Transport and Highways has made a slew of changes to the model concession agreement for Build-Operate-Transfer, including construction support, to ensure timely completion of the projects. But industry says the profitability of the new agreements need to be tested. With many projects nearing completion, the focus also needs to shift from asset creation to asset management as well as maintenance and safety, say experts. The industry seeks standard operating procedures for construction of bridges and tunnels to avoid safety incidents such as the Silkyara tunnel collapse in Uttarakhand in 2023.

What are the challenges in Railways?

The capital expenditure for Indian Railways with a network of over 68,584 route km has increased by 77% over the past five years (₹2.62 lakh crore in FY24) with investments in the construction of new lines, gauge conversion, and doubling. Yet, many challenges remain. According to Afaq Hussain, Director, Bureau of Research on Industry and Economic Fundamentals (BRIEF), the skewed freight movement share in favour of roads has to be amended. Long-haul freight transportation through roads is approximately 25-30% costlier than railways for distances less than 500 km, he pointed out. Other issues such as uncertainty in rake supply, delay in providing adequate infrastructure and sharing of lines by passenger and freight trains also need to be dealt with. Smooth entry and exit of freight vehicles is necessary for efficient loading and unloading operations.

What about shipping and airports?

Under the Sagarmala national programme launched in 2015, a total of 839 projects worth ₹5.8 lakh crore have been undertaken across five key areas including fresh development. Till date, 262 projects worth ₹1.4 lakh crore have been completed. Mr. Hussain explains that though there are more than 230 maritime ports, two ports at JNPT and Mundra handle nearly 40% of export, import cargo. Therefore, there is a need to develop a plan for the remaining ports. As for airports, under the second phase of privatisation in 2019, six AAI airports were privatised. There is a plan to privatise 25 more airports.

What about attracting private investments?

According to CRISIL’s Infrastructure Yearbook 2023, between FY2019 and 2023, the Centre contributed 49% of the total investments on infrastructure and State governments 29%, leaving the balance to be covered by the private sector. Jaganarayan Padmanabhan, Senior Director at CRISIL, explains that the private sector has been shying away because of the market risks experienced due to delays in completion of projects which impacts returns.

There is also a need to identify a lot more assets to monetise built infrastructure. In order to bring policy and regulatory challenges that Ms. Sitharaman mentioned in the speech, the government must also implement the Kelkar Committee report of 2015, says Mr. Padmanabhan.

The story so far: The Union Budget for 2024-25 made it clear that employment was a major priority of the government, with the word getting 23 mentions in the Finance Minister’s speech. With many voters expressing their disenchantment with rising unemployment in the recent election, Prime Minister Narendra Modi has lent his title to a package of schemes on employment.

What is the current state of employment?

According to the Economic Survey, India’s workforce was estimated to be nearly 56.5 crore in 2022-23, of which more than 45% is employed in agriculture, 11.4% in manufacturing, 28.9% in services, and 13% in construction. Officially, the unemployment rate was just 3.2% in that period, but economists note that these statistics do not reflect ground reality, given the large number of underemployed people in the country and the fact that many job seekers continue to work on farms or the unorganised retail sector or as casual labourers. A person is categorised as employed if he pursued any economic activity for at least 30 days in the preceding year.

Almost one in five people in the workforce (18.3%), mostly women, do not receive any wages for their labour, as they are unpaid workers in household enterprises. The urban unemployment rate for the quarter ending March 2024 stood at 6.7%, while youth unemployment stood at 10% in 2022-23. The percentage of people in regular salaried work has dropped from 22.8% in 2017-18 to 20.9% five years later, despite policy efforts to formalise the workforce; many salaried workers do not have access to contracts or social security benefits that usually define a formal worker. The government cites enrolment in the Employees Provident Fund Organisation (EPFO) as evidence of formalisation. The EPFO has 7.3 crore contributing subscribers, though total accounts are 30 crore, including inoperative accounts and multiple accounts held by individuals.

What were specific schemes in the package?

Three of the schemes provide employment-linked incentives. The first scheme is meant to support the hiring of first-time employees, with a wage subsidy of up to ₹15,000 paid to the employee, and is expected to cover one crore people. The second is aimed at the hiring of first-time employees, specifically in the manufacturing sector, with wage subsidies to be paid to both employees and employers for four years, with a maximum incentive of 24% of a ₹25,000 monthly wage. The third supports employers who hire new workers, not necessarily first-timers, by reimbursing up to ₹3,000 of their monthly EPFO contribution. In fact, all three schemes are dependent on employees being registered with the EPFO. The fourth scheme aims to upgrade Industrial Training Institutes and boost skilling efforts, with 20 lakh students expected to benefit. The final scheme, which garnered headlines partly because of its similarities to a proposal in the Congress’s manifesto, is aimed at on-the-job skilling, with an ambitious target of one crore youth to be given internships in India’s top companies with a monthly allowance of ₹5,000 for one year, with the companies bearing training costs and 10% of the allowance.

What is in the fine print?

Economists and small industrialists say the conditions and procedures built into these schemes may create obstacles for effective implementation. For instance, the incentive scheme for first-time employees, which offers a ₹15,000 subsidy is paid out in three instalments; the second instalment is only payable if the employee undergoes a compulsory online financial literacy course. “This is impractical. Why should employees in every unrelated sector be expected to do this? And why should this be a condition for this incentive?” asks Himanshu, who teaches at Centre for Economic Studies and Planning, Jawaharlal Nehru University (JNU).

More worrying is the clause stating that the subsidy is “to be refunded by the employer if the employment to the first timer ends within 12 months of recruitment.” If the employee switches jobs in 10 months, he has already received the benefit of the scheme, but the employer is required to bear the costs; labour experts say few small employers will be willing to take that risk. The scheme for creating jobs in manufacturing has a minimum requirement of hiring 50 people or 25% of their existing strength, which is a significant number of people to be hired at one go for any firm in return for marginal benefits.

How effective are these schemes likely to be?

These schemes essentially attempt to encourage hiring by reducing the cost of new hires. However, economists note that this is not the main constraint preventing employers from hiring new workers. Anamitra Roychowdhury, a labour economist at JNU, notes that India is already a low wage economy, with real monthly incomes falling over the last five years for the majority of the workforce. “Wage costs are a redundant constraint,” he says, adding that while skilling is certainly needed, it is not the central issue preventing hiring either.

“There is a bigger structural reason why the economy is not able to create jobs, and that is due to insufficient demand, caused by low consumption… and the lack of private investment. And if that comes up, then these costs won’t matter,” notes Amit Basole, professor at Azim Premji University. He adds that these schemes need to be pitched to the niche group of employers for whom such costs do matter, usually small firms with small margins. In fact, Finance Secretary T.V. Somanathan indicated in an interview with The Hindu that this may have been the government’s intention behind the scheme, noting that “fiscal incentives have a role at the margin”.

Editorial | Shuffling the deck: On the Union Budget 2024-25

With regard to formalisation of the workforce, Mr. Basole points out that apart from new people entering the workforce, there are also large numbers seeking to leave agriculture, petty trade, unorganised retail and domestic service. The need is to create formal jobs to keep up with the pace of the supply, which is not happening, as evidenced by the fact that the proportion of salaried workers has actually dropped slightly over the last five years.

What else is needed to create jobs?

“When we think of where we need to create jobs, it should not be in the top 500 companies which are largely capital intensive, but in the MSME (micro, small and medium enterprises) sector, in labour intensive sectors, in small towns. The need is to raise wages there, infuse money into MSMEs, which will have a multiplier effect,” says Mr. Himanshu, recommending a bottoms-up approach. If the urgent requirement is to stimulate demand by increasing consumption, another step could be to raise wages in MGNREGA, the rural jobs scheme, and create a similar employment guarantee scheme for urban workers, says Mr. Roychowdhury. “This would be the more direct approach to kickstart consumption,” he says, noting that the Centre has instead curbed MGNREGA funding.

New Delhi:

Deviating from the stand taken by her counterparts belonging to other parties in the INDIA alliance, West Bengal Chief Minister Mamata Banerjee has said she will attend the Niti Aayog general council meeting on Saturday because it is in the interest of her state, adding that she will raise the issues of all opposition-ruled states.

The Niti Aayog general council meeting is one of the few forums where state chief ministers get to meet not just the Prime Minister, who presides over the gathering, but also Union ministers.

The Trinamool Congress chief arrived in Delhi on Friday amid speculation about her cancelling her visit and skipping the Niti Aayog meeting in line with chief ministers of Congress-ruled states and others like Punjab’s Bhagwant Mann, Kerala’s Pinarayi Vijayan and Tamil Nadu’s MK Stalin. 

Stating that she had cancelled, but reconsidered on the advice of senior Trinamool Congress leader Abhishek Banerjee, who is also her nephew, the Bengal chief minister said the Union Budget had been brazenly politicised. 

“They say the Budget shows cooperative federalism, but it is biased politicisation. The Budget is total deprivation of states. You can give some special package to your friends but you can’t deprive opposition states completely,” she asserted, adding that states have to be empowered.

“Centre should only have external affairs, defence and internal security. Finance (is something) they have destroyed,” she claimed. 

‘Scrap Niti Aayog’

Ms Banerjee said that, during the meeting, she would raise the issue of West Bengal “not getting anything” in the Budget as well as the Rs 1.71 lakh crore her government claims the Centre owes the state. She also said it was time the Niti Aayog was scrapped and the Planning Commission was brought back.

“It (Niti Aayog) has no financial implications… The Planning Commission had worked well for India since Independence. It was mooted by Subhash Chandra Bose,” she said. 

On being asked if she was part of the opposition INDIA bloc, she said she was at the national level but the alliance was not needed in the state. “Trinamool Congress is enough to fight the BJP in West Bengal. Nationally, we are with INDIA,” she said.

In the Lok Sabha elections, she said the Congress had gained in states where regional parties are strong and credit should be given to both. She also predicted that, in the upcoming Assembly elections, the Uddhav Thackeray-led Shiv Sena faction, which is an INDIA ally, will win in Maharashtra, Congress will emerge victorious in Haryana and Hemant Soren of the Jharkhand Mukti Morcha would remain the Jharkhand chief minister. 

On Delhi Chief Minister Arvind Kejriwal, who is in prison in the liquor policy case, she said she was very concerned about him and others “targeted” by the BJP-ruled government at the Centre. “Only agencies and conspiracies cannot give you political results,” she said.

Ms Banerjee also met Mr Kejriwal’s wife, Sunita, on Friday evening. 

New Delhi:

For a growing economy to meet its needs and aspirations, borrowing is a must, but the focus of the finance ministry under her is to ensure that debt is reduced without affecting growth, Nirmala Sitharaman has told NDTV. 

In an exclusive interview with NDTV’s Editor-In-Chief Sanjay Pugalia on Friday, Ms Sitharaman said fixing a number for the eventual fiscal deficit and working towards it with temporary solutions every year can be one way of going about things, but it is not the right way from a macroeconomic perspective. 

Ms Sitharaman, who became the first finance minister in India’s history to present seven Union Budgets in a row this year, said, “We have chosen a healthy option for getting the fiscal deficit closer to the number. Instead of looking at the number alone, it is also about the way you decide to get there. An obvious method for every country is to reduce debt, but borrowing is a must for a growing economy. The question is how much are you borrowing and where it is being used.”

“Are you using it for asset creation or to service or reduce the existing debt? If the growth in the debt is to be reduced, borrowing more to do this is not the right thing. So you borrow and create assets. We have studied the NK Singh Committee report (on fiscal responsibility), held discussions and decided that we won’t look at the number alone but choose the right path to reduce debt without affecting your growth, desires and aspirations,” she explained.

Addressing other aspects of the Budget, the finance minister also said that its communication has become much simpler and the document now speaks for itself without needing an intermediary or expert to explain it. 

“Each budget is a challenge for its contents but equally it is a challenge to craft the language of the budget. It has been a desire of the Prime Minister that the budget should be simple, you convey it simply and the language should be simple so that anyone can understand what you are saying. The other feature he has been clear about from the beginning is that the budget should say everything, without hiding anything,” Ms Sitharaman said.  

“We try to fine-tune it each time so that ultimately it should be a simple document. In my childhood, I remember the budget document was so complex, people would study and analyse it and simplify it… From those days to, I think, today the budget speaks for itself,” she added. 

To a question on one of the key criticisms of the Budget, with the opposition claiming that many states have been ignored while Andra Pradesh and Bihar – ruled by BJP allies crucial in getting the NDA to a majority – have been in focus, Ms Sitharaman said that has not been the case. 

“States are receiving allocations as they have in the past… no state has been denied anything. The Act (Andhra Pradesh Reorganisation Act) requires the centre to support (the state) in building its capital city and developing backward regions,” she said. 

India’s Finance Minister Nirmala Sitharaman holds up a folder with the Government of India’s logo as she leaves her office to present the union budget in the parliament in New Delhi, India, July 23, 2024.
| Photo Credit: ALTAF HUSSAIN

Union Finance Minister Nirmala Sitharaman, on Tuesday, presented the first Union Budget of the third term of the Narendra Modi-led NDA government. The Hindu Data team has compiled a series of graphs to analyse the impact of the Budget on select sectors and schemes. 

Data shows that expenditure as a share of the total budget on infrastructure has increased. In contrast, expenditure on major schemes in the social sectors, which includes education, pension and health, have either stagnated or declined. Spending on agriculture too, when considered as a share of the total budget, has stagnated. 

Before delving into individual sectors and schemes, the graph below provides an overview.

The graph below depicts the budgeted expenditure (Rs crore) for FY25BE and the change from FY24RE in percentage points. The bigger the rectangle, the higher the allocation for a sector. The deeper the blue, the higher the increase compared with FY24RE. The deeper the red, the higher the decrease compared with FY24RE. 

As usual, interest payments garnered a lion’s share of the budget this year. In absolute figures, Rs 11,62,940 crore was allocated for interest payments. If expressed as a share of FY25BE’s total Budget, it comes to 24.12%, which is 0.62 percentage points more than its share in FY24RE. Apart from interest payments, the transport sector formed the bulk of the expenditure in FY25BE at 11.29%. However, transport’s share in the total Budget came down by 0.4% points from last year.

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The allocation to agriculture remained stagnant at around 3.1% of the total budget. Allocation to flagship schemes such as Pradhan Mantri Fasal Bima Yojana (PMFBY) and Pradhan Mantri Kisan Samman Nidhi (PMKSN), as a share of total budget, declined in FY25BE.

Defence expenditure as a share of the total Budget declined to 9.43%, the lowest in at least nine years. In fact, defence expenditure in absolute terms has also declined. Allocations to the departments of Space have stagnated, while the Science and Technology ministry’s share in total Budget has improved slightly to 0.17%.

Allocations to all the schemes under the Space sector, as a share of total budget, have stagnated. 

Allocations for various social sectors such as health, rural development and education as a share of the total budget have stagnated or declined, with the social welfare sector being the only exception – whose share improved to 1.17% of the total budget in FY25BE.

Also read: Budget 2024: The government’s focus is on ease of paying taxes 

Outlays to schemes under social sectors such as MGNREGA, Samagra Shiksha, Ayushman Bharat, old age pension, widow pension, Swasthya Suraksha, have all declined in the recent years. Allocation to Ayushman Bharat has remained more or less the same in recent years after a sharp increase seen in FY23. 

The Transport sector on the other hand has formed a bulk of this year’s expenditure. Allocation to the Ministry of Road Transport and Highways (MORTH) and the telecom department has remained consistently high. Allocations to the power sector too have improved marginally from last year. 

While the outlays to implement housing in urban & rural areas, and other basic amenities in urban areas improved marginally in FY25BE, allocations to smart city missions, as a share of the total Budget, has plunged. 

In FY25BE, the Railway Ministry outlay in the overall budget continued to be over the 5% mark. Allocations for the signalling and telecom works, under which KAVACH (automatic train collision system for trains) is included, increased compared with FY24RE

However, allocations for the Aviation Ministry which has remained consistently low in recent years declined marginally. The outlay for the Shipping Ministry has also stagnated.

Source: Budget Documents

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The announcement of a hike in securities transaction tax and short term capital gains tax in the Budget for 2024-25, impacted markets’ sentiment negatively during the initial trade on July 25, 2024.

Equity market benchmark indices Sensex and Nifty tumbled in early trade on July 25, continuing to decline for the fifth day running, dragged by Axis Bank and overall bearish global market trends.

The announcement of a hike in securities transaction tax and short term capital gains tax in the Budget for 2024-25, heavy foreign fund outflows and profit-taking after a record rally also impacted markets’ sentiment negatively during the initial trade.

Also Read: Markets still sour after tax hike on equity investments, Nifty, Sensex fall marginally

The 30-share BSE Sensex tanked 671 points to 79,477.83. The NSE Nifty tumbled 202.7 points to 24,210.80.

From the Sensex pack, Axis Bank declined nearly 6% after the company’s June quarter earnings failed to cheer investors.

JSW Steel, Tata Steel, ICICI Bank, Power Grid, UltraTech Cement and Titan were the other laggards.

Tata Motors, Larsen & Toubro, HDFC Bank and Kotak Mahindra Bank were the gainers.

In Asian markets, Seoul, Tokyo, Shanghai and Hong Kong were trading lower. The U.S. markets ended significantly lower on July 24.

“Global cues have turned distinctly negative with a sharp 3.64% cut in Nasdaq, which is the worst cut in 2024. The tech stocks which have been driving the rally in the U.S. are facing the brunt of selling due to worse-than-expected results and news.

“In India, too, the sentiments have turned a bit negative on the Budget proposals to raise the capital gains tax,” said V. K. Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

Foreign Institutional Investors (FIIs) offloaded equities worth ₹ 5,130.90 crore on July 25, according to exchange data.

Global oil benchmark Brent crude declined 0.76 % to USD 81.09 a barrel.

The BSE benchmark declined 280.16 points or 0.35 % to settle at 80,148.88 on July 24. The NSE Nifty dropped 65.55 points or 0.27 % to 24,413.50.