The Union Budget 2024, presented by Finance Minister Nirmala Sitharaman, represents a significant milestone in India’s ongoing journey towards inclusive growth and economic resilience. With a strategic emphasis on job creation, infrastructure development, support for MSMEs, and affordable housing, this Budget addresses the nation’s critical needs while prudently reducing the fiscal deficit to 4.9%.

Stimulating employment and economic participation

A cornerstone of this Budget is the ambitious scheme to boost job creation in the manufacturing sector, specifically targeting first-time workers. Key components of this initiative include:

• EPFO contribution incentives for both employees and employers for the first four years of employment.
• Expected benefits reaching 3 million young people, fostering employment across various sectors.
• Government reimbursement of up to ₹3,000 per month for two years for each additional employee’s EPFO contributions.
• An overarching goal to create employment opportunities for 5 million additional people.

Additionally, the introduction of a Direct Benefit Transfer (DBT) scheme provides ₹15,000 to new workers registered with EPFO, disbursed in three instalments. This initiative, benefiting 210 lakh youth, is designed to support individuals entering the formal workforce, with eligibility extending to salaries up to ₹1 lakh per month.

Empowering youth through skilling initiatives

The Budget places a strong emphasis on employment-linked skilling, unveiling schemes as part of the PM’s comprehensive package. These initiatives focus on recognising and supporting first-time employees. A PM Package, valued at ₹2 lakh crore, includes five schemes aimed at enhancing employment and skilling opportunities, with a substantial provision of ₹1.48 lakh crore allocated for education, employment, and skilling.

Supporting MSMEs and infrastructure development

In a significant boost to the MSME sector, the Budget introduces a new credit guarantee scheme for term loans aimed at purchasing machinery and equipment without the need for collateral. This scheme will offer guarantees up to ₹100 crore, enhancing the growth potential of small businesses. Additionally, the limit for MUDRA loans under the TARUN category has been increased from ₹10 lakh to ₹20 lakh for those who have successfully repaid previous loans.

On the infrastructure front, the Budget allocates ₹10 lakh crore to the PM Awas Yojana Urban 2.0, addressing the housing needs of the urban poor and middle class. An additional ₹2.2 lakh crore initiative focuses on making housing more affordable, reflecting the government’s commitment to improving living standards.

Advancing energy security and sustainable development

Energy security and sustainable development are pivotal elements of this budget. The PM Surya Ghar Muft BijliYojana, aimed at installing rooftop solar plants, promises to provide free electricity up to 300 units per month to 1 crore households. This initiative has already seen remarkable interest with 1.28 crore registrations and 14 lakh applications.

Fostering innovation and simplifying investment rules

To drive innovation, the budget proposes a mechanism to promote private-driven research at a commercial scale, supported by a financial pool of ₹1 lakh crore. Removing angel tax is a very positive step to boost start-up morale. Additionally, simplifying rules and recognition for Foreign Direct Investments (FDIs) aims to facilitate inflow and promote the use of the Rupee for overseas investments.

Promoting fiscal responsibility and tax overhauls

In its commitment to fiscal responsibility, the Budget plans to reduce the fiscal deficit to below 5%. Numerous reforms in tax law operations are introduced to simplify the process for taxpayers and rationalise tax rates, ensuring the system remains straightforward and inflation is controlled. The market is expected to absorb a slight increase in long-term and short-term capital gains taxes from 10% and 15% to 12.5% and 20%, respectively, which will be balanced by benefits to salaries and the middle class due to lower tax burdens. Similarly, a modest rise in the Securities Transaction Tax (STT) on Futures and Options (F&Os) is deemed manageable.

The Union Budget 2024 is a well-rounded strategy to foster inclusive growth, enhance economic stability, and improve the overall quality of life for all citizens. By focusing on vital areas such as job creation, skill development, support for MSMEs, and infrastructure enhancement, this budget lays the groundwork for sustained economic prosperity in India. The government’s approach ensures balanced and inclusive development, steering India towards a future of economic resilience and equitable growth.

(The writer is Founder, IIFL Group)

Former RBI governor Raghuram Rajan said regardless of whether one picks services, manufacturing, agricultural construction, India has a problem. File
| Photo Credit: PTI

India is not reaping the benefits of demographic dividends, former RBI governor Raghuram Rajan said on April 16, emphasising that there is a need to focus on improving the human capital and enhancing their skill sets.

“I think we are in the midst of it (demographic dividend), but the problem is we are not reaping the benefits,” Mr. Rajan said at a conference on “Making India an Advanced Economy by 2047: What Will it Take” at the George Washington University here.

“That’s why I said 6% growth. If you think that’s about what we are right now, take away the fluff in the GDP numbers. That 6% is in the midst of a demographic dividend. It is much below where China and Korea were when they reaped their demographic dividend. And that’s why I’m saying we are being overly complicit when we say this is great. This is not because we are losing the demographic dividend because we are not giving those guys jobs,” the former RBI governor said.

“And that leads us to the question, how do we create those jobs? The answer to my mind is partly enhancing the capabilities of the people we have, partly changing the nature of the jobs that are available and we need to work on both fronts.

“This idea of apprenticeship, which the Congress has in its manifesto is worth working on. I think there’s a lot that needs to be done to make it effective, but we need many more students to at least be capable of doing a good job,” Mr. Rajan said, adding that there also needs to be focus on job creation.

Mr. Rajan was critical of India spending billions of dollars on chip manufacturing. “Think about these chip factories. So many billions going to subsidise chip manufacturing,” he said, adding that a number of job intensive areas like leather are not doing good.

“We are going down in those areas. No wonder we have more of a job problem. The job problem was not created in the last 10 years. It’s been growing over the last few decades. But if you neglect the areas which are more intensive, I’m not saying we need to now offer subsidised subsidies to leather examples, but figure out what’s going wrong there and try and rectify that,” he said.

Responding to a question, Mr. Rajan said a lot of Indian innovators now are going to Singapore or to Silicon Valley to set up because they find access to the final markets much easier there. “We need to ask what is it that forces them to go outside of India to set up rather than stay inside India? But what is really heartwarming is talking to some of these entrepreneurs and seeing their desire to change the world and increasingly many of them are not happy staying in India,” he said.

“They want to actually expand more globally. I think there is a young India that has a Virat Kohli mentality. I’m second to none in the world,” Mr. Rajan said.

Earlier in his presentation, Mr. Rajan said regardless of whether one picks services, manufacturing, agricultural construction, India has a problem.

“And this is so well known, I don’t need to elaborate. Unemployment numbers are high, disguised unemployment is even higher, labour force participation is low, female labour force participation is really alarmingly low…the share of agriculture and jobs is increasing in recent times. Of course, all this is exhibited in highly educated unemployment and massive numbers of people applying for government jobs. PhDs applying for jobs as peons in railways,” he said.

“Even as this is happening. Even as we have a massive labour which is unemployed, we have the capital intensity of manufacturing steadily going up,” Mr. Rajan said.

Article corrected post publication.