The Union Budget for FY25 presented by Finance Minister Nirmala Sitharaman builds on the Interim Budget earlier this year and sets the tone for next year’s Budget. It aligns with Prime Minister Narendra Modi’s vision of enabling India to achieve a developed economy status by 2047. This statement of intent is clearly supported by a future-oriented plan and backed by specific allocations in employment generation and skilling, start-ups, research & innovation, MSMEs, and climate action to support India’s ambitions.
The Budget comes in the backdrop of a resilient Indian economy with healthy macroeconomic fundamentals. The Economic Survey on Monday estimated that India’s real GDP will grow at a pace of 6.5-7% in FY25, reflecting the rising global confidence in India’s economic prowess. The fiscal deficit for 2024-25 is estimated to be 4.9% of GDP, indicating a commitment to fiscal prudence while supporting growth.
Creating Skilled Jobs
The Budget has paid due attention to employment generation, skilling, entrepreneurship, and the startup economy. In a country with the world’s largest and youngest workforce, India needs to produce more skilled jobs and move a greater proportion of its workforce into higher productivity sectors to maintain its economic momentum through consistently high GDP growth.
To address this crucial need, the FM has allocated Rs 2 trillion over the next five years with the aim of benefiting 41 million youth.
The scheme to provide internships at large companies with government and CSR-backed stipends for 10 million youth over the next five years is the right approach to employability and jobs for the future.
Moreover, 21 million youth are expected to benefit from the employment-linked incentive scheme for first-time employees wherein the government will provide a month’s wage to all new entrants in formal sectors.
Incentives for businesses, notably those in the manufacturing sector, upgradation of 1,000 Industrial Training Institutes (ITIs), as well as subsidised loans for higher education will also go a long way in laying a solid foundation for a future-ready workforce.
Start-ups and Entrepreneurship
The Indian start-up scene is a vibrant and dynamic space, and the government’s decision to abolish the ‘angel tax’ for all classes of investors is a welcome move. This will create a more favorable environment for investments in early-stage start-ups in India as well as boost the overall start-up ecosystem, thereby fostering growth and innovation.
Furthermore, the decision to double the limit to Rs 20 lakh for collateral-free MUDRA loans for small/micro enterprises is likely to encourage entrepreneurship, promoting self-reliance and boosting the rural economy.
Research & Innovation
Science, technology, and innovation are the future drivers of the Indian economy. The Budget’s focus on research and innovation recognizes this critical factor. What we need now is an ecosystem and policies that encourage industry investment in R&D and innovation.
Towards this, the FM announced the setting up of a mechanism for spurring private sector-driven research and innovation at commercial scale with a financing pool of Rs 1 trillion. However, we need to read the fine print to fully understand the implications of the outlay, particularly regarding support for private sector R&D.
It is also encouraging to see a strong emphasis on research and innovation in agriculture, which is crucial. The government is also looking at upgrading and upskilling farmers through research.
Specific to the pharma sector, the removal of Customs duty on three cancer drugs will provide relief to cancer patients. However, the government needs to consider GST exemption for all cancer drugs to make cancer care more affordable for patients.
Boosting MSMEs
The Budget also offers significant support for the Micro, Small & Medium Enterprises (MSME) sector. It ensures accelerated funds availability by reducing the threshold for working capital requirements and provides special attention to labour-intensive manufacturing. A new mechanism will facilitate the continuation of bank credit to MSMEs during periods of stress. Additionally, e-commerce export hubs will be established in a public-private partnership mode to help MSMEs and traditional artisans sell their products internationally, offering seamless trade and export services under one roof.
Climate Action
The FM also announced that it will develop a taxonomy for climate finance to enhance the availability of capital for climate adaptation and mitigation.
The Budget also announced financial support for micro and small industries to shift to cleaner energy and introduced a policy for electricity storage to facilitate the smooth integration of renewable energy.
These proposals signal the government’s intention to promote renewable energy, green infrastructure, and sustainable practices to ensure long-term environmental and economic health.
Conclusion
This Budget underscores the government’s commitment to inclusive development and economic resilience. As an entrepreneur who has been part of India’s growth story, I am optimistic about the potential this Budget holds for our nation’s future as we navigate the path to becoming a developed nation by 2047.
(A version of this was published in the July 24, 2024, edition of The Economic Times)
