The Union Budget for 2024-25 has adopted a multi-faceted approach, focusing on enhancing productivity in sectors such as agriculture, education and skill development, manufacturing — particularly among MSMEs, energy security, and infrastructure. A key highlight of this budget is the introduction of next-generation reforms through an Economic Policy Framework, which aims to leverage technology to boost the productivity of all four factors of production.

Agriculture to boost rural demand

Agriculture, vital for the livelihoods of nearly half of India's population and crucial for food security and controlling food inflation, remains a central focus. Initiatives include improving productivity and climate resilience by introducing high-yielding and climate-resistant crop varieties, increasing funding for agricultural research, establishing vegetable production and supply chain clusters, and strengthening digital infrastructure. Moreover, strategies to reduce reliance on oilseed imports by enhancing domestic production, storage, and marketing have been outlined. The extension of the PM Garib Kalyan Anna Yojana for five years is expected to benefit over 80 crore people, while the digitalisation of land registries aims to facilitate easier access to credit for farmers, thereby supporting rural demand, which has been subdued throughout much of FY 2024.

Employment and skilling to increase consumption expenditure

Despite an impressive economic growth rate of 8.2%, consumer spending has seen modest growth. To stimulate demand, the government has announced measures to improve employment opportunities, skill development, and increase disposable income. Notably, raising the tax deduction limit to ₹75,000 is expected to put significant funds into the hands of the middle class. Additionally, the budget introduces three schemes aimed at creating employment for nearly 3 crore people and providing internships to approximately 1 crore individuals in the top 500 companies, thereby bridging the gap between education and employability. Efforts to enhance women's labour force participation include establishing creches and promoting market access for women's self-help group (SHG) enterprises, underscoring the budget's commitment to inclusive growth and economic resilience.

Driving India's economic dynamism through thriving MSMEs

The government continues to prioritise manufacturing, especially among MSMEs, which contribute 30% to the nation's GDP. Most of the announced initiatives focus on improving access to credit, including collateral-free loans, support during financial stress, expanding SIDBI branches, leveraging digital footprints to assess credit eligibility, and enhancing opportunities for MSMEs to join TReDS. These measures aim to tackle the longstanding challenge of access to credit. Beside, these measures aim to encourage mechanisation, promote digital adoption, and strengthen the sector's overall resilience and competitiveness.

Renewable Energy: Production and Storage

India is earnestly pursuing its Panchamrit goals, aiming for energy self-sufficiency and reducing dependence on certain geographies for energy requirements amidst geopolitical uncertainties. This budget focuses on boosting production and improving storage capabilities to enhance reliability, stabilize grid operations, and maximize the utilization of intermittent energy sources such as solar and wind. This includes initiatives to enable rooftop solar installations for one crore households and promote pumped storage projects.

Non-Tax Revenue aiding Fiscal Consolidation

The government remains committed to fiscal consolidation, even amid high capital expenditure. This is a key indicator that is observed by global investors and has implications on sovereign yield and capital flows into the country. The fiscal deficit for FY 2024 was reported at 5.6% of GDP, lower than the budgeted figure of 5.9% of GDP. Looking ahead to FY 2025, the deficit is projected to decrease further from 5.1% to 4.9%. By managing its finances effectively, the government is paving the way for strong investment inflows and encouraging private capital expenditure. A controlled deficit also helps keep sovereign yields low and stable, and inflation in check, both of which are critical for financial and economic stability. The substantial dividend payout of ₹2.1 lakh crore by the RBI, marking a 141% increase from ₹87,416 crore in FY 2023, has greatly bolstered the government’s non-tax revenue, further narrowing the deficit ratio. While capital expenditure has remained steady, revenue expenditure has increased due to rising interest expenditures.

(Authors: Dr. Rumki Majumdar, Economist, Deloitte India and Debdatta Ghatak, Manager, Deloitte India)

Economic Policy Framework

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