Finance minister Nirmala Sitharaman presented another balanced budget on Tuesday, one that addressed both the immediate and long-term needs of the country. Continuity and consistency have been two critical themes that have dominated policy making over the past decade and the finance minister delivered on both counts by looking to create jobs through pin-pointed schemes, and boost consumption by putting more money in the hands of taxpayers.
Another remarkable feature of this budget is the acceleration on the path of fiscal consolidation that was outlined in 2021. The FM has advanced the fiscal deficit target to 4.9% for FY25, an improvement over the 5.1% announced during the interim budget in February. This is a welcome sign, particularly with global investors and raters, and underscores India’s attractiveness as an investment destination. With an aggressive target of below 4.5% in FY26, the FM has also paved the way for sovereign-ratings upgrades for India.
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Micro, medium and small enterprises are the life force of our economy and the flow of credit to them will have a multiplier effect on the economy. The FM announced several measures to simplify credit flow to MSMEs through a credit guarantee scheme and new assessment model for these businesses. The limit for Mudra Loans has also been increased from ₹10 lakh to ₹20 lakh under the Tarun category, which will have a cascading effect on the sector and its ability to create jobs.
Top priority: creating jobs
By supporting manufacturing and MSMEs, the government is addressing the primary need of the hour – job creation. Creating more jobs will lead to higher consumption and fire up various consumer industries, increasing the multiplier effect.
A similar multiplier effect is sought to be perpetuated by the continued attention to infrastructure development and a more directed effort towards urban redevelopment. The FM has maintained capital expenditure for FY25 at ₹11.11 trillion, up 11.1% from last year.
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Higher tax collections – gross tax collections rose 19.5% year-on-year – have give the FM room to allocate funds to numerous schemes that will benefit the poor. Providing free electricity to one crore households under PM Surya Ghar Muft Bikli Yojana and housing to one crore rural and middle-class families under the PM Awas Yojana – Urban 2.0 at an investment of ₹10 trillion will address two of the primary needs of Indians. The FM has also put up to ₹17,500 a year in the pockets of taxpayers with changes to personal income tax rates under the new regime.
Other key priorities
The government has delivered on its key priorities under Viksit Bharat, which include – apart from employment & skilling – productivity & resilience in agriculture, support to MSMEs, urban development, infrastructure, energy security and housing. Under each of these, the FM has provided support to middle- and lower-middle-income households through both direct and indirect interventions.
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The issue of job creation has been tackled through several measures that will support manufacturing entities. While first-time employees will gain from direct benefit transfer, those creating new jobs will get support from the government through EPFO contributions.
The rationalisation of capital gains taxes may have a sobering effect on markets but there is enough momentum for them to continue growing.
Fiscal prudence and higher tax buoyancy as gave the FM room to manoeuvre, and she delivered an efficient budget that provides relief to some segments while keeping the growth momentum going.
The author is chief executive officer and managing director of Tata Capital Ltd.
