Indian businesses welcome budget focused on infrastructure, consumption growth and employment

The Minister of Finance announced a series of measures to revitalize the economy, but emphasis on fiscal prudence was not lost, and the goal was to set the budget deficit for 2024-25 at 4.9% of GDP. This is far below the target of 5.1 percent set in the provisional budget.

Indian businesses welcome the 2024 federal budget's focus on continuing infrastructure development, reducing taxes and streamlining, prioritizing spending in rural areas, and strengthening efforts to create jobs and learn skills, while providing incentives to the domestic manufacturing industry.

On July 23, Finance Minister Nirmala Sitharaman left the government's infrastructure capital investment target of 11 trillion110 billion rupees unchanged, which was announced in the February interim budget. In order to promote the rural economy and consumption, the Minister of Finance announced a series of measures, such as contributing 2.66 billion rupees to rural development and changing the income tax slab under the new tax system to enable common people to save up to 17,500 rupees in income tax. The prime minister also raised the standard deduction for salaried earners from 50,000 rupees to 75,000 rupees.

However, the Federal Chancellor placed emphasis on fiscal prudence, and the budget deficit target for 2024-25 was 4.9% of GDP, which was significantly lower than the target value of 5.1% for the mid-term budget.

“I'm pleased that the federal budget is committed to fiscal discipline and infrastructure development. Our budget deficit of 4.9% and next year's target of 4.5% indicate our economic prudence. Prioritizing employment, skill acquisition, MSME, and the middle class is critical to building a strong and resilient economy,” JSW Group Chairman Sajan Jindal said in a post on social media X.

Sanjay Nayar, chairman of the industry group ASSOCHAM, added that it was a bold budget by the government that took into account long-term fiscal prudence.

“The focus is on a longer, more sustainable path of creating jobs and strengthening the role of MSMEs through domestic manufacturing without easy treatment. An environment where young people's skills are improved, employment creation is formalized, infrastructure spending continues, urban development, and local capital investment is strengthened will encourage private sector participation where there is room in the balance sheet. This is a longer and more reliable way to promote employment and sustainable consumption,” Nayar said.

Furthermore, it was added that the MSME division is expecting further support, and that the budget has given momentum to MSME through several schemes, such as expanding unsecured loans for machine purchases and requesting public sector banks to develop internal capacity to finance MSMEs, and has been correctly realized.

Notably, the 2024 federal budget includes several measures to support the MSME sector, such as credit guarantee schemes for MSMEs in the manufacturing industry, new credit evaluation models formulated by state-owned banks to evaluate MSMEs, credit support for MSMEs during periods of stress, and SIDBI branches in MSME clusters.

The government's efforts to boost consumption by leaving more cash in the hands of the middle class through tax cuts and large-scale spending programs to revitalize the rural economy were also highly praised by industry experts.

Kumar Rajagopalan, Chief Executive Officer (CEO) of the Indian Retail Trade Association (RAI), said he highly appreciates that the association is putting effort into improving the status of middle class and rural people.

He pointed out that disposable income will increase due to efforts such as financial support for farmers, raising personal income tax exemption limits, and expanding standard deductions, leading to an increase in spending.

“We believe this will stimulate consumption growth and boost the economy as a whole. Reduced tariffs on gold, precious metals and mobile phones will also be a major boost for these sectors, especially during the festival season,” Rajagopalan said.

Skills acquisition initiatives announced in the budget are also viewed as important moves from a long-term perspective to improve employment opportunities for young people.

“This budget announcement lays a strong foundation for promoting education, skill acquisition, and employment opportunities, and is truly commendable. The allocation of 0.2 billion rupees to the five employment and skill acquisition schemes, along with 0.148 billion rupees for education, employment, and skill acquisition, underscores the government's commitment to dedicate itself to the country's youth and drive growth. The new scheme sponsored by the central government, which aims to acquire skills for 20,000,000 young people over 5 years, will greatly contribute to developing a skilled workforce,” said Pankaj Jathar, CEO of NIIT Ltd.

Such measures are needed right now to bridge the gap between skills and education, which are essential for young people to become ready to work in industry. “These initiatives will help maximize our education and skilling efforts and drive the next phase of growth for the Indian economy.