Analyzing the EU budget for 2024: a comprehensive guide

The Union Budget 2024 is here, setting the policy direction for the next five years. As businesses and individual taxpayers try to decipher the implications of the Union Budget for them, Mint, in association with HDFC Securities, has come up with a special report with key takeaways from the Budget. The full report, available as a handy PDF, details how the Budget has impacted various sectors, who benefited and who hasn’t. It also includes the overall budget numbers and what has become cheaper and what has become more expensive.

This year’s budget has been marked by several key announcements that have far-reaching repercussions for individuals, businesses and the economy as a whole. With the detailed report available to download here, let’s delve into the highlights of this landmark budget.

Building Viksit Bharat

The budget underlined the government’s commitment to the welfare of its citizens. The four pillars of ‘Viksit Bharat’ — Garib (poor), Mahila (women), Yuva (youth) and Annadata (farmers) — were at the centre of the announcements.

With the theme of Viksit Bharat in mind, the Budget has identified 9 priorities that will drive India’s economic growth.

1. Productivity and resilience in agriculture
2. Employment and skills
3. Inclusive Human Resource Development and Social Justice
4. Production and services
5. Urban development
6. Energy security
7. Infrastructure
8. Innovation, research and development and
9. New generation reforms

Learn how these priorities will translate into action in our in-depth analysis here.

On the way to sustainable growth

The broad agenda that the government has pushed through the budget is sustainable growth through fiscal consolidation. Resisting calls to use available resources to spend them on growth, the government has chosen a path of fiscal prudence. The Union Budget projects a fiscal deficit of 4.9%, down from an estimate of 5.1% in the interim budget earlier this year. It is expected to reduce further to 4.5% in fiscal year 2026, with the stated target being “to maintain the fiscal deficit each year in such a way that the central government debt follows a declining trend relative to GDP.”

Such fiscal consolidation will help build a more solid credit profile for India internationally, potentially leading to a rating upgrade. This will help the government create an environment in which the sovereign balance sheet, corporate balance sheets and household balance sheets are in great shape, making the country more attractive to investors and positioning the nation for sustained earnings growth.

While managing the overall expenditure, the government has made efforts to address the problems of rural areas. It has declared Rs 2.66 lakh crore for rural development and rural infrastructure. This is expected to create more employment in rural areas and boost the rural economy in the country. The budget has also allocated ₹1.52 trillion for agriculture and related services.

Also focusing on the formal employment economy, the budget also included ₹2 trillion outlay for young people entering the job market. Specialised programmes have been launched to educate, employ and train the population entering the job market for the first time. These initiatives are expected to benefit over 4.1 crore Indian youth in the next five years.

This formalization and upskilling of youth and a focus on increasing women’s participation in the labor force will help reduce unemployment and increase household consumption. Total household disposable income will increase, leading to more discretionary purchases.

Mixed feelings for the middle class

Taxpayers always wait with bated breath for the income tax announcements in the Budget, hoping for a tax relief. The Budget included revised income tax brackets for those earning up to ₹10 lakh falls in the 10% tax bracket. The revised rates coupled with the increase in the standard deduction amount ₹50,000 to ₹75,000 are expected to go to more than 400,000 salaried workers ₹17,500 each. Learn more about the implications of the new tax rules in our in-depth analysis here.

With these tax cuts, consumers will now have more money in their pockets. Some desirable items have also become cheaper, which could encourage consumers to spend more. The budget has reduced the prices of mobile phones, gold, silver and platinum. Lithium-ion batteries have also become cheaper, which will have a cascading effect on electric vehicles. The prices of electric vehicles will come down, adding sustainable fuel to the growing electric vehicle market in the country. In line with the theme of sustainability, the prices of non-biodegradable plastic items will increase.

Most investors, however, will feel they have been given a bad deal. The government has increased capital gains – both long-term and short-term. Higher capital gains mean lower returns on investment. As a result, the stock market could become even more attractive, offering returns significantly higher than other financial investment options. Investors are expected to flock to the stock market either directly or through mutual funds.

However, in the medium to long term, the impact on the average investor should be minimal. Markets remain bullish and investors will soon adjust to the new regulations. Investors will be more interested in the opportunities to make money than in a 250 or 500 basis point increase in the tax rate from a low base. Investors may want to hold on to their investments for a longer period to take advantage of the lower rate in LTCG, which shows better investor behavior.

Investors should use this opportunity to review their asset allocation. If the equity ratio has increased due to rising equity values, this is a good time to correct this, reduce the equity ratio and allocate it to gold, fixed income, real estate or other asset classes that are lacking. In the case of stocks that have recently risen sharply but do not justify this type of valuation, it would be wise to cash out some of the profits now and reinvest them in the market with a focus on diversification.

Breakdown of the budget you need

Laying out the strategy for Viksit Bharat, the Union Budget 2024 has ensured that there is something for everyone. While this article provides a snapshot of the key points of the Budget, you can gain a deeper understanding of the implications of the Budget and how it will affect you by downloading our comprehensive Budget report here. Our expert analysis, prepared in association with HDFC Securities, breaks down the complex details of the Budget into easy-to-understand language, providing actionable insights.