Unpacking the Union Budget 2024: A Comprehensive Guide

The Union Budget 2024 is here, setting policy directions for the next five years. As businesses and individual taxpayers try to decode the implications of the Union Budget for them, Mint, in partnership with HDFC Securities, has curated 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 has benefited and who has not. It also includes broad budget numbers and what has become cheaper and what has become costly.

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

Building a 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 core of the announcements.

Building on the Viksit Bharat theme, the budget laid down the 9 priorities that are going to drive India’s economic growth.

1. Productivity and resilience in Agriculture
2. Employment & Skilling
3. Inclusive Human Resource Development and Social Justice
4. Manufacturing & Services
5. Urban Development
6. Energy Security
7. Infrastructure
8. Innovation, Research & Development and
9. Next Generation Reforms

Find out how these priorities are going to turn into action in our in-depth analysis here.

On the Road to Sustainable Growth

The broad agenda that the government has pushed through the budget is sustainable development enabled by fiscal consolidation. Resisting the calls to use available resources to spend their way to economic growth, the government has chosen the path of financial prudence. The Union Budget projects a fiscal deficit of 4.9% as against the estimate of 5.1% presented in the interim budget earlier this year. It is expected to reduce further to 4.5% in FY26 with the stated goal being “to keep the fiscal deficit each year such that the Central Government debt will be on a declining path as percentage of GDP.”

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

While managing overall spending, the government has taken an effort to address the rural distress. It has pledged Rs.2.66 lakh crore for rural development and rural infrastructure. This is expected to create more rural jobs and revive the rural economy in the country. The budget also allocated ₹1.52 trillion for agriculture and allied services.

Focusing on the formal job economy as well, the budget also included a ₹2 trillion outlay for youths entering the job market. Specialised schemes have been launched to educate, employ and skill the population entering the workforce 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 focus on increasing women participation in the workforce will help reduce unemployment and result in increased household consumption. Overall disposable incomes for a household will rise leading to more discretionary purchases.

A Mixed Bag for the Middle Class

Taxpayers always wait with bated breath for income tax announcements in the budget, hoping for some tax relief. The budget included revised income tax slabs with those earning up to ₹10 lakh falling in the 10% tax bracket. The revised rates coupled with the increase in standard deduction from ₹50,000 to ₹75,000 is expected to benefit over 4 crore salaried employees to the tune of ₹17,500 each. Learn more about the implications of the new income tax rules in our in-depth analysis here.

Thanks to these tax cuts, consumers will now have more money in their pockets. Some coveted items have also become cheaper which may encourage consumers to spend more. The budget reduced 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 EVs will fall which is going to add sustainable fuel to the growing EV market in the country. In line with the sustainability theme, the prices of nonbiodegradable plastic items will go up.

Most investors, however, will feel that they got a raw deal. The government increased capital gains – both long term and short term. Higher capital gains mean lesser return on investment. As a result, the stock market may become even more attractive by offering returns far higher than other financial investment options. Investors are expected to flock to the equity market either directly or through mutual funds.

In the medium to long term, however, there should be minimal impact on the average investor. The markets remain bullish and investors will soon adapt to the new regulations. Investors will be more concerned about the possibilities to make money rather than a 250 or 500 bps increase in tax rate from a low base. Investors may want to hold on to their investments for a longer period to avail the lower rate in LTCG, displaying better investor behavior.

Investors should use this opportunity to do an asset allocation review. If the equity proportion has gone up due to rising equity values, then it is a good time to readjust that, bring down the equity proportion and reallocate that to gold, fixed income, real estate or other asset classes they are short in. For stocks that have gone up sharply in recent times but don’t justify that kind of valuation, it would be wise to take some profits out of that now and redeploy in the market with a focus on diversification.

The Budget Breakdown You Need

Laying down the strategy for a Viksit Bharat, the Union Budget 2024 provided something for everyone. While this article has provided a snapshot of the key highlights of the budget, you can gain a deeper understanding of the budget's implications and how it will impact you by downloading our comprehensive budget report here. Our expert analysis, prepared in collaboration with HDFC Securities, breaks down the complex details of the budget into easy-to-understand language, providing actionable insights.

Disclaimer: This article has been produced on behalf of the brand by HT Brand Studio. The content is for information purposes only and does not constitute financial advice.