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General Studies 2 >> Governance

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BUDGET 2024- KEY HIGHLIGHTS

BUDGET 2024- KEY HIGHLIGHTS

 
 

 Overview

"Budget Insight 2024" is a special edition magazine tailored for UPSC aspirants, focusing exclusively on the Union Budget 2024. This comprehensive guide breaks down the complex financial document into digestible, exam-relevant content. It serves as an essential resource for candidates preparing for various stages of the UPSC examination, offering in-depth analysis, key highlights, and potential questions related to the budget.

The magazine is structured to provide a holistic understanding of the Union Budget 2024, catering specifically to UPSC exam requirements:

  • Executive Summary: A concise overview of the budget's main points, key allocations, and major policy shifts.
  • Economic Survey Analysis: Breakdown of the Economic Survey preceding the budget, highlighting crucial economic indicators and their implications.
  • Sector-wise Budget Allocation: Detailed examination of budget allocations across various sectors such as agriculture, defense, education, healthcare, and infrastructure.
  • Policy Initiatives: In-depth analysis of new schemes, programs, and policy changes introduced in the budget.
  • Fiscal Management: Explanation of fiscal deficit, revenue projections, and debt management strategies outlined in the budget.
  • Taxation Changes: Comprehensive coverage of alterations in direct and indirect taxes, and their potential impact on the economy.
  • Socio-economic Implications: Discussion on how budget provisions affect different sections of society and various economic indicators.
  • Budget and Five-Year Plans: Correlation between budget allocations and ongoing five-year plan objectives.
  • International Perspective: Comparison of India's budget with global economic trends and policies.
  • Expert Opinions: Insights from economists, policy experts, and successful UPSC candidates on the budget's implications.
  • Glossary of Budget Terms: Explanations of technical terms and concepts used in the budget document.

 

 

1.Agricultural Initiatives

 

The 2023-24 Union Budget allocated 1.52 Lakh Crore to agriculture and related sectors. Farmers will receive 109 new crop varieties that are both high-yielding and climate-resilient, covering 32 field and horticultural crops. The government aims to introduce 1 crore farmers to natural farming methods over two years and establish 10,000 bioinput research centers based on need. A Digital Public Infrastructure for agriculture will be implemented in partnership with states over three years, and Jan Samarth-based Kisan Credit cards will be made available in five states.

2. Employment and Skill Development

The budget set aside Rs 1.48 lakh crore for education, employment, and skill development. Five new schemes with a total outlay of Rs 2 lakh crores will be introduced to provide employment opportunities and benefits to 4.1 crore youth. Three employee-linked incentive programs are planned:

  • The Section A  program will offer a one-month salary as direct benefit transfer to first-time employees, potentially benefiting 210 lakh young people.
  • The Section B focuses on job creation in manufacturing, aiming to assist 30 lakh new employees and their employers.
  • The Section C is a cross-sector initiative to incentivize additional employment, expected to support 50 lakh individuals.

 

Educational Initiatives:

The government plans to support higher education by offering education loans of up to Rs10 lakh for students attending domestic institutions. Annual interest subsidies of 3% will be provided through e-vouchers to 100,000 students each year. Additionally, 1,000 industrial training institutes will undergo upgrades, and the model skill loan scheme will be revised to allow loans up to Rs. 7.5 lakh, potentially benefiting 25,000 students annually. New medical colleges and sports facilities are slated for construction in Bihar.

Women's Empowerment:

To boost women's participation in the workforce, the government has proposed several measures. These include setting up hostels for working women and providing childcare facilities. The plan also encompasses women-specific skill development programs and efforts to enhance market access for enterprises led by women's Self-Help Groups (SHGs).

A substantial allocation of over Rs 3 lakh crore has been made for schemes aimed at benefiting women and girls, underscoring the government's commitment to women-led development. Furthermore, the government is encouraging states to consider reducing stamp duty rates for property purchases made by women, as an additional measure to promote women's economic empowerment

3.Human Resource Development and Social Justice

Purvodaya

  • Comprehensive Development Plan: This initiative focuses on the holistic development of the eastern region, encompassing Bihar, Jharkhand, West Bengal, Odisha, and Andhra Pradesh. It aims to enhance human resources, infrastructure, and economic opportunities to transform the region into a driver of national development.
  • Industrial Corridor: The Amritsar-Kolkata Industrial Corridor will include the establishment of an industrial node in Gaya.
  • Road Connectivity Projects: Major projects include the Patna-Purnea Expressway, Buxar-Bhagalpur Expressway, spurs in Bodhgaya, Rajgir, Vaishali, and Darbhanga, and an additional two-lane bridge over the Ganga River at Buxar, with a total investment of ₹26,000 crore.

Andhra Pradesh Reorganization Act

  • Financial Support: The government will provide special financial assistance through multilateral development agencies, starting with ₹15,000 crore in the current financial year, with more to follow. There is a strong commitment to funding and completing the Polavaram Irrigation Project. Additionally, funds will be allocated for essential infrastructure like water, power, railways, and roads in the Kopparthy node on the Visakhapatnam-Chennai Industrial Corridor and the Orvakal node on the Hyderabad-Bengaluru Industrial Corridor.

Pradhan Mantri Janjatiya Unnat Gram Abhiyan

  • Tribal Community Development: This program aims to improve the socio-economic conditions of tribal communities, specifically targeting tribal-majority villages and aspirational districts.

North East Region

  • Banking Expansion: Over 100 new branches of the India Post Payment Bank will be established in the North East Region

4. Manufacturing and Services

For MSMEs

  • Support Package: A comprehensive package will be developed for MSMEs, including financing, regulatory reforms, and technological support to enhance their growth and global competitiveness.
  • Credit Guarantee Scheme: A credit guarantee scheme for MSMEs in the manufacturing sector will be introduced, allowing the purchase of machinery and equipment without collateral or third-party guarantees. Additionally, a self-financing guarantee fund will offer up to ₹100 crore in guarantee cover per applicant.
  • New Credit Assessment Model: Public sector banks will build internal capabilities to assess MSME creditworthiness, moving away from reliance on external assessments.
  • Credit Support During Stress Periods: MSMEs in the 'special mention account' (SMA) stage will receive credit support to maintain operations and avoid transitioning into non-performing assets (NPA).
  • Mudra Loan Enhancement: For entrepreneurs who have successfully repaid previous loans under the 'Tarun' category, the Mudra loan limit will be increased from ₹10 lakh to ₹20 lakh.
  • TReDS Platform: The turnover threshold for mandatory onboarding on the TReDS platform will be reduced from ₹500 crore to ₹250 crore.
  • SIDBI Expansion: SIDBI will open new branches to serve all major MSME clusters within three years, providing direct credit.
  • Food Irradiation and Testing Labs: Financial support will be provided for establishing 50 multi-product food irradiation units and 100 food quality and safety testing labs with NABL accreditation.
  • E-Commerce Export Hubs: Public-private partnership (PPP) mode e-commerce export hubs will be set up to help MSMEs and traditional artisans sell products internationally.

Promotion of Manufacturing & Services

  • Youth Internships: One crore youth will receive internships in 500 top companies over five years, with companies covering training costs and 10% of the internship cost from CSR funds.
  • Industrial Parks: Development of investment-ready "plug and play" industrial parks with complete infrastructure will be facilitated in or near 100 cities, in collaboration with states and the private sector, as part of the National Industrial Corridor Development Programme.
  • Worker Housing: Rental housing with dormitory-type accommodations for industrial workers will be developed.
  • Digital Public Infrastructure Applications: Proposed applications will cover credit, e-commerce, education, health, law and justice, logistics, MSME service delivery, and urban governance.
  • Critical Mineral Mission: A mission for the domestic production, recycling, and overseas acquisition of critical minerals will be established.
  • C-PACE Services: The Centre for Processing Accelerated Corporate Exit (C-PACE) services will be expanded.
  • Offshore Mining Blocks: The government will launch the auction of the first tranche of offshore blocks for mining.
  • Integrated Technology Platform: An integrated technology platform for the IBC ecosystem will be set up.
  • IBC Reforms: Reforms to the Insolvency and Bankruptcy Code (IBC) and strengthening of tribunals and appellate tribunals will be initiated to expedite insolvency resolution

5. Urban Development

PM-AWAS Yojana Urban 2.0

  • Housing for Urban Poor and Middle-Class Families: The PM Awas Yojana Urban 2.0 aims to address the housing needs of 1 crore urban poor and middle-class families with an investment of ₹10 lakh crore.
  • Central Assistance: The scheme will receive ₹2.2 lakh crore in central aid over the next five years.
  • Affordable Loan Interest Subsidies: A mechanism will be established to provide interest subsidies to encourage loans at affordable rates.
  • Rental Housing Market Reforms: Laws and regulations will be introduced to promote efficient and transparent rental housing markets, increasing the supply of rental properties.

Water Supply and Sanitation

  • Collaborative Projects: In partnership with state governments and multilateral development banks, the government will support water supply, sewage treatment, and solid waste management projects in 100 major cities through viable initiatives.
  • Use of Treated Water: These initiatives will also include the use of treated water for irrigation and filling local tanks.

Street Markets

  • Support for Street Vendors: Building on the success of the PM SVANidhi Scheme, the government plans to facilitate the establishment of 100 weekly haats or street food hubs over the next five years.

Stamp Duty

  • Encouraging Moderate Stamp Duty Rates: States will be encouraged to continue charging moderate stamp duty rates and consider further reductions for properties purchased by women, forming a key part of urban development plans

6.Energy Security

Nuclear Energy

  • Small and Modular Nuclear Reactors: The government will collaborate with the private sector to:
    1. Establish Bharat Small Reactors.
    2. Conduct research and development of Bharat Small Modular Reactors.
    3. Develop new technologies for nuclear energy.

Solar Power (PM Surya Ghar Muft Bijli Yojana)

  • Rooftop Solar Plants: In line with the interim budget announcement, the PM Surya Ghar Muft Bijli Yojana has been launched to install rooftop solar plants, providing 1 crore homes with free electricity up to 300 units per month.

Pumped Storage Policy

  • Electricity Storage Strategy: A policy will be formulated to promote pumped storage projects for electricity storage, ensuring the smooth integration of renewable energy into the overall energy mix despite its variability.

Advanced Ultra Super Critical Thermal Power Plants

  • Indigenous Technology Development: A joint venture between NTPC and BHEL has developed indigenous technology for Advanced Ultra Super Critical (AUSC) thermal power plants, leading to the creation of a full-scale 800 MW commercial plant.
  • Economic Benefits: Developing indigenous capacity for producing high-grade steel and other advanced metallurgy materials for these plants will yield significant economic advantages.

Roadmap for 'Hard to Abate' Industries

  • Emission Reduction Strategy: A strategy will be developed to transition 'hard to abate' industries from focusing solely on energy efficiency to achieving emission reduction objectives.

Support for Traditional Micro and Small Industries

  • Energy Efficiency and Clean Energy Transition: Investment-grade energy audits will be conducted for traditional micro and small enterprises, such as brass and ceramic industries. Financial assistance will be provided to help these enterprises transition to cleaner energy sources and implement energy efficiency measures.
  • Expansion to Additional Clusters: This strategy will be replicated in another 100 clusters in the next phase

 

 

According to the International Atomic Energy Agency (IAEA), Small Modular Reactors (SMRs) are advanced nuclear reactors with a power generation capacity ranging from under 30 MWe to over 300 MWe.

Characteristics of SMRs:

  • Small: They are significantly smaller in size compared to traditional nuclear power reactors.
  • Modular: Their systems and components can be assembled in a factory and transported as a complete unit to the installation site.
  • Reactors: They utilize nuclear fission to generate heat, which can be used for electricity production or other direct applications.

SMRs encompass both small and medium-sized modular reactors, tailored to a country's specific context. Their SSCs (structures, systems, and components) are designed for factory production and site transportation, which helps to shorten construction timelines. This approach aims to achieve cost efficiency through serial production, allowing for the addition of power modules as demand increases

 

 

7. Infrastructure

  • Budget Allocation: The government has earmarked ₹11,11,111 crore for capital expenditure, which accounts for 3.4% of the GDP.
  • Pradhan Mantri Gram Sadak Yojana (PMGSY): Phase IV of PMGSY will be launched to ensure all-weather connectivity for 25,000 rural habitations.
  • Irrigation and Flood Control: Through the Accelerated Irrigation Benefit Programme and other funding sources, the government will support projects worth ₹11,500 crore, including the Kosi-Mechi intra-state link and 20 other ongoing and new schemes.
  • Tourism: Development plans for the Vishnupad Temple in Gaya and the Mahabodhi Temple in Bodh Gaya, Bihar, will follow the model of the Kashi Vishwanath Temple Corridor to transform them into world-class pilgrimage and tourist destinations. Comprehensive development strategies for Rajgir and Nalanda in Bihar will be implemented, along with support for key destinations in Odisha

8. Innovation and Research & Development

  • Basic Research and Prototyping: The government will operationalize the Anusandhan National Research Fund to support basic research and prototype development.
  • Space Economy: To grow the space economy fivefold over the next decade, the government will establish a venture capital fund of ₹1,000 crore

9. Next Generation Reforms

Rural & Urban Land Reforms

  1. Unique Land Parcel Identification Number (ULPIN): All land parcels will be assigned a unique identifier, also known as Bhu-Aadhaar.
  2. Cadastral Map Digitization: Cadastral maps will be digitized.
  3. Survey of Sub-Divisions: Mapping of sub-divisions according to current ownership.
  4. Land Registry: Establishment of a comprehensive land registry.
  5. Farmers Registry Linkage: Land records will be linked to the farmers registry.
  6. Urban Land Records Digitization: Land records in urban areas will be digitized with GIS mapping.

Labour-Related Reforms

  1. e-Shram Portal Integration: A comprehensive integration of the e-Shram portal with other portals to provide a one-stop solution.
  2. Revamping Shram Suvidha and Samadhan Portals: Enhancements to these portals to improve compliance ease for industry and trade.

Climate Finance Taxonomy

  • Development of Taxonomy: A taxonomy for climate finance will be developed to increase the availability of capital for climate adaptation and mitigation.

Foreign Direct Investment and Overseas Investment

  • Simplification of Rules: The rules and regulations for FDI and overseas investments will be simplified to:
    1. Facilitate foreign direct investment.
    2. Encourage prioritization.
    3. Promote the use of the Indian Rupee for overseas investments.

NPS Vatsalya

  • Contribution Plan for Minors: A plan will be introduced allowing parents and guardians to contribute to NPS for minors, which can seamlessly convert into a standard NPS account when the child reaches adulthood.

Ease of Doing Business

  • Jan Vishwas Bill 2.0: The government is developing this bill to enhance the ease of doing business.
  • State Incentives: States will be incentivized to implement their Business Reforms Action Plans and digitize processes.

New Pension Scheme (NPS)

  • NPS Review: A committee reviewing the NPS has made significant progress, and a solution will be developed that addresses key issues while maintaining fiscal prudence to protect citizens

10. Tax-Related Proposals

Simplifying the New Tax Regime

  • Revised Tax Rates: The new tax regime will include a revised tax rate structure.

Comprehensive Review of the Income Tax Act, 1961

  • Review Announcement: Finance Minister Nirmala Sitharaman has announced a thorough review of the Income Tax Act, 1961. The aim is to make the Act more concise, clear, and user-friendly, reducing disputes and litigation while providing greater tax certainty for taxpayers. This review is expected to be completed within six months.
  • Initial Simplifications: The Finance Bill will initiate simplifications in the tax regime for charities, the TDS rate structure, reassessment and search provisions, and capital gains taxation.

Angel Tax Abolishment

  • Abolition Announcement: Union Minister Nirmala Sitharaman has declared the removal of angel tax on investors in India to support startups.
  • Background on Angel Tax: Introduced in 2012 to prevent the use of unaccounted money in share subscriptions above the fair market value, the tax was expanded to include non-resident investors from April 1, 2024, which faced strong opposition from startups.

Litigation and Appeals

  • Appeal Backlog: To address the backlog of first appeals, the government plans to deploy additional officers to handle and resolve these appeals, particularly those involving significant tax amounts.
  • Dispute Resolution: The government is proposing the Vivad Se Vishwas Scheme, 2024, to resolve certain pending income tax disputes.
  • International Taxation: To reduce litigation and ensure certainty in international taxation, the government will expand and enhance the attractiveness of safe harbour rules.

Deepening the Tax Base

  • Increased Security Transactions Tax: The Security Transactions Tax on futures and options will be increased to 0.02% and 0.1%, respectively.

Other Major Proposals

  • Equalization Levy: The 2% equalization levy will be withdrawn.
  • Tax Benefits Expansion: Tax benefits will be extended to certain funds and entities in International Financial Services Centres (IFSCs).
  • Benami Transactions: Immunity from penalty and prosecution will be provided to benamidars who fully and truthfully disclose transactions, aiming to improve convictions under the Benami Transactions (Prohibition) Act, 1988.
  • Custom Duty Adjustments: Changes to custom duties will be introduced.
  • Capital Gains Simplification: Efforts will be made to simplify and rationalize capital gains taxation

 

Basic Concepts regarding Union Budget

What is the Union Budget?

The Union Budget, formally referred to as the Annual Financial Statement under Article 112 of the Indian Constitution, provides a comprehensive overview of the government's financial status. It details the government's income from the previous year, its expenditures, any borrowing required to cover the deficit, and projections for the upcoming financial year. This includes anticipated revenue, planned spending, and expected borrowing needs. The Union Budget is divided into two main sections: Revenue and Capital.

Key Budget Documents

In addition to the Union Finance Minister’s Budget Speech, several essential documents are presented to Parliament:

  1. Constitutionally Mandated Documents:
  • Annual Financial Statement (AFS): As required by Article 112.
  • Demands for Grants (DG): As per Article 113.
  • Finance Bill: Defined under Article 110.
  1. Documents Required by the Fiscal Responsibility and Budget Management Act, 2003:
  • Macro-Economic Framework Statement
  • Medium-Term Fiscal Policy cum Fiscal Policy Strategy Statement

Important Budget Terms

  1. Revenue Budget: This includes the government's revenue receipts (both tax and non-tax) and revenue expenditures. Tax revenues are derived from taxes and duties imposed by the Union.
  2. Revenue Expenditure: This covers the regular expenses of government departments, interest payments on debt, subsidies, grants, etc. It is expenditure that does not create assets for the government.
  3. Capital Budget: This comprises capital receipts (loans raised by the government) and capital expenditures (investment in assets like land, buildings, machinery, and loans to various entities).
  4. Fiscal Deficit: This is the shortfall between the total revenue receipts (including non-debt capital receipts) and total expenditure, indicating the government's total borrowing requirements.
  5. Demands for Grants: According to Article 113, these are estimates of expenditure from the Consolidated Fund of India, which need to be approved by the Lok Sabha.
  6. Money Bill: As per Article 110, a Money Bill deals with taxes, borrowing by the government, and expenditure from the Consolidated Fund of India.
  7. Finance Bill: Presented alongside the Annual Financial Statement, this bill details proposed changes to tax laws. Unlike Money Bills, Finance Bills can incorporate recommendations from the Rajya Sabha, though the Lok Sabha is not obligated to accept them

 


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