"The Show Must Go On" is often attributed to circus impresario P.T. Barnum, emphasizing the enduring commitment to continue a performance despite the challenges. This is also true in case of the Indian economy. According to WEO data, despite strong economic development, global exports of goods and services increased by 0.5 percent in 2023 as compared to 2022. Also, according to the recently tabled economic survey before the new government union budget, the slow growth was driven by lower demand in developed economies and weaker trade in East Asia and Latin America (UNCTAD March Update 2024). High energy prices and inflation weighed severely on demand for manufactured products, causing a decline in global trade volumes in 2023. Recurring interruptions, particularly since the Russia-Ukraine crisis, and growing concerns about supply-chain reliability all contributed to the slowdown. Trade is being reallocated along geopolitical lines, with more cross-border trade restrictions. Global Trade Alert data (IMF, WEO, April 2024) show that around 3,000 additional trade restrictions were implemented in 2023.
India's economy carried forward the momentum it built in FY23 into FY24 despite a gamut of global and external challenges. The focus on maintaining macro-economic stability ensured that these challenges had minimal impact on the Indian economy. As a result, India's real GDP grew by 8.2 percent in FY24, posing a growth of over 7 percent for a third consecutive year, driven by stable consumption demand and steadily improving investment demand. On the supply side, gross value added (GVA) at 2011-12 prices increased by 7.2% in FY24, with growth continuing broadly based. Net taxes at constant (2011-12) prices grew by 19.1 percent in FY24, aided by reasonably strong tax growth, both at the center and state levels, and rationalization of subsidy expenditure. This led to the difference between GDP and GVA growth in FY24. In FY24, agriculture, industry, and the services sector accounted for 17.7 percent, 27.6 percent, and 54.7 percent of the total GVA at current prices. GVA in the agriculture sector continued to grow, albeit at a slower pace. Erratic weather patterns during the year and uneven spatial distribution of the monsoon in 2023 impacted the overall output.
The Finance Minister, Nirmala Sitharaman, has been tasked with laying the groundwork for the next five years of economic growth. As the Hon'ble Prime Minister, she demonstrated her commitment to the continuation of reforms and growth momentum. While keeping in mind that the government is currently constrained to respect the coalition partners and their demands, the FM has appropriately defined 9 priorities in pursuit of 'Viksit Bharat' to promote all-round growth. They include productivity and resilience in agriculture, employment & skilling, inclusive human resource development and social justice, manufacturing & services, urban development, energy security, infrastructure, innovation, research & development and next-generation reforms.
Productivity and Resilience in Agriculture
The government plans to review the agricultural research setup to prioritize increasing productivity and developing climate-strong crop varieties. Funding will be provided including to the private sector, with oversight from domain experts. 109 high-yielding and climate-robust varieties of 32 field and horticulture crops will be released for cultivation, and efforts will be made to achieve self-sufficiency in pulses and oilseeds. The government aims to strengthen production, storage, and marketing of oilseeds like mustard, groundnut, sesame, soybean, and sunflower.
Furthermore, large-scale clusters for vegetable production will be developed near major consumption centres, and the government will establish separate co-operative ministry guidelines to promote Farmer-Producer Organizations, co-operatives, and startups for vegetable supply chains. In addition, the government will implement Digital Public Infrastructure (DPI) in agriculture in partnership with the states to provide coverage to farmers and their lands within three years. Four hundred districts will undergo digital crop surveys for kharif, and the details of 6 crore farmers and their lands will be included in farmer and land registries. The issuance of Jan Samarth based ‘Kisan Credit Cards’ will be enabled in five states.
Employment & Skilling
The generation of employment has been quite a challenging task for any FM, and the government has certain limited options. The government has rolled out 3 schemes, with the first scheme providing one-month's wage to all persons newly entering the workforce in all formal sectors. The direct benefit transfer of one-month salary in 3 instalments to first-time employees, as registered in the EPFO, will be up to ₹15,000. The eligibility limit will be a salary of ₹1 lakh per month. The scheme is expected to benefit 210 lakh youth.
The job creation in manufacturing scheme will incentivize additional employment in the manufacturing sector, linked to the employment of first-time employees. An incentive will be provided at specified scale directly to both the employee and the employer with respect to their EPFO contribution in the first 4 years of employment and is expected to benefit 30 lakh youth entering employment, and their employers.
The employer-focused scheme will cover additional employment in all sectors. Any additional employment within a salary of ₹1 lakh per month will be counted. The government will reimburse employers up to ₹3,000 per month for 2 years towards their EPFO contribution for each additional employee. The scheme is expected to incentivize additional employment of 50 lakh persons and facilitate higher participation of women in the workforce through the setup of working women hostels in collaboration with the industry and establishing creches.
Inclusive Human Resource Development and Social Justice
The government will increase the implementation of various schemes to support economic activities for craftsmen, artisans, self-help groups, scheduled caste, scheduled tribe, women entrepreneurs, and street vendors. These schemes include ‘PM Vishwakarma,’ ‘PM SVANidhi,’ ‘National Livelihood Missions,’ and ‘Stand-Up India.’ A comprehensive plan called ‘Purvodaya’ will be developed to promote the all-round development of the eastern region of the country, covering Bihar, Jharkhand, West Bengal, Odisha, and Andhra Pradesh. This plan will focus on human resource development, infrastructure, and the generation of economic opportunities to make the region a key driver of progress. Additionally, the government has announced the construction of three crore additional houses under the ‘PM Awas Yojana’ in rural and urban areas, with necessary allocations being made. To empower women, over 3 lakh crore rupees have been allocated for schemes benefiting women and girls, reflecting the government's commitment to enhancing women's role in economic development. Furthermore, a new initiative called the ‘Pradhan Mantri Janjatiya Unnat Gram Abhiyan’ will be launched to improve the socio-economic condition of tribal communities, with a focus on providing comprehensive coverage for tribal families in tribal-majority villages and aspirational districts. This initiative will impact 63,000 villages and benefit 5 crore tribal people.
Manufacturing & Services
Introducing a credit guarantee scheme to support MSMEs in acquiring machinery and equipment without the need for collateral or third-party guarantee. Under this scheme, a self-financing guarantee fund will cover each applicant for up to ₹100 crore, with the borrower only required to pay an upfront guarantee fee and an annual guarantee fee. Public sector banks will enhance their capabilities to assess MSMEs for credit internally, aiming to develop a new credit assessment model based on the digital footprints of MSMEs. This innovative approach ensures continued access to bank credit for MSMEs during challenging periods, supported by a government-promoted fund guarantee. This initiative aims to prevent MSMEs from entering the NPA stage and ensures their business continuity. Rental housing with a dormitory-type accommodation for industrial workers will be facilitated in PPP mode with VGF support and responsibility from anchor industries. An Integrated Technology Platform will be set up for improving the outcomes under the Insolvency and Bankruptcy Code (IBC) for achieving consistency, transparency, timely processing and better oversight for all stakeholders.
Urban Development
The government is constantly focusing on urban planning and achieving a transformative impact. To accomplish this, a framework for enabling policies, market-based mechanisms, and regulation will be formulated. Transit-Oriented Development plans will be created for fourteen large cities with a population above 30 lakhs, along with an implementation and financing strategy.
Under the ‘PM Awas Yojana Urban 2.0,’ housing needs of 1 crore urban poor and middle-class families will be addressed with an investment of ₹10 lakh crore, including central assistance of ₹2.2 lakh crore over the next 5 years. This will include a provision of interest subsidy to facilitate loans at affordable rates.
The government also aims to promote water supply, sewage treatment, and solid waste management projects and services for 100 large cities through bankable projects, in partnership with State Governments and Multilateral Development Banks. These projects will involve the use of treated water for irrigation and filling up of tanks in nearby areas.
Moreover, to enhance the successful transformation of the lives of street vendors through the ‘PM SVANidhi Scheme,’ the government plans to support the development of 100 weekly 'haats' or ‘street food hubs’ in selected cities each year, over the next five years.
Energy Security
Recognizing the importance of energy transition in combating climate change, the Finance Minister proposed to expand the list of exempted capital goods for the manufacture of solar cells and panels. Additionally, in light of sufficient domestic manufacturing capacity of solar glass and tinned copper interconnect, further support will be provided for energy transition.
Infrastructure
The significant investment that the Central Government has made over the years in building and improving infrastructure will have a strong multiplier effect on the economy. The government's plan to maintain strong fiscal support for infrastructure over the next 5 years, along with other priorities and fiscal consolidation imperatives, is commendable. The government has allocated ₹11,11,111 crore for capital expenditure, which would be 3.4 percent of our GDP. Additionally, Phase IV of ‘PMGSY’ will be launched to provide all-weather connectivity to 25,000 rural habitations that have become eligible due to their population increase.
Innovation, Research & Development
The central government plans to activate the Anusandhan National Research Fund to support basic research and prototype development. Additionally, a mechanism will be established to encourage private sector-driven research and innovation at a commercial scale, with a funding pool of ₹1 lakh crore, as per the announcement in the interim budget. There is also a focus on expanding the space economy by five times in the next 10 years, with the establishment of a ₹1,000 crore venture capital fund.
Next Generation Reforms
The government will develop an ‘Economic Policy Framework’ to outline the overall approach to economic development and define the scope of the next generation of reforms. These reforms aim to create more employment opportunities and sustain high growth. The government will focus on two key areas: (1) improving the productivity of factors of production, and (2) making markets and sectors more efficient.
The reforms will encompass all factors of production, including land, labour, capital, entrepreneurship, and technology as a means to improve overall productivity and address inequality. In rural areas, land-related actions will involve assigning a ‘Unique Land Parcel Identification Number’ (ULPIN) or ‘Bhu-Aadhaar’ to all lands, digitizing cadastral maps, surveying land sub-divisions based on current ownership, establishing a land registry, and linking them to the farmers' registry. These actions will also facilitate credit flow and other agricultural services.
Land-related reforms and actions, both in rural and urban areas, will incorporate land administration, planning, and management, as well as urban planning, usage, and building bylaws. To encourage the completion of these actions within the next 3 years, appropriate fiscal support will be provided.
The government has proposed to fully exempt customs duties on 25 critical minerals such as lithium, copper, cobalt, and rare earth elements, and reduce BCD on two of them. This move aims to boost the processing and refining of these minerals to ensure their availability for sectors like nuclear energy, renewable energy, space, defence, telecommunications, and high-tech electronics, which rely heavily on them.
To promote the Indian start-up ecosystem, raise the entrepreneurial spirit, and encourage innovation, the Finance Minister has proposed to abolish the so-called angel tax for all classes of investors. The government has appropriately balanced the aspirations of the segment and prioritized the growth in an equitable manner, with a particular emphasis on women, in order to facilitate an economic turnaround. It is evident that this will have a multiplier effect on various sectors.
About the Author
Sanjay Jain is engaged as Chief Financial Officer of Epigral Limited (erstwhile Meghmani Finechem Limited) for the last 15 years. He has created a team of professionals in finance team to run the department process driven and helping Epigral reaching these heights by supporting all the requirements of the company. Prior to Epigral, Sanjay Jain had worked with Ashima Limited for around 7 years. He has in total 28 years of experience with expertise in financial reporting, treasury, statutory compliance, strengthening internal control systems and other finance related work.
