Union Budget 2024: Will it Stimulate New Jobs?

The first budget of the new government will aim to energize the economy with focused interventions in job creation, rural areas, micro, small, and medium enterprises (MSMEs), and technology, according to sources familiar with the deliberations reported by ET. However, it will likely adhere to the fiscal consolidation plan. Finance Minister Nirmala Sitharaman will present her seventh budget on July 23, buoyed by high growth and robust revenue. Gross domestic product (GDP) expanded by 8.2% in FY24, highlighting India's status as the world's fastest-growing major economy, while direct tax revenues have increased nearly 20% this year so far, providing the government with room to increase allocations or launch new programs.

"Measures that would lead to direct job creation, including support for MSME, manufacturing, and tech - seen as large employment-creating sectors - are likely," said one of the sources. The emphasis will be on growth and job creation, with a focus on new-age technology, including space tech. The budget is expected to stay the course on fiscal consolidation. In her interim budget in February, Sitharaman had pegged the FY25 fiscal deficit at 5.1% of GDP.

A dedicated fund for high-tech sectors and MSMEs, enhanced funding support for infrastructure sectors such as highways and railways, and women-related programs such as self-help groups and the agriculture sector are anticipated. The budget is also expected to simplify the withholding tax regime with easier procedures and tweaks in rates.

Additionally, it could roll out more measures to make the Ahmedabad-based Gujarat International Finance Tec-City (GIFT City) more attractive to foreign investors. "With the necessary regulatory framework in place, Union Budget 2024 is expected to bring tax clarity for the characterization of securities listed on IFSC (International Financial Service Centre) exchanges, akin to deeming capital gains for FPIs (foreign portfolio investors) on mainland stock exchanges," said Sameer Gupta, tax leader at EY.

He called for enabling regulatory and tax reforms to allow offshore holding company structures to relocate to India, similar to Gift-IFSC norms. He also urged the establishment of a framework for global commodity trading to boost India's global financial hub ambitions, as recently recommended by an expert committee.