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(GIST OF KURUKSHETRA) Budget 2024-25: A Step Towards Viksit Bharat

(SEPTEMBER-2024)

Budget 2024-25: A Step Towards Viksit Bharat

Context:

Economic Survey mentions that the inflation rate is under control; the trade deficit in 2023-24 is lower than that of the preceding year; the foreign exchange reserves are sufficient and public sector investment has caught a momentum. In this backdrop, this paper analyses some Budget 2024 announcements, especially those related to the manufacturing and services sectors.

Budget Priorities

The focus of the Interim Budget 2024 was on the Poor, Women, Youth and Farmers. Taking this forward, the recent Budget emphasizes on employment, skilling, Micro, Small and Medium Enterprises (MSMEs) and the middle class.

There is a common thread, underscoring all-round development, which runs through all the nine priorities of Union Budget 2024-25. The navratna priorities are as follows:

Productivity and Resilience in Agriculture;
Employment and Skilling;
Inclusive Human Resource Development and Social Justice;
Manufacturing and Services;
Urban Development;
Energy Security;
Infrastructure;
Innovation, Research and Development; and ix. Next Generation Reforms

Manufacturing and Services

The contribution of industry and services sectors at 27.6 percent and 54.7 percent, respectively, to Gross Value Added (GVA) at current prices in 2023-24, justify the focus of the Budget on manufacturing and services.
Manufacturing is a sub-sector within industry. Economic Survey 2023-24 analyses that the high output share of manufacturing indicates its tremendous backward and forward linkages.
The average annual growth rate of the manufacturing sector over the past decade has been 5.2 percent, despite the adverse impact of the pandemic. The services sector recorded a real growth rate of more than 6 percent in most years of the past decade, i.e. except 2020-21. In 2023-24, estimates indicate a growth of 7.6 percent for the services sector.

Entrepreneurship

Entrepreneurship development, bolstered by facilitating access to finance, technology and marketing, along with easing out doing business, have been at the forefront of GoI’s policies and programmes.
Entrepreneurs are known to grab opportunities, even in the worst adverse situations, the case in point being the challenges posed by the recent global COVID pandemic of 2020 to 2022, which debilitated a substantial part of the world.

Financing

The objective of loan guarantees is to protect the lender against default by the borrower, who typically has a low credit rating and may not have any collateral. Based on this principle, the Ministry of MSME implements the Credit Guarantee Scheme for Micro and Small Enterprises with the objective of providing guarantee coverage of 75-85 percent on loans up to Rs. 5 crore.
Since the roll out of the Scheme in 2000, more than 93 lakh guarantees worth Rs. 7 lakh crore have been provided to Micro and Small Enterprises. Complementing this Scheme, is the announcement of Budget 2024 regarding the introduction of another Credit Guarantee Scheme, which would be for strengthening the manufacturing sector by facilitating term loans to MSMEs for the purchase of machinery and equipment, without collateral or third-part guarantee.

Conclusion

The Budget announcements instill renewed vigour in recent initiatives taken by the Government of India. The Budget has announced a holistic approach to ensure employment, skilling, welfare of MSMEs and the middle class. The approach spans across a myriad of methods which strengthen accessibility to affordable credit, state-of-the-art technology and strengthened market linkage. As evident from the Budget announcements, a concerted effort by various stakeholders is desirable to achieve the goal of Viksit Bharat.