Budget 2024: What to prioritise for a blockbuster policy framework for India

The Union Budget 2024, the first after the recent elections, marks the beginning of a new five-year innings for the government. It’s a unique opportunity to lay out a transformative policy framework that will shape our economic trajectory. India is projected to be the fastest growing major economy and to maximise our growth potential, here’s what the budget should prioritise:

Long-Term Policy Commitment

The Union Budget 2024 presents a chance for the government to provide a clear and consistent policy roadmap. A five-year policy horizon offers the stability and predictability needed for economic planning and investment. This long-term approach can boost investor confidence and pave the way for sustainable growth. Think about it — if we know the policies the government will focus on for the next five years, the economy can truly take off. This strategy is crucial for helping us reach our goal of becoming the 4th largest economy by 2025.

Boosting Housing Sector

One of the key sectors that should get a significant boost is housing. The housing sector has a multiplier effect on the economy, driving demand in allied industries like cement and steel. Plus, it’s a labour-intensive sector, generating the much needed employment opportunities. According to the National Real Estate Development Council (NAREDCO), the Indian real estate market is expected to reach $1 trillion by 2030, contributing around 13% to the country’s GDP by 2025. By offering tax incentives, subsidised interest rates for home loans, and affordable housing schemes, the government can accelerate the growth of this sector.

Prime Minister Narendra Modi’s vision of housing for all aligns perfectly with this goal. By incentivising housing, we can meet the aspirational needs of our populace and provide a robust stimulus to the economy.

Empower MSMEs

Micro, Small, and Medium Enterprises (MSMEs) are the backbone of our economy, contributing about 30% to the GDP and employing over 110 million people. However, MSMEs often struggle with accessing credit and navigating regulatory complexities. The Union Budget 2024 should prioritise empowering MSMEs by providing open credit lines and simplifying regulatory processes. Ensuring easy access to credit can fuel innovation and expansion within the MSME sector, driving India’s overall economic growth. According to the Reserve Bank of India (RBI), credit flow to MSMEs saw a significant increase of 13.5% in 2023. Building on this momentum, the government can introduce policies that facilitate hassle-free loans and reduce the compliance burden on MSMEs.

Stability in Capital Markets

In 2024, our stock markets reached new heights, with the BSE Sensex crossing the 80,000 mark. This robust performance has attracted significant foreign investment, bolstering the economy and creating a positive narrative around our capital markets. The key here is maintaining this stability and growth. It would be great to focus on creating a conducive environment for capital markets to flourish, benefiting investors and businesses alike.

Driving Consumption

Driving consumption is an important lever to drive economic growth. Increasing disposable income through various measures can stimulate demand across sectors. The government can explore avenues like reducing personal income tax rates and increasing tax exemptions. Direct cash transfers to those who need it most can have a huge impact. Expanding programs like PM-KISAN to reach more farmers is also crucial. Lowering personal income tax for the middle class is another powerful tool to stimulate spending. We need to find ways to boost consumption from villages to cities.

Embracing Green Technologies and Digital Transformation

The budget should allocate substantial funds for research and development (R&D) in green technologies and artificial intelligence (AI). This is an investment in our future, creating jobs and making our country more sustainable. Also, it will be good to incentivise digital finance, strengthen cybersecurity, and foster a thriving fintech ecosystem. This is where innovation meets inclusion, and it’s an area where India can truly shine.

Unleashing Private Investment

To fuel long-term growth, we need a surge in private investment. How do we achieve this? By creating a stable and predictable regulatory environment. Streamlining approval processes and providing a transparent way to resolve disputes will build trust and confidence among investors. We should also consider lowering the cost of capital through interest subsidies or tax breaks in strategic sectors. Think of it as a nudge to encourage investment in areas that matter. And let’s not forget the power of Public-Private Partnerships (PPPs). These collaborations can leverage the strengths of both sectors, accelerating infrastructure development and delivering value for all.

The Union Budget 2024 has the potential to be a game-changer for India. By focusing on long-term policy commitment, incentivising the housing sector, empowering MSMEs, ensuring stability in capital markets, and driving consumption, we can lay the foundation for a resilient and inclusive India. With the right policies and a focus on sustainable growth, we can achieve our dream of becoming a $5 trillion economy during the Amritkaal.