Budget 2024: Novelties Yes, But Pitfalls More
India is on a manual mode in the finance ministry when the world is moving towards the AI mode. Two budgets ago, three centres of AI excellence were mooted
2024 Budget, impregnated in July, to be delivered by March 2025, is largely unbalanced , with a huge tilt towards two States. Having seen 44 Budgets since 1980, when I learnt Budgeting nuances from the renowned Prof. Govindrajan, at IIM Ahmedabad, I have attempted a balanced assessment of it. Difficult task, it was because it has already earned the epithets of “status quo ‘do nothing’ exercise”, & “lot of optics” , with MP Tharoor’s expression that “car mechanic can raise the sound of the horn if the brakes can't be repaired”. Parliament also saw an MP’s creative dig that the “Budget is taxing us like Britain ,but giving services like Somalia”.
Dealing with the novelties first, my 35 years experience in Government make me perceive 10 clear innovative introductions.
Focus on agricultural research for enhancing productivity and generating 109 high-yielding, climate- resistant seeds for 32 varieties of crops. This is laudable because for the first time, attention has been given to technological advance in agricultural crops, reminding us of the Green Revolution which ushered in huge prosperity in the country.
Grant of financial support for establishment of 50 multi-product and food irradiation units by MSMEs, to enhance food safety and quality, and extend shelf life of food products, benefitting both producers and consumers. This highlights the recognition by government, of the need for maintenance of food quality for the consumers. Added to this is the announcement of creation of 100 NABL-accredited food quality and safety testing labs ,to benefit MSMEs. Never in the past has quality of food been emphasized as precisely as this, and therefore, deserves full appreciation.
Equipping 100 cities with plug and play industrial parks, having complete infrastructure, is a great step forward, if done in a coordinated manner with the States and the private sector, using the town-planning departments to identify appropriate land parcels, in or near the cities. This can give a big fillip to new entrepreneurs,& production related startups and enable facilities for enhancing our share of manufacturing in GDP.
High stamp duty has been a bone of contention for setting up new ventures, and for registration of property documents. Central Government’s encouragement to States to moderate or reduce these duties, is a welcome step, specially for properties purchased by women. This will bring down the transaction cost countrywide , if the States agree to lessen the burden of such duties. While it is not necessarily a Budget item, but its announcement by FM sends the right signal, indicating Government’s intention to facilitate registration of documents.
In my book 100 ideas to improve governance in India , I had ideated on the full potential of rooftop solar in India, based on a formal estimated rooftop solar capacity for Varanasi, in 2017,at 676 MW. Extrapolating this to 7,000 towns in India, this renewable energy can suffice to meet India’s full power needs. I am happy to see the launch of PM Surya Ghar Muft Bijli Yojana of rooftop solar installation, for 1 crore households, upto 300 units per month. It is heartening to note that 1.28 crore registrations have already taken place and 14 lakh applications have been received. This is estimated to save Rs. 15000-18000 crores annually in their power bills ,with the added advantage of selling surplus power to the power distribution companies. Large scale promotion of vendors for such supply and installation ,will be an important offshoot of this scheme. Rs. 75,000 crores has been earmarked for exploiting its full potential,and Government will fund 60% of the cost of installation upto 2 kW and 40% for 2-3kW capacity.
Flood control structures are a novelty in the Budget, and reflect a recognition of facing reality, by proactively handling a calamity which hits many States annually. Rs. 11,500 crores has been earmarked for this purpose, which incudes Kosi-Mechi intra-state link and 20 other ongoing and new projects, including barrages, river pollution abatement and irrigation projects to tackle the situation in Bihar. Similarly, Assam has been given a package for flood mitigation measures from Brahmaputra river. Himachal Pradesh has also experienced extensive flood- related losses and will benefit from assistance through multilateral development agencies, for reconstruction and rehabilitation. Uttarakhand was hit by cloud bursts and massive landslides, and will get assistance ,like Sikkim.
Reduction of TDS rate from 1 per cent to 0.1 per cent for e-commerce is an extremely positive announcement as B2C e-commerce transactions in India have crossed $65 billion in value, and are galloping due to its extensive use in tier-2/3/4 cities also. Introduced as a dampener, its huge reduction will trigger enormous growth of B2C sales in the ensuing years.
Creation of digital public infrastructure for agriculture through a set of electronic registries and open networks, is a solid beginning to correct and refine farmers’ data. 100 million farmers are availing the PM Kisan Scheme reportedly , but no IDs have been issued to them so far. It is estimated that 60 million farmer IDs will get issued by this year, and another 50 million will be created further, to cover all farmers under this scheme. If this happens successfully and correctly, it will create a huge database, which will be amenable to AI applications, for a wide variety of use cases in future.
A bold initiative in the Budget is the decision to auction the first tranche of offshore blocks for mining ,based on the results of the exploration done so far. This has never been done before, and its innovative inclusion, implies that mineral deposits will get retrieved domestically, from the deep seabed, below 200 metres.
The decision to set up a Critical Mineral Mission is timely and appropriate in the context of Atmanirbhar Bharat. With full focus on exploration and enhancement of domestic production, acquisition of such mineral assets abroad, and recycling of these minerals through technology development, extended producer responsibility concept, and appropriate financing mechanisms ,can make this happen successfully, The concerned essential minerals are copper, lithium, nickel, cobalt and rare earth elements, which have important ramifications for the electronics industry.
While these 10 announcements are commendable if acted upon comprehensively, the pitfalls in the Budget are double , and need to be carefully understood by the policymakers ,and the implementing agencies.
India imports $17 billion worth of edible oil and about $3 billion worth of pulses annually. While the Budget has increased the MSP for all major crops, mere tinkering of this kind, cannot lead to massive import substitution that is required in these two crops. A concerted action plan and strategy to enhance production cover ,with all required inputs to be arranged for the concerned farmers ,is crucial and essential. While the important oil seeds have been mentioned in the Budget like mustard, groundnut, sesame, soybean and sunflower, there is no clear cut announcement of how large-scale enhancement of their production and storage will be achieved. Hence it looks more like an announcement, than an intention to solve a major pain point ,of reducing inflation for the lower and the middle class.
It is strange to find that while taking eligibility of income up to Rs. 1 lakh per month to touch 2.1 crore youth, as new employees in all sectors, for employment-linked incentive, the Finance Ministry is displaying the phenomenon of “the left hand not knowing what the right hand is doing”!!. I say this because the income slabs for income tax have been tinkered with in a ludicrous manner up to Rs. 12 lakhs, which is the limit for the above employment-linked incentive. Does it mean that on one hand employment-linked incentive will be given up to Rs. 15,000 for incomes earned up to 1 lakh per month, and at the same time they will be taxed at the rate of 10-12%% ,depending on their actual income. Such anomalies are disturbing, and clearly depict non-application of mind.
The imbalance in the Budget is acute and finds reference in several comments in the last few days. An anamolous tilt towards Bihar and Andhra Pradesh, at the cost of remaining states, to ensure the survival of the Government, was never the intention of the famous Sarkaria Commission, which dwelt on this subject at enormous length, or the various finance commissions which have given their recommendations every 5 years.Rs. 26,000 crores for road infrastructure in Bihar, including 2 greenfield expressways- Patna-Purnea and Buxar-Bhagalpur, is an enormous dole for a state, where corruption and lack of action is prominent, with more than half a dozen bridges collapsing in the last one month. The total allocation for Bihar is an astounding Rs. 58,900 crores which includes Rs. 21,400 crores for 2400 MW Pirpainti Thermal Power Project ,and many other projects including Maha Bodhi Corridor in Bodhgaya and Vishnupad Corridor in Gaya.
As if this is not enough, Andhra Pradesh has been promised a loan of Rs. 15,000 crores for the development of Amravati, a state capital. Huge expenditure on this greenfield city was incurred during TDP’s earlier rule,when I visited the plush Secretariat. Change of state capital to Vishakhapatnam, by the last CM incumbent, has made a mockery of political maneuvering, at the expense of the poor taxpayer. Other massive fund commitments like completion of Polavaram dam, infrastructure costs on the Visakhapatnam- Chennai Industrial Corridor and the Hyderabad- Bengaluru Industrial Corridor ,is causing huge heartburns to the other States, with no mention about them in the Budget.Is it justified by any standards?
PM Awaas Yojana has been operational for the last 40 years, and a lot of data is available with the Government. Despite this ,announcement of 3 crore additional houses under the scheme in this Budget , is a signal that duplication and triplication is taking place, because there is no finality in this longest functional scheme of the Government. I suggest AI must be deployed to find out the irregularities, that make this scheme continue compulsively , without any feedback on the endless & final beneficiaries !!
Domestic shipping industry has suddenly gained attention with announcement of ownership, leasing and flagging reforms. I am amazed at this because the lone domestic shipping company, Shipping Corporation of India (SCI) has been on the list of disinvestment projects for several years. It is incongruous to do shipping industry reforms ,with simultaneous closure and sale of SCI. The Ministry of Ports and Shipping, and the Government, must attain clarity on what is in the long-term public interest.
Nalanda will be developed as a tourist centre as the University has been declared open. Nalanda was never a tourist centre, but known the world over for its high academic learning and facilitation. Instead of spending resources on tourism development, which again is incongruous with the University’s past glory, I suggest that at least 100 Nobel laureates should be identified and hired as part-time or full-time faculty so that hordes of scholars rush to Nalanda to learn at their feet, to restore its pristine glory.
Space economy is being envisaged to grow 5 times in 10 years. This is no small announcement, and in my book referred to above, "100 Ways to Improve Governance in India," I had suggested that ISRO should do a global demand estimation study for the launch of satellites by different countries. Taking advantage of the demand-supply gap that will emerge, ISRO should develop facilities for launching any foreign satellite from its various stations created for this purpose. Such a strategy alone can provide us with a 5-fold jump in space economy turnover in one decade.
The budget talks about the reduction of tax incidence on GST and bringing down the compliance burden of taxpayers. However, GST rationalization of rates is pending for several years, as if it is rocket science! No one in the GST council has taken pains to go through the rates on each item and amend them responsibly, keeping the current needs and requirements for such lopsided rates in many cases. The common man is burdened with too many taxes, and the joke going around on social media is that we should stop paying taxes to force the government to become Atmanirbhar! Hence, mere announcements on GST are not enough, and a complete data-based analysis of all rates needs to be done expeditiously to bring it in tune with a triple tax rate structure, which the CBIC Chief mentioned in his interview in Economic Times.
Reduction of all kinds of duties on cell phone-related products & microphones, and exemption to 25 critical minerals from basic custom duties, will only result in deepening our trade deficit with China, which already stands at $85 billion. No other country can supply India’s needs on this account, and it is unfathomable why China is getting this kind of attention from India when the world is looking at us as a China-plus-one alternative. Geopolitics suggests that we must be wary of China, but the budget seems to believe otherwise! Why? There is talk of getting more FDI from China for Make in India, but this again shows a dangerous tilt in the budget towards China without assessing and analysing the risks involved in the likely catastrophic damage to domestic industry. Instead of cutting down non-essential item imports from China by identifying them and using AI to pin down the culprits, we seem to be pursuing China as if its dominance is taken as inevitable. It is also surprising to find that Indian industry wants a relaxed visa regime for Chinese nationals while our soldiers are battling with them at the borders. Such incongruous budget inputs show that a holistic approach has not been taken while drafting and announcing this important financial document.
Import duty on gold and precious metals has been reduced from 15 per cent to 6 per cent. While this has been applauded for checking the smuggling of gold, the policymakers seem to be unaware that our imports of gold exceeded $45.5 billion in 2023-24, as against $30 billion in 2022-23. Reduction of massive duties on gold can result in our import bill not only crossing the $50 billion mark but may assume a regular high trajectory, worsening our overall trade deficit substantially.
A comprehensive review of the Income Tax Act in 6 months has been mentioned in the budget. I recall the same was stated in several budgets in the last 10 years, but nothing has been done, and the poor taxpayer, even the EWS defined category of up to Rs.7 lakhs annual income, is under the tax slab today. When will relief come to the honest salaried taxpayer is the million-dollar question in the minds of the middle class for decades now? This is like the proverbial low-hanging fruit picked by children, while tapping the high-hanging fruit lying in store with the 6 major tax-evading categories, needed to be done by adults! It is conspicuous by its absence in the budget. In my view, the tax slab should start at Rs 10 lakh, a little above the EWS level, with a tax rate of 10 per cent up to Rs. 20 lakhs, 20 per cent from Rs. 21-30 lakhs, and 30 per cent beyond Rs. 31 lakhs income, with no exemptions and no surcharges.
E-commerce TDS rates have been reduced, but the e-commerce policy is pending for 7 years and yet to emerge. I wonder why such anomalies exist in our system and why progressive sectors like e-commerce, which have grown from $10 billion ten years ago to $65 billion today, lack a clear policy framework under which it can operate progressively and smoothly.
Simplification and rationalization of capital gains is an avowed objective of this budget. Here again, short-term capital gains tax has been raised from 15 to 20 per cent, and long-term capital gains from 10 to 12.5 per cent. The booming stock market has hence become the target of the Income Tax Department. It is like killing the goose that lays golden eggs because the maximum discussion, debate, and dissension is on this account in social media. A careful relook is necessary to prevent dissonance from converting into fury.
Cruise tourism with tax concessions for foreign shipping companies undertaking domestic cruises in India is a double-edged sword as it will hit the domestic companies who want to tap this large market along our 7,000 km long coastline. I suggest the calibration of this point and the tax advantage being given to domestic cruise companies who can lease or hire foreign cruise ships for this purpose.
With the advent of AI, it is clear that several jobs will get severely affected, and all repetitive jobs will become redundant. The budget is silent on this, although the Economic Survey has highlighted its impact on all low, semi, and high-skilled workers. Hence, it is important that the caution given by the Economic Survey should be heeded by the Ministry of Labour, and an extensive study must be done quickly to identify how to retrain and reskill those categories of jobs which are at the mercy of AI.
The budget is completely silent on the defence and health sectors for no apparent reason. It is amazing that while the interim budget dwelt at length on health, the July budget, pregnant with all the possibilities, has completely ignored the physical and mental health of the nation as if they don't matter. A relook at this important dimension is imperative because without ensuring the nation’s good health, nothing is possible on all other fronts!
The budget talks about the top 500 companies offering 20,000 internships each over 5 years, which is a challenging task. Debates are seen about why and how these 500 companies will be identified. Many of the big firms in India are already hiring interns from college graduates to post-graduate students, with remuneration going up to as high as a few lakhs per month. Will these companies be lured by a Rs.15,000 hazy reimbursement is a moot question, and hence the entire scheme needs a careful relook, and if necessary, a postponement, till full consultation with the industry ensures its appropriate calibration.
The 100 Smart Cities Mission was started in 2015 with 2020 completion. Covid lost 3 years, but even today only 23 cities have completed all projects, and 77 remain in WIP mode. The budget is completely tongue-tied on this. Why? Is it no longer a priority? Are the works in progress jettisoned, or is a final deadline announcement obscure as of now? How will this mission be funded is the budget’s call or someone else’s?
Rs 5.1 crores of cost overruns on 438 projects appear on MOSPI’s website & public releases. Is it not incumbent on the finance ministry to explain in the budget how this massive excess funding is being financed? Is the budget only to tax, not to save taxpayers' hard-earned money by tracking each project through AI if necessary, on a weekly basis, and bringing them to a logical and expeditious conclusion? Can the poor taxpayers continue to defray the inordinate completion delays?
In the last full budget, connecting 1460 Mandis and 1800 haats with the eNAM portal was the target set. But there are 7000 APMCs in India & 22000 haats. Why are the remaining 5600 mandis & 20200 haats not getting their due attention in the budget? When will this happen if farmers must get the due price for their hard toil? POT or potatoes, onions & tomatoes are in short supply seasonally, creating havoc with food inflation. If the budget takes up this mammoth task in a graded manner, it will solve the monumental annual problem of shortages of agricultural goods, as data availability online will enable swift movement of such goods from surplus to deficit areas of the country.
Conclusion: India is on a manual mode in the finance ministry when the world is moving towards the AI mode. Two budgets ago, three centres of AI excellence were mooted. What is their status today? The interim budget projected? 10000 crore for plug and play, supercomputing & quantum computing capabilities to be created for use by startups and researchers. The full budget must provide the status update and also indicate steps taken for an AI ethics policy to be put in place, having just concluded the world AI summit in Delhi. 8 AI-based startups by MEITY are very encouraging in the agriculture, health & education sectors, and the budget must incentivise more apps in all sectors of the economy, where public interest is served manifold. Outside the USA, India is the second-largest user of ChatGPT at 7 per cent globally. GitHub has a total of 13.2 million developers in India & speedily growing to take over the USA’s ascendancy by 2027. Is the budget-making body aware of this, and if not, why should it not reduce their pain points? The best-case scenario in an AI-dominated era is for the Bureau of Indian Standards to collaborate with the best in the world to develop AI safety and trustworthy standards so that AI technology can use all the finance ministry data of decades and create an ideal budget, which is bereft of political machinations. That’s the best yardstick of Atmanirbhar Bharat.
