The Budget is a roadmap for future growth and not a prescription that delivers immediate benefits. In the 2024-25 Budget, Finance Minister Nirmala Sitharaman has laid the foundation for sustained growth amidst strong headwinds. She has looked at fiscal discipline, capital expenditure, equity in taxation, employment and skilling, women empowerment, and rural development among others, exhibiting prudence over populism.

Aiming at a fiscal deficit of 4.9 per cent of GDP for 2024-25 and 4.5 per cent for 2025-26, the Finance Minister has brought to the fore the importance of fiscal discipline for sustained growth. The unprecedented capital expenditure (capex) outlay of ₹11.1 lakh crore resonates with the Economic Survey that highlighted public investment-led capital formation across major sectors and spanning various States for ramping up national assets.

The calibrated allocation for women and rural development not only aligns with the Interim Budget’s focus but also reaffirms their importance in India’s growth story. Emphasis on MSMEs, skilling, employment and access to higher education in the Budget reflect their importance as growth ingredients.

The new credit guarantee and credit assessment framework for MSMEs is welcome as it delivers the much-needed local touch for businesses. Also, the new schemes that seek to enhance the skills of youth and knowledge capital in the country are noteworthy.

Skilling 20 lakh people over five years and providing guaranteed loans up to ₹7.5 lakh for 25,000 skilled persons every year will definitely spur rural entrepreneurship, with potential to scale up quickly with the MUDRA loan cap being increased to ₹20 lakh.

Equipping the youth

The Employment Linked Incentive (ELI) and internship to around one crore youth in the next five years in top 500 companies or their value chain stakeholders will equip employable youth with the required workplace skills. If this trio of ELI, internship and skilling is largely aligned with manufacturing rather than services, the much-spoken about demographic dividend will be tapped effectively. While India’s highly skilled services export is ranked seventh globally, the country’s 1.6 per cent share in global manufacturing exports is less than Vietnam’s 2 per cent despite manufacturing and construction being the largest employers outside agriculture.

If this trio creates more employment in construction and manufacturing, India may emerge an attractive manufacturing destination in the context of global supply chains and as an alternative to China.

The focus on research and development through the Anusandhan National Research Fund, which has been allotted ₹1 lakh crore, is a huge opportunity for public and private universities. However, the research funding mechanism must be competitive and transparent to maximise research outcome; polarised funding, on the other hand, will minimise it.

Domestic higher education loans up to ₹10 lakh, with interest subvention through e-vouchers for one lakh students every year, is a big push towards achieving gross enrolment ratio targets. Ensuring the right mix of students and institutions will help improve both output quality and input quantity.

While there are many positives in the Budget, there are certain missed opportunities which the Finance Minister will hopefully address in the planned comprehensive review of the Income Tax Act. The review, for instance, should consider providing much-needed relief to charitable trusts running educational institutions.

The writer is Vice-Chancellor & Tata Sons Chair Professor of Management, SASTRA University. Views are personal