Decoding Various Facets of The Budget 2024

Dr. Pamarty Venkataramana, is a distinguished Business Strategist, International Corporate Lawyer, and Author. With a keen insight into the nuances of global business and economic strategies, Dr. Venkataramana offers a comprehensive perspective on the Union Budget for 2024-25. We'll delve into various facets of the Budget, including its impact on India's commitment to Net Zero by 2070, the strategies to combat inflationary pressures, the focus on infrastructure development, and the support for key sectors such as technology and pharmaceuticals. Additionally, Dr. Venkataramana will shed light on areas where the Budget may have missed the mark, providing valuable insights into where additional focus could drive further progress. Here's the excerpt of the interview.

1. How does the Budget 2024-25 reinforce India's commitment to achieving Net Zero by 2070, particularly in terms of expanding focus into the green energy sector?

Ans : The Budget announcement reaffirms India's commitment to achieving Net Zero by 2070, with a particular emphasis on expanding efforts into traditionally underserved areas like batteries and energy storage. This is a pivotal moment for the Indian oil and gas sector, which, having set its own Net Zero targets over the past year, now has the opportunity to lead in emerging energy solutions such as biofuels, green hydrogen, energy storage, and carbon capture. The allocated funds, including specific provisions like the VGF for battery storage, represents a significant step towards attracting both global and domestic investment in these crucial sectors, which have previously faced financial shortfalls.

2. What strategies does the Budget introduce to mitigate inflationary pressures on the consumer goods sector?

Ans : India remains a bright spot not only in economic performance but also in consumer confidence. However, inflation has significantly impacted consumption. Although commodity inflation has eased recently, the costs of key raw materials like cereals, milk, and pulses have risen by 25-40% compared to last year. This has led to price increases of over 8-10%, resulting in a slowdown in consumption volumes for the FMCG sector. Urban consumption has grown by a mere 1-2%, while rural demand has either stagnated or declined depending on the category.

The budget focuses on addressing the Implementing prudent policies, supply-side interventions, and changes in the taxation structure to mitigate the impact of inflation. This approach aims to put more money in the hands of consumers, boost consumption, and prevent downtrading, especially among aspiring households with incomes below 5 lakhs.

Increasing disposable income, allocating funds to farming, and enhancing rural infrastructure, connectivity, and mobility to create long-term jobs. These measures will help stimulate growth in rural demand.

India remains a net importer of various essentials and discretionary items, particularly consumer electronics and components. The Production Linked Incentive (PLI) scheme has been successful in driving change. Sustained focus on this area will encourage startups and local manufacturing, making Indian companies globally competitive.

3. What's your views on infrastructure development, and what specific initiatives are introduced to improve connectivity, promote sustainable transport, and boost affordable housing?

Ans : Infrastructure is the backbone of every societal growth. Recognising this time-tested truism, the Union Budget has mentioned this aspect as being a main driver of growth-engine. More and more hospitals, community centers and factory units need to be built along with the rapid growth in the number of bridges, roadways and burgeoning populations.

This has many facets and includes infrastructure development in rural areas such as promoting farmland ventures,oxygen parks as lungs for industrial zones and in agriculture oriented regions of the country. In particular in reference to the healthcare sector, more and more centers of treatment using alternative systems of medicine and cancer speciality hospitals that follow the allopathic medicinal system are an urgent need. Infrastructure building should also consider advanced technology of precast blocks and safer structural construction.

4. How does the Budget aim to drive economic growth through investment and consumption, particularly in the industrial goods sector, and what specific measures are being implemented to support various industrial sectors additionally, how does the budget address agricultural sector reform and growth?

Ans : This budget aims to drive economic growth through both investment and consumption. Infrastructure spending is expected to be a key driver, with a 35% increase in capital expenditure allocation, loans to states tied to their capital spending, higher funding for railways, and investments in regional connectivity and coastal transportation. These measures will have significant short-term impacts on project spending and long-term benefits from enhanced infrastructure.

Innovation is the key to the success of advanced societies. While India has a rich heritage as a former Viswa Guru, it must rise to current challenges in a divided world. This calls for innovative research and application in both industry and agriculture. Innovation should also extend to administration, governance, and public policies to ensure law and order. The budget serves as a political tool to fulfill the aspirations of the country's youth and experienced citizens. It requires a collective effort from industry, professionals, and political workers to drive economic development forward.

Building materials will benefit from infrastructure spending, automotive and electrification from higher allocations and a push for clean energy transition, and chemicals and non-ferrous metals from duty changes. Notably, the budget also emphasizes agricultural sector reform and growth, with the creation of the Agriculture Aggregator Fund to introduce modern technology, decentralized storage to reduce post-harvest losses, and digital/AI innovations for precision agriculture. These measures aim to enhance farm incomes and promote biodiversity and sustainable farming, which will help reform agriculture over the medium to long term.

5. What are your views on specific initiatives aimed at driving digital transformation and ease of doing business in India?

Ans : The Hon'ble Finance Minister's use of a tablet instead of the colonial briefcase or 'bahi-khata' to present Budget 2024 was a positive signal for the Tech sector. Increased BCD on PCB assembly for telecom equipment supports local manufacturers and lowers costs for telecom OEMs (original equipment manufacturers). This development will invigorate the industry with renewed energy and confidence". Efforts to drive digital pervasiveness across various sectors, including agriculture. Collaboration with industry and participation in interdisciplinary research to strengthen the digital ecosystem.

6. Given India's ambition for its pharma market to grow from $48-50 billion today to $90-120 billion by 2030, how does the 2024-25 Budget plan to support this vision through enabling policies and incentives, particularly in the areas of R&D, domestic production, wellness sector, and healthcare infrastructure?

Ans: India's pharma market, currently valued at $48-50 billion, is poised to reach $90-120 billion by 2030. This ambitious vision can be achieved through five key pillars: Discover in India, Make in India, Promoting Wellness, Enhancing Health Equity, and Creating a Knowledge Economy.

To support this vision, the budget can introduce enabling policies and incentives. Specifically, policies that encourage R&D through funding support and the development of a robust talent ecosystem will incentivize industry investment in research. Increased allocations towards the PLI scheme and encouraging more domestic production of APIs and KSMs will bolster the Make in India initiative. Reducing duties on nutraceuticals will help boost the wellness sector. Additionally, increased overall allocation towards health is essential to establish a new normal in the post-COVID healthcare sector.

To further the Atma Nirbhar Bharat vision and strengthen supply chain resilience, the government should consider expanding the PLI scheme to include more APIs and KSMs while improving the ease of doing business, particularly for small and medium enterprises. Investment in public health and the development of necessary healthcare infrastructure should remain a priority.

Given the prevalence of non-communicable diseases, focusing on preventive healthcare can reduce the overall healthcare burden. Therefore, the government should rationalize duties on nutraceuticals, aligning them with those of pharmaceuticals. Lastly, there is an opportunity to boost R&D and innovation through the RLI (Research Linked Incentive) scheme, which can help transition India from Make in India to Discover in India.

7. How is the Union Budget expected to leverage public sector investments to enhance infrastructure, particularly to support the government's vision of making India a manufacturing hub with a projected sector output of USD 500 billion per annum by 2030?

Ans : Amid a slowing global economy, public capital expenditure has been a crucial driver of India's growth. Infrastructure spending has reached unprecedented levels, with government tendering exceeding INR 1.3 trillion by December 2022, marking a 45% year-over-year increase. Seizing the opportunity presented by global de-coupling, the government aims to transform India into a manufacturing hub, targeting a 15-fold growth and achieving a sector output of USD 500 billion annually by 2030. Realizing this vision will require significant investment in industrial parks, innovation centers, and related infrastructure sectors such as transport and energy. Consequently, infrastructure is expected to be a focal point in the Union Budget once again, with increased allocations anticipated to establish an ecosystem supporting various industrial corridors.

8. What areas do you believe the government may have overlooked in the Budget 2024-25, and where do you think additional focus or attention is needed?

Ans : In the Budget 2024-25, several critical areas seem to have been overlooked and warrant more focused attention. Firstly, while recent developments such as Telangana's success at Davos, India's semiconductor ambitions, and Apple's plan to manufacture a significant portion of iPhones in India indicate positive momentum, the Budget missed an opportunity to lay out robust mechanisms, incentives, and expedited frameworks. To effectively capitalize on the chance to significantly increase India's share of global electronics manufacturing, a more systematic approach is needed to rapidly capture market share from China rather than making incremental advances.

Additionally, although skill development has been a focus area for some time, the current moment calls for the creation of specialized skill hubs tailored to various industry needs. The Budget could have addressed this by proposing the establishment of sector-specific equivalents to NASSCOM, aimed at advancing digital literacy at grassroots levels and leveraging the potential of India's large, tech-savvy population.

The Indian startup ecosystem is also facing challenges, including drying up funds, investor caution, and difficulties in achieving profitability. The Budget missed an opportunity to support the maturation of this sector by easing and streamlining the tax framework for startups, their employees, and investors. Providing a more supportive fiscal environment is crucial for the growth and stability of the startup ecosystem.

Finally, the Budget could have done more to stimulate green finance investments, particularly in businesses dedicated to ESG best practices. With India's ambitious COP commitments, it was an opportune time to establish a concrete path to drive action and integrate ESG considerations more deeply into public and private investments. Addressing these areas could have further strengthened the Budget's impact and supported India's long-term economic and social goals.