Where to Invest After Budget 2024: Key Sectors to Consider
Aug 12, 2024
The Indian Budget proposes a wide range of changes to boost economic growth, promote investment, and enhance backing for startups and small and medium-sized enterprises (SMEs).
The Union Budget had everyone eagerly anticipating results that would reshape India's financial position. Every sector hopes the Finance Minister's proposals will meet their requirements and boost the country's growth.
Industry experts see the removal of the Angel Tax and the reduction in corporate tax rates for foreign businesses as groundbreaking steps. These measures are expected to position India as a stronger option for investments, fostering a welcoming environment for innovation and entrepreneurship.
When investors assess the revised economic landscape, they pinpoint specific key sectors as great investment prospects in the post-budget period.
Before exploring the sectors, Let’s dive in the key announcement for capital expenditure and related to budget allocation are:
Budget Announcement | Capital Expenditure |
Infrastructure Sector | 11.11 lakh crores |
PM Awas Yojana Urban 2.0 | 10 lakh crores |
Road Connectivity Projects | 26,000 crores |
Power Sector | 21,400 crores |
The union budget impacts the economy, shapes interest rates, and charts a course for the stock market. With India's GDP projected to grow at 7% for FY 24-25, Budget 2024 has came up with the theme – MSMEs.
The budget included important measures for MSMEs by the government. The industry plays a critical role in India's economic progress. It consists of 6 crore units that hire more than 11 crore workers, making up 30% of GDP and 50% of exports. Nevertheless, only 14% of these SMEs have the ability to obtain credit.
The new Credit Guarantee Scheme would extend term loans for machinery and equipment assets without a demand for any collateral. Entrepreneurs who have given debts will expand the loan limit of ₹10 lakh to ₹20 lakh in mudra loan scheme.
The dedication to establish twelve industrial parks through the National Industrial Corridor Development Programme is intended to boost industrial growth and offer modern facilities for manufacturing and services sectors.
Business Reforms
Simplification of Tax Regime for Domestic Cruise Operators: The tax regime for operating domestic cruises has been streamlined. This simplification is expected to boost tourism and related business revenues.
Corporate Tax Rate Cut: Foreign companies are set to gain from a decreased corporate tax rate, dropping to 35% from the previous 40%. This factor enhances India's attractiveness for foreign investors.
Taxation on Gains
Short-term capital gains from financial assets are now taxed at 20%. It is good news for the investors who were considering the impact on short-term trading strategies.
Long-term gains on both financial and non-financial assets are taxed at a more favorable rate of 12.5%, promoting longer holding periods.
The exemption for capital gains on financial assets has been raised to ₹1.25 lakh per year. This slight relief may attract more investors to bonds and other financial assets.
Key sectors to consider for strategic investments after Budget 2024:
Agriculture
In the latest budget, the agriculture industry was granted Rs 1.52 lakh crore, with an emphasis on advancements in biotechnology and digital agriculture. Setting up 10,000 bio-research centers and enhancing digital agriculture infrastructure offer positive chances for agri-tech startups. These new companies have the potential to be pioneers in eco-friendly farming techniques, precise agriculture, and effective farm organization, which will boost India's international standing in the agricultural sector.
2. Infrastructure
The provisions of the budget for the financial year 2024 offers crores of Rs, 11.11 lakh crore for infrastructure sectors including roads and transport and communication that is meant to enhance the existing transport means. L&T and GMR INFRA will benefit from projects such as PMGSY and the Amritsar-Kolkata industrial corridor.
3. Space Economy
The budget reveals a Rs 1,000 crore fund for space startups to increase the space economy five times in the next ten years. This decision encouraged creativity and monetary investments in the aerospace industry.
4. Renewable Energy
The government emphasis on renewable energy aligns with global sustainability trends. Incentives for companies involved in renewable energy projects make this sector attractive. Solar, wind, and hydro projects are already underway, and aggressive commissioning targets are expected. The exemption of capital goods used in solar cell and panel manufacturing further fuels growth.
5. Affordable Housing and Urban Development
The PM Awas Yojana Urban 2.0 received got actual allocation of ₹10 lakh crores. For this, this initiative is aimed at giving subsidies on housing and urban development, providing opportunities for real estate developers and construction companies.
- Real Estate Sector
The budget eliminates the indexation benefit for property sales. Previously, sellers could adjust acquisition costs for inflation to reduce taxable capital gains.
Despite the reduction of the capital gains tax rate on property sales to 12.5%, the elimination of indexation may lead to increased taxable gains. Real estate investments may seem less appealing in terms of taxes than they did in previous years.
6. Manufacturing and OEMs
Private sector capital expenditure is likely to surge as manufacturing facilities ramp up production. The tax exemption for capital goods will encourage investment. Original Equipment Manufacturers (OEMs) catering to construction materials would show increased demand.
7. Financial Services
With the budget's focus on economic revival, financial services companies, including banks like SBI and PNB, are well-positioned for growth.
8. Telecom
Telecom companies are set to benefit from infrastructure development and digital connectivity initiatives.
Conclusion
The 2024 Indian Budget offers a combination of obstacles and advantages for businesses and investors. Increased exemption limits and reduced tax on long-term gains may make bonds more attractive, while the real estate sector may undergo changes that could redirect investor focus to tax-efficient options. As the business landscape evolves, keeping up-to-date and adjusting investment strategies will be essential as the business environment changes.