
(Image source from: REUTERS)
The Indian stock market saw a steep decline after the Finance Minister announced higher capital gains taxes in the Union Budget 2024. Ms. Sitharaman revealed that the Long-Term Capital Gains tax would rise from 10% to 12.5%, and the Short-Term Capital Gains tax would increase from 15% to 20%. Additionally, the securities transaction tax (STT) would be raised to 0.1% from 0.02%. Following these announcements, the benchmark Sensex plunged over 500 points and briefly dipped below the 80,000 mark. Similarly, the Nifty index also traded in negative territory. While the Sensex closed at 80,502.08, the NSE benchmark ended at 23,537.85 the previous day. However, the Budget did offer some relief, with the standard deduction in the new tax regime being increased from ₹50,000 to ₹75,000. Titan, ITC, and Hindustan Unilever emerged as the leading gainers among the BSE stocks, while Power Grid, Bajaj Finance, and Larsen and Toubro were the major losers. Additionally, IT stocks like HCLTech, Infosys, and Tech Mahindra also traded in the red. The pre-budget Economic Survey had noted a significant slowdown in IT sector hiring during the last financial year, suggesting limited prospects for a substantial recovery.
The government has announced that the fiscal deficit, the gap between its total revenue and expenditure, is estimated to be 4.9% of the country's GDP for the current year. This figure is lower than the 5.1% target set in the previous interim budget before the Lok Sabha elections. This development aligns with the expectations of the markets, which were hoping the finance minister would adhere to the fiscal consolidation path. The finance minister has also stated that the government aims to further reduce the fiscal deficit to 4.5% by 2025-26. Additionally, the government's gross and net market borrowing for the next fiscal year is projected to be ₹ 14.01 lakh crore and ₹ 11.63 lakh crore, respectively. The finance minister emphasized that the fiscal consolidation strategy implemented in 2021 has served the economy well and that the government is committed to maintaining this course. From 2026-27 onwards, the government's goal is to keep the fiscal deficit on a declining trajectory, ensuring that the central government's debt as a percentage of GDP will also be on a downward path.
This year, the finance minister has made history by unveiling her seventh consecutive Union Budget, setting a new precedent as the Indian finance minister with the most budgets presented.