India’s New Budget: Big Plans for Growth and Changes in Taxes
The Indian government has decided to spend a lot on building things and growing the economy. This spending will make up 23% of the total government spending and 3.4% of the country’s GDP. This plan is part of the budget for the fiscal year 2024-25, which was presented in Parliament this week.
One important part of the budget is the fiscal deficit, which is the amount the government spends more than it earns. This year, the fiscal deficit is set at 4.9% of GDP, which is lower than what people expected. Mahesh Nandurkar, the head of India research at Jefferies, believes this number could go even lower next year. This is good news for the bond market and the Indian currency.
In the stock market, the budget has increased taxes on investments. The short-term capital gains tax has gone up from 15% to 20%, and the long-term capital gains tax has increased from 10% to 12.5%. Long-term investments are now those held for more than a year. Even though some people are worried about these higher taxes, the market has not reacted too strongly. For example, HDFC Asset Management saw a small drop in its stock price but then quickly recovered.
The report also says that political stability is helping the market. Prime Minister Narendra Modi is expected to keep his government stable for the next five years, which is good for the economy.
Lastly, the report talks about the gold reserves of the BRICS countries, which include Brazil, Russia, India, China, and South Africa. These countries have increased their gold reserves by 428 tonnes since the start of 2022. China and India have added the most gold. However, the BRICS countries still have less gold than the United States and the Eurozone.
Doubts Revealed
Budget -: A budget is a plan for how a government will spend its money. It shows where the money will come from and how it will be used.
GDP -: GDP stands for Gross Domestic Product. It is the total value of all goods and services produced in a country in a year.
Fiscal Deficit -: Fiscal deficit is when a government spends more money than it earns. It shows how much more the government needs to borrow.
Taxes -: Taxes are money that people and businesses have to pay to the government. The government uses this money to provide services and build things.
Short-term and Long-term Investments -: Short-term investments are things you buy to make money quickly, usually within a year. Long-term investments are things you buy to make money over a longer time, like several years.
Prime Minister Narendra Modi -: Narendra Modi is the current Prime Minister of India. He is the leader of the government and makes important decisions for the country.
BRICS -: BRICS is a group of five countries: Brazil, Russia, India, China, and South Africa. They work together to improve their economies.
Gold Reserves -: Gold reserves are the amount of gold that a country keeps in its banks. It is used to support the country’s money and economy.
US and Eurozone -: The US is the United States of America, a country in North America. The Eurozone is a group of European countries that use the Euro as their money.