India’s Budget 2023 was presented by Nirmala Sitharaman, Finance Minister under the back-drop of various accolades and recognitions received such as “G20 Presidency”, “India in Bright Spot”, “An opportunity called India”, “5th Largest Economy in the World” and “Pharmacy of the World”.
The COVID pandemic has spread miseries everywhere, creating a tailspin in all economies. While many countries are still reeling under the negative financial impact, India has come out of the crisis early, thanks to the efficient and effective measures initiated at various levels.
As expected, economic indicators such as the country’s GDP, growth in essential sectors such as agriculture, industry and services, inflation, employment, capital investment, fiscal deficit and FOREX have shown unfavourable numbers during this bad phase of the economy. The government has on hand daunting challenges such as growing unemployment, increasing inflation, slow growth of capital projects, increasing public debt, interest burden and higher fiscal deficit, all stunting overall growth.
The Budget 2023 is embarking on a new trajectory with renewed vigour, optimism and confidence and has incorporated certain significant measures. The approach adopted is mature, totally professional and oriented towards “What is required for rejuvenating the economy”, rather than on introducing populist measures with an eye on the vote bank.
With enhanced allocation to various sectors, expected higher private consumption, efficient tax buoyancy, further ease of doing business, changes in tax rates and concessions, expected better performance of corporates and lending institutions and effective monetary and fiscal steps, India is all set to move forward in its financial agenda, trying to excel, even better than the pre-pandemic level.
The government’s vision looms large around continuing the fundamental framework such as affordable housing, clean drinking water and sanitation, access to education, health, nutrition, road, telecom and sustainable livelihood and employment opportunities.
1. GDP growth: The essential trigger of the economy comes from improving the “In-Country Production Value” i.e.Gross Domestic Product (GDP) between 6 to 6.8% in 2023-24. To achieve this, the Government has increased the Capital Investment outlay by about 33.4% to Rs 10 Lakh Crore, which is about 3.3% of the GDP. This allocation will ensure the setting up of new projects, production units and infra structure facilities such as transport networks, ports, roads and railways. All these will have a multiplier effect in terms of a rise in growth, improved supplies, new employment generation, increased business opportunities for ancillary units, the flow of higher credit, improved cash flow and softening of inflation. It is expected that the Private Sector, which was playing at a low gear during the pandemic phase will take up much of the share in this capacity-building process.
2. Fiscal deficit & inflation control: Reduction of Fiscal Deficit (Spending in excess of receipts), is another focus area. From a level of 9.2% of GDP in 2020-21, it has been brought to 6.4% in 2022-23, aiming to reduce further to 5.9% in 2023-24 and 4.5% in 2025-26. To bridge Fiscal Deficit, the Government proposes to source external borrowings and internal savings aggregating to Rs 15.4 Lakh Crore. Needless to mention that three shocks namely COVID-19, the Russian-Ukraine conflict and the increase in the FED Rate in the US leading to an appreciation of the US Dollar and widening of the Current Account Deficit (CAD) have caused inflation at 6.8% in 2022-23. Improved GDP, higher capital outlay, and increased production and supplies shall yield higher tax collections and contribute towards a reduction in fiscal deficit and inflation.
3. Currency depreciation: India’s high Private Consumption (Eg: 58% of GDP in Q2 of 2022- 23) has helped overcome the shrinkage of exports, caused by the currency challenges being faced by importing countries. India has sufficient FOREX to finance the CAD and intervene appropriately to manage volatility in the Indian Rupee, which is still better performing than many other currencies.
4. Broad frame: The financial agenda is widespread with a special focus on harnessing the aspirations of youth, empowerment of women, encouragement of artisans, promotion of tourism, emphasis on green energy, special emphasis on the power sector, changes in the personal and corporate income tax, excise and customs duties, all intended towards rejuvenating the economy.
5. Agriculture focus: Agriculture occupies a sizable % of GDP and Agriculture Exports % being high, the government has given a big push to providing digital support (electronic access to crop planning, health, inputs, credit, insurance and market intelligence and linking up all primary agricultural credit societies), financial support (setting up an accelerator fund for start-ups in farming and providing higher credit), storage support (building more common storage facilities) and collaboration support (creation of public private partnerships). Higher revenue, attractive prices, productivity and profitability, upgrading of skills, access to new markets and creation of jobs are some of the positive outcomes for the farmers.
6. Medical & knowledge building: In the medical field, coinciding with the recent creation of medical colleges, the Government proposes to establish new nursing colleges, encourage medical and pharmaceutical research and create multi-disciplinary courses for medical devices. Besides, general training of teachers and the creation of digital libraries shall be undertaken as a knowledge-building initiative.
7. Supportive Measures: Expansion of public digital platforms, national logistics policy and production linked incentive scheme shall be supportive towards achieving various objectives.
8. Changes in tax, customs and excise: Increase in personal tax exemption limit from Rs 5 Lakhs to Rs 7 Lakhs, Changing the tax rates under various slabs, extension of standard deduction for certain taxpayers, concessions relating to corporate tax, selective increase in customs duty (except some) and selective hike in excise, (except cigarettes) are welcome measures. The government is foregoing receipts by Rs 35,000 Crores by these changes. No specific relief has been extended to NRIs.
9. Subsidies untouched: The much-needed bold reforms on reduction of subsidies in agriculture, food, fuel and fertilisers and limiting the beneficiaries are missed this time and hence non-genuine beneficiaries shall continue to take away a big slice of the Budget.
Overall, the Budget 2023 has incorporated many bright spots towards growth and stability and with the long-standing steps planned; it should pave the way for making India a better India.