Budget 2023: Is it everything we expected to be?

The 2023 financial budget comes at a crucial juncture considering it is the last full-fledged budget before the upcoming Lok Sabha elections and the 9 state elections due before that.

The biggest highlight of the budget 2023 would be the target of bringing down the fiscal deficit to 5.9% of GDP, from 6.7% last year. The FY24 GDP growth is also estimated to be 7%, accompanied by a per capita income of 1.97 lakhs, which has doubled in the last nine years.

The government also presented a tremendous increase in capital expenditure to ₹10 lakh crore in 2023. This 33% increase will be the highest outlay in capital expenditure in the history of India, amounting to 3.3% of the country’s GDP. While these numbers are impressive, the fine print on which sectors and projects it would be spent on is still awaited.

The saptarishi priorities across Inclusive Development, Reaching the Last Mile, Infrastructure & Investment, Unleashing the Potential, Green Growth, Financial Sector, and Youth Power all align with the expected and predicted themes from pre-budget write-ups and commentaries. Hopefully, Amrit Kaal comes over a period of time.

Indirect taxes and corporate taxes did see a few changes which should be positive news for the beneficial sub-groups.

The populist move of giving relief to the middle class in the form of personal income tax was present as well, but for the new tax regime, which has now been made the default regime as well. Tax rebate has been increased from 5L to 7L but this is rebate only and not tax saving. Slabs have changed and surcharges have been reduced for the biggest bracket.

Excel calculators would be out to do the maths, to check whether all of this makes enough noise to move to the new regime, but without the various 80C of the world, most people earning more than 12L would continue with the old regime; probably making this announcement more a benefit to a slightly smaller audience than the masses.

TCS through LRS has been increased to 20% and thankfully LRS for educational purposes has been kept unchanged. So, the retail investor who was more bullish on global markets compared to our own Sensex would need to be cautious.

Ecological conservation was a big talking point in the budget, with the promise of a ‘green push’ being made and several schemes announced, focusing on climate change and conserving India’s ecological health. Plans for ‘Digital India’ are going strong with the government proposing an outlay of more than 4,000 crore for the program.

While these sectors and many others have seen a considerable push, it was not the case for the defense and insurance sectors, somewhat to the dismay of a few.

MLDs are back to be treated as short-term gains irrespective of the holding period and will be taxed at the highest bracket. This is a huge negative for HNIs who park investments through this route. Also, for the first time, returns from life insurance policies above 5L would also be taxed, except for in the case of death and ULIP. Stock prices of insurance companies fell 8 to 11 percent after this news.

In the end, EVs, televisions, and mobile phones are cheaper whereas clothes and of course cigarettes are more expensive.

The 2023 financial budget aligns with the government’s target of achieving a $5 trillion economy by 2025, and now only time can tell whether the government’s efforts will pan out the way we envisioned and hoped it will.

Devrath Banerjee is the Director of TresVista