scorecardresearchBudget 2023: Biggest takeaways for the economy, industries and taxpayers

Budget 2023: Biggest takeaways for the economy, industries and taxpayers

Updated: 07 Feb 2023, 08:33 AM IST
TL;DR.

  • The government highlighted seven priority areas for this budget: Inclusive Development, Reaching the Last Mile, Infrastructure and Investment, Unleashing the Potential, Green Growth, Youth Power, and the Financial Sector.

New Delhi, Feb 01 (ANI): Union Finance Minister Nirmala Sitharaman carrying the tablet leaves from the Ministry of Finance to present and read out the Union Budget 2023 at the Parliament, at North Block, in New Delhi on Wednesday. (ANI Photo/Rahul Singh)

New Delhi, Feb 01 (ANI): Union Finance Minister Nirmala Sitharaman carrying the tablet leaves from the Ministry of Finance to present and read out the Union Budget 2023 at the Parliament, at North Block, in New Delhi on Wednesday. (ANI Photo/Rahul Singh)

All eyes were on the 2023-24 Budget on February 1, the last full budget before India heads for the 2024 general elections. This year’s budget speech covered all key aspects of the economy, from a focus on agriculture and sunrise sectors to taxation and infrastructure development. The government highlighted seven priority areas for this budget: Inclusive Development, Reaching the Last Mile, Infrastructure and Investment, Unleashing the Potential, Green Growth, Youth Power, and the Financial Sector.

Here are all the highlights of the budget:

Makeover of the new tax regime

The finance minister (FM), Nirmala Sitharaman, announced a major overhaul in personal taxation. Currently, in the old & new regimes, individuals don’t pay taxes on a total income of less than 5 lakhs. This limit is increased to 7 lakhs under the new tax regime. Additionally, the standard deduction of 50,000, which was only allowed in the old regime, will now be allowed in the new regime too.

Fiscal deficit estimated at 5.9% of the GDP

In 2021-22’s budget, the FM expressed the government’s goal to bring down the fiscal deficit to <4.5% of GDP by 2025-26. In 2023-24, the fiscal deficit target is set at 5.9% of GDP, lower than 2022-23’s estimate of 6.4%.

Growth in capital investments budget

This year, the capital investment outlay has been increased for the third year in a row by 33% to 10 lakh crore, 3.3% of GDP. This will be almost three times the outlay in 2019-20.

Additionally, the 50-year interest-free loan to state governments has been extended for another year. The expected outlay for these loans is expected to be 1.3 lakh crore. This will encourage higher investments in infrastructure and incentivise state governments for complementary policy actions. An Urban Infrastructure Development Fund (UIDF) will be established through the use of priority sector lending shortfall. This will be managed by the National Housing Bank and will be used by public agencies to create urban infrastructure in Tier 2 and Tier 3 cities.

Rural India’s development through digital infra & enterprises

The government plans to bring efficiency to agriculture by building an open-source digital public infrastructure. This will provide information services related to crop planning, farm inputs, credit, insurance, crop estimation, etc. An agriculture accelerator fund will also be established to encourage entrepreneurship in rural areas. The agriculture credit target will be increased to 20 lakh crore with a focus on animal husbandry, dairy, and fisheries.

Enhancing regional connectivity

Railway has been allocated a capital outlay of 2.40 lakh crore – the highest ever outlay, ~9 times the budget of 2013-14. Additionally, allocation to the National Highways Authority of India and other road work projects has been increased from 2.16 lakh crore (revised estimates) to 2.69 lakh crore. The government will revive fifty additional airports, heliports, and advanced landing grounds to improve air connectivity.

Commitment to green mobility

The finance minister emphasised the PM’s vision of LiFE (Lifestyle for Environment), which promotes an environmentally conscious lifestyle. Since transportation is one of the most polluting sectors, the government has highlighted its plans to encourage the shift towards green mobility.

To this end, the government will allocate funds towards scrapping old vehicles of the central & state governments. 5,172 crore has been allocated towards the FAME India scheme, which encourages the adoption of electric and hybrid vehicles. Further, exemption on customs duty will be provided on the import of capital goods and machinery required for lithium-ion cells. This will encourage local manufacturing of batteries used in electric vehicles.

Conclusion

India continues to be one of the fastest growing large economies. Recently, IMF retained India’s growth forecast of 6.8% and called the country a bright spot and major engine of growth amid an expected fall in global growth. The central government’s continued focus on increasing public capex to create infrastructure assets, like roads and railways, is likely to finally set private capex rolling. These factors, combined with reduced tax liabilities for middle class individuals, are expected to create demand and continue to push macro growth prospects.

 

Naveen KR is smallcase manager and Senior Director at Windmill Capital

Article
Budget 2023
First Published: 07 Feb 2023, 08:26 AM IST