BUDGET 2023: It’s a dream budget

The focus of fiscal policy has thus shifted from normalizing activity impacted by the pandemic to securing the recovery through macro-economic stability by pursuing fiscal consolidation while maintaining capex support

Given the current domestic and macroeconomic environment, Union Budget 2023-24 can be rightly called a Dream Budget. It was important to focus on growth, especially to ensure the private capex cyclical recovery continues. The increase in government capex by 33% combined with a Rs. 2.4 lakh crore outlay provided to the railways should give a huge boost to the economy.

Infrastructure, along with the agriculture push and ancillary push, will also help the rural economy improve by boosting employment and incomes. The numbers put out by the Finance Minister appear very credible and pragmatic. There were no outlandish targets or promises.

KYC simplification is good news for MFs

There were many steps announced that are likely to have a far-reaching impact on the financial sector. First off, the move to simplify the Know Your Customer (KYC) process for the financial sector is likely to make it easier to onboard new investors, especially for Mutual Funds (MFs). Given that India’s ratio of mutual fund assets under management (AUM) to Gross Domestic Product (GDP) is 65% lower than the global average, we may conclude that India's mutual fund penetration is much lower than global standards. Hence, it is imperative to expand the mutual fund investor base in India.

Secondly, the proposal to undertake a comprehensive review of the regulations in the entire financial sector with public consultation is a good step, especially if it involves frameworks leading to more seamless coordination among various regulators.

Gift City moves a big plus

It is also important to recognise the additional support being offered to Gift city. There are strong signs that Gift City will establish itself as one of India’s top financial centres and could draw large investments from both domestic and foreign companies. There have been significant changes in the financial sector globally. It is important that Indian markets keep pace with these changes.

The finance minister has proposed that where an aggregate of premium for life insurance policies (other than ULIPs) is above Rs 5 lakh, income from such policies does not qualify for tax exemption except in the event of the death of the person insured. This eliminates a significant tax arbitrage that existed between insurance and mutual fund products and hence is likely to prove to be a significant positive factor for the growth of the mutual fund industry.

The MSME sector, which was particularly hard hit during the Covid-19 outbreak, will receive much-needed assistance from the revision of the loan guarantee for Micro, Small and Medium Enterprises (MSMEs). More than 9 million individuals are employed by the country's 633.9 lakh MSMEs. They must undoubtedly be at the centre of development.

India, which has a population of more than 1.3 billion, has a massive demand for energy to support its quickly expanding economy. A priority capital of Rs 35,000 crore for the energy transition National Green Hydrogen mission, with an outlay of Rs 19,700 crore, will facilitate the transition of the economy to low-carbon intensity, reduce dependence on fossil-fuel imports and make us an energy independent nation.

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Surcharge reduction: Highly paid professionals will stay in India

Tax benefits have been adjusted to help the middle class and encourage people to switch to the new tax system. Enterprises and highly paid professionals will be much more likely to stay in India thanks to the reduction of the peak rates of surcharge. The amount of disposable income held by salaried individuals would effectively grow through the simplification of tax slabs and an increase in the tax rebate under the new tax regime. Consumption will rise as a result, which will eventually accelerate economic development.

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Last but not least, the focus given to enhancing the rural economy is crucial for long-term economic growth and will undoubtedly assist in boosting our country’s growth trajectory.

A well-thought-out budget

Overall, Union Budget 2023-2024 paints a very credible and well-thought-out image that will promote inclusive growth and strengthen the economy's resilience in the face of an expected global slowdown.

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This budget is one of the most pragmatic budgets we have seen in recent times. Rather than talking about outlandish and wishful numbers, the finance minister has emphasised on what can be done and what ought to be done in order to achieve inclusive growth.

We may claim that this budget takes care of every item on our reasonable wishlist.