Finance minister Nirmala Sitharaman has adopted a pragmatic pro-growth approach in the Budget 2023 in setting the path for India’s transition from the fifth-largest global economy to the third-largest by the turn of this decade.
The Union Budget has been presented in the backdrop of a strong recovery in the Indian economy post covid, recessionary headwinds for major global economies in 2023 and a turbulent global geopolitical environment.
The Budget recognises and acknowledges the emergence of the Indian economy as an oasis in the economically challenged global economic environment and the world is looking upon India to step up its role as the fastest-growing major economy in the world. The government has taken a pragmatic approach towards this ambitious pursuit.
The finance minister has focussed on reinvigorating economic growth, yet done that with a long-term sustainable approach, avoiding falling prey to short-term impulses, given that it was supposedly an election budget.
Capex growth push
The government has laid major emphasis on accelerating capital expenditure as the cornerstone for driving growth. As result, the aggregate government capital expenditure has been increased by 33 percent to 10.5 lakh crore.
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Within infrastructure, the capital outlay on railways is slated to increase by 50 percent to Rs 2.4 lakh crore and 9x when compared to FY14 outlay.
Apart from railways, the allocation has been increased across sectors like defence, rural housing, other transportation (roads & ports) and urban infrastructure. The capex now stands at an all-time high of 3.3 percent of GDP. The Budget is focused towards increasing productivity and efficiency by ensuring quality spending.
Push for Bharat
To drive the rural and agricultural economy, the FM made a slew of announcements.
Foremost, the food subsidy programme has been continued for another financial year. The target for agriculture credit has been further increased to Rs 20 lakh crore (versus Rs 18 lakh crore last year). In addition to improved availability of credit, the Budget proposes a fund to encourage agri-startups by young entrepreneurs.
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To improve agricultural productivity, there have been plenty of announcements to facilitate a better quality of seeds, investments in digital infrastructure and skill development.
The allocation for the Pradhan Mantri Awas Yojana (PMAY) increased to Rs 79,000 crore, which is 66 percent higher than the Rs 27,500 crore in FY22. This will continue to boost the affordable housing segment.
Digital, green India
In the post covid era, digitisation has been at the heart of all new initiatives taken by the government. India’s Digital Public Infrastructure is the most advanced globally and even superior to the developed world.
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The Budget further pushed for harnessing the power of technology by initiatives like (a) the use of PAN as the common identifier for all digital systems (b) setting up 100 labs for developing applications for 5G services (c) expanding the scope of documents that can be shared through Digilocker and many more initiatives so as to make digitisation all pervasive in business and governance.
The Budget builds on the focus on green growth in line with India’s commitment to be net zero carbon emission by 2070. The recently launched 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 the country assume technology and market leadership in this sunrise sector.
The FM has set an ambitious target to reach an annual production of 5 MMT of green hydrogen by 2030. The Budget provides Rs 35,000 crore for priority capital investments towards energy transition and net zero objectives.
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Given the buoyancy in tax collections, GST collections for FY23 has been revised upwards by 9.5 percent to Rs 8.6 lakh crore. Similar has been the case for personal and corporate tax collections.
In the last Budget, the government chose to build conservative and realistic estimates to ensure that the fiscal deficit targets also appear credible. The same approach continues for FY24 as well. Total tax revenues are budgeted to increase by 11.7 percent on the back of expected nominal GDP growth of 10.5 percent.
Fiscal prudence
To delight the middle class and offset the impact of rising inflation, personal tax rebates have been increased and there has been a reduction in effective personal tax rates.
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The government has demonstrated fiscal discipline by adhering to the FY2022-23 BE (budget estimates) target of a 6.4 percent fiscal deficit and continued the path of fiscal consolidation with a projected fiscal deficit of 5.9 percent for FY2023-24.
In the absence of any exogenous shocks, the budget maths is conservative and credible. Despite being the last Budget before the general elections, the government has resisted the temptation to be populist and focus on fiscal prudence.
The Budget sets the path for long-term sustainable growth of the Indian economy with a pragmatic and prudent approach.
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