The Budget for 2023-24 has laid a strong foundation and blueprint for India @ 100 guided by Prime Minister Narendra Modi’s vision for Amrit Kaal. Finance minister Nirmala Sitharaman made a mention in her budget speech of the seven Saptarishis or priorities adopted by the government. Looking at it from the point of view of the investing community, we saw the seven key areas broadly under the blocks of investments, digitisation, and financial inclusion.
Capex Boost
Firstly, and most importantly, the allocation of Rs 13.7 lakh crore towards capital expenditure, of which Rs 10 lakh crore has been dedicated towards infrastructure investments. This reinforces the government’s focus on infrastructure as a top priority. The infrastructure spend to GDP stands at 4.6 percent and has continued to grow.
Considering the multiplier effect of capital expenditure on the economy, impetus on private investments and job creation, this augurs well for the vision set for Amrit Kaal, complimented by containing fiscal deficit to 5.9 percent of GDP.
Easing Credit & Investment Flows
Ease of investing has been an area of focus, through measures taken to reduce cost of compliance, a re-look at existing regulations to arrive at optimality, and greater powers given to the path-breaking GIFT city regime with a focus to evolve it into a more mature ecosystem.
Digital India acceleration measures have been brought in through KYC adapted for risk, enhancing the scope and creating an Entity DigiLocker, the establishment of the NIFR as a repository that will promote efficient credit flow and the agriculture stack. Each of these measures have the potential to drive further innovation and financial inclusion.
As we look to the next phase of growth, deepening of bond markets is critical for India. A step in this direction is seen with the measures taken to develop the municipal bond market. This is significantly large, in excess of 20 percent in markets like the US.
MSMEs have been significantly starved for credit; the credit gap is estimated at Rs 25 lakh crore. Backed by the government guarantee programme, the last year saw a robust 30 percent growth in credit offtake to MSMEs, as highlighted in the CEA’s Economic Survey. The continuance of the MSME guarantee programme in this year’s budget and resultant addition of Rs 2 lakh crore of credit is a huge positive for the sector.
Supporting Entrepreneurship
The budget recognises the vital role played by entrepreneurship in economic development and the advancement of India as a startup hub. Continuance of income tax benefits and unleashing innovation through anonymised data enabled through the National Data Governance Policy have been proposed in the promotion and development of start-ups. A strong impetus to startups building innovative and affordable solutions for the agricultural sector has been provided through the accelerator fund.
Finally, the signalling to wealth creators that they’re also loved with a 3 percent top rate tax reduction.
While there have been some announcements for startups, this may not be adequate. The government has a lot more to do on the AIF and the startup industry front. The startup community may have to wait for February 2024.
Gopal Srinivasan is CMD, TVS Capital. Views are personal and do not represent the stand of this publication.
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