Increased Capex, better fiscal control and lower Income Tax headline Budget 2023

“Robust financial sector and knowledge-based economy, with strong public finances essential for Amrit Kaal,” said FM Nirmala Sitharaman

By Rangoli and Anish Pathiyil

Chennai: Union Finance Minister Nirmala Sitharaman presented the Union Budget for fiscal year (FY) 2023-24 at the Parliament today, with the major highlights being the reduction in Income Tax, reduction in custom duties and more focus on green energy.

Outlining her vision for the economy, Sitharaman spoke of seven focus areas, which she termed as ‘Saptarishi’. These include - inclusive development, reaching the last mile, infrastructure development, potential, green growth, youth power, & finance sector. These seven areas would be in focus during the Amrit Kaal, the period till 2047.

In what was the last budget before the 2024 general elections, the Finance Minister announced that the fiscal deficit for the FY 2023-24 was 5.9 per cent, well below the 6.4 percent estimated for 2022-23. The minister said that the intention was to narrow the budget gap gradually to 4.5% by 2025-26 as opposed to the existing limits in FRBM act.

"In my Budget Speech for 2021-22, I had announced that we plan to continue the path of fiscal consolidation, reaching a fiscal deficit below 4.5 percent by 2025-26 with a fairly steady decline over the period," Sitharaman said.

For the next fiscal year, the total receipts other than borrowings and the total expenditure are estimated at Rs 27.2 lakh crore and Rs 45 lakh crore, respectively. The net tax receipts are estimated at Rs 23.3 lakh crore, she added.

The capital investment outlay has also been increased by 33 percent to Rs 10 lakh crore, which will account for 3.3 per cent of the GDP. This substantial increase will help in creation of jobs and capital assets, she said.

Though no major announcements were made regarding the defence sector, the Ministry of Defence has been allocated Rs 5.94 lakh crore, higher than the Rs 5.25 lakh crore allocated in FY 2022-23.

Catering to the needs of the middle-class, the budget proposed a reduction in Income Tax with the slabs being modified from six to five. The Income Tax rebate limit was increased from Rs 5 lakh to Rs 7 lakh. This change will be reflected only in the new tax regime, which was announced during Budget 2020 and will be made default from now. This however doesn’t indicate the end of the old tax regime. If one prefers to apply for a tax break under the old regime, he\she will not be eligible for the new rebate.

“I am a believer in a low tax regime. So, any tax cuts are welcome because giving more money into the hands of the people is the best way to boost the economy,” said Congress leader Karthi Chidambaram to ANI.

Under the budget, the prices of mobile phones, televisions and raw materials for Electric Vehicles (EVs) will be cheaper whereas gold, cigarettes, electric kitchen chimneys and gold articles will be more expensive.

As claimed by many financial experts, the budget focuses on the needs of the middle class, with key importance given to skill development and digitisation. It is said to be a forward and positive budget but few critics say that the issues of inflation haven’t been addressed.

“There are some good things in the Union Budget 2023 but there was no mention of MNREGA, poor rural labour, employment and inflation,” Congress leader Shashi Tharoor told news agency ANI.

Delhi Chief Minister Arvind Kejriwal commented, “There is no relief from inflation in this Budget. On the contrary, this budget will increase inflation. There is no concrete plan to remove unemployment.”

Sensex shot up by over 1200 points (2 percent) and Nifty by over 310 points (1.75 percent) after market investors reacted positively to the budget proposals made by the finance minister.

In her budget speech, she said that the government’s philosophy of ‘Sabka Saath Sabka Vikas’ will help in the inclusive development by focussing on farmers, women, OBCs, SCs and STs. An amount of Rs 15000 crores has been allocated for the Prime Minister Particularly Vulnerable Tribal Groups (PM-PVTG) development mission for the next three years.

There is an increase in health expenditure up to 2.1 percent of GDP including schemes for joint private and public research, a sickle cell anaemia elimination mission and setting up of 157 nursing colleges.

The education expenditure has also been increased to 2.9 percent of GDP compared to 2 percent in the previous years. A National Digital Library will be set up for kids and adolescents and states will be encouraged to set up physical libraries in panchayat and ward levels.

As part of infrastructure development, the budget proposed Rs 2.40 lakh crore capital outlay for the railways - the highest ever allocation - 9 times more than the amount in 2013-14. Allocations were also provided for critical infrastructure projects, regional connectivity and transformation into sustainable cities.

The budget provides multiple avenues for green growth, with the aim of achieving net-zero emissions by 2070. The major schemes are in the areas of energy storage, energy transition, National Hydrogen Mission, waste to wealth plants under the PM-Gobardhan scheme and the protection of marshlands under the Amrit Darohar scheme.

For promotion of youth power, The PM Kaushal Vikas Yojana 4.0 was launched, to upskill lakhs of youth over the next three years. New-age courses like Internet of Things (IoT), robotics and 3D printing will also be included in these skill development programs. Sector specific skills will be provided for achieving the objectives of the tourism initiative ‘Dekho Apna Desh’. The ‘Swadesh Darshan Scheme’ was also launched to promote domestic tourism over international tourism.

Under financial reforms, a credit guarantee scheme was launched for MSMEs leading to an infusion of Rs 97000 crore, which will reduce cost of credit by 1 percent. A one-time small savings scheme called the ‘Mahila Samman Bachat Patra’ will be launched for a period of two years. The Securities and Exchange Board of India (SEBI) will be allowed to develop and maintain standards for education in the National Institute of Securities Market (NISM).