Takeaways from Indian Financial Budget 2023

Deconstructing India’s Budget for the year 2023–2024

On February 1st 2023, the Finance Minister of India, Mrs Nirmala Sitharaman, presented the financial budget for the financial year 2023–2024. It was a well-sought-after budget this time as the world is recovering from the biggest pandemic of the century as well as the war in Ukraine.

On January 31st, the minister submitted the Economic Survey for the year 2022–2023. The Minister and the Government deemed the budget as the first budget of Amrit Kaal, indicating a change in India’s era. PM Modi also spoke on the same during his address.

The following article enlists important takeaways from the budget speech readout by the Honourable Minister, explaining its relevance and the politics-policy perspective of the particular that is being discussed.

Major announcements from the Budget Speech

1. The fiscal deficit target is fixed at 5.9%- This has come down again after 6.4% last year. India’s annual fiscal deficit has been reducing, but ever since the pandemic struck, the government has to spend more to instil demand in the economy, hence we can see that post-pandemic budgets, the government is focusing on spending more and politically it might continue for the next two budgets as well taking into consideration of 2024 General Elections as well.
2. Pradhan Mantri Awas Yojana shares to rise 66% to Rs 79,000 crore — With elections in mind and the pandemic's negative effect on both rural and urban poor, the government decided to extend the Affordable Housing Project last year till the end of 2024 and now it has increased the spending to a record figure.
3. 100 critical transport projects to be built- The Government is focusing on massive infrastructural development with upcoming elections in mind and also as a measure to generate jobs.
4. Senior citizens' savings scheme cap increased from ₹ 15 lakh to ₹ 30 lakh — A welcome change from the previous one.
5. Rs 5,300 crore assistance for the Upper Bhadra project in Karnataka- The Poll bound state has received a lot of funds from the centre which we can see how the government wants to get more votes through the same.
6. SEBI to oversee the National Institute of Securities Markets- It is an institute to study stock markets which will now directly be overseen by SEBI.
7. Rs 15,000 crore mission for safe housing, sanitation, drinking water and electricity for tribals — This can be seen as a massive reach out to the tribal communities across India.
8. Capital investment outlay to be 3.3% of GDP in 2024.
9. COVID-era Food programme stopped this year.- The govt was providing free food to citizens who need the same due to the pandemic. Three years after the same, the govt. has stopped the same.
10. The effective capital expenditure of the centre is Rs 13.7 lakh crore. — The govt is increasing the capital expenditure ahead of elections.
11. Rs 2.4 lakh crore to improve and maintain the railways- With the abrogation of the Railway budget, the Financial Budget is inclusive of the Railway budget.
12. The education budget was raised to Rs 11.3 lakh crore rupees- With National Education Policy (NEP) coming to effect this year, increased allocation is aimed at enhancing the spending in Education and catering to the next generation.
13. The health budget raised to Rs 8.895 lakh crore- Post-pandemic, healthcare has been given due importance.
14. Gross borrowing limit- Rs15.43 lakh crore
15. Expected 10.5% growth rate- India expects to grow at a record rate post-pandemic as a sign of recovery and also to be back as the fastest-growing big economy.

Major Takeaways

• Shortest Budget Speech ever- 87 minutes.
• The budget again was read from a digital tablet.
• The first budget of Amrit Kaal was a phrase used by the Minister and the government
• No Income Tax till Rs 7 lakh.
• Changes in the Taxation system- Rebate limit increased from Rs 5 lakh to Rs 7 lakh a year

Rs 0–3 lakh — no tax

Rs 3–6 lakh — taxed at 5%

Rs 6–9 lakh — taxed at 10%

Rs 9–12 lakh — taxed at 15%

Rs 12–15 lakh- taxed at 20%

Above Rs 15 lakh — taxed at 30%

• The Highest ever budget allocation for railways.
• Basic customs duty cut from 21% to 13%
• The highest hike in the defence budget.
• Taxes on cigarettes hiked by 16 %
• New cooperatives to attract a lower tax rate of 15 per cent.
• Agriculture-based rural startup support.
• 100 joint commissioners for disposal of small appeals.
• Rs 2.4 lakh crore outlay which is the highest ever.
• Full electrification by 2023

Roadways

• 100% mechanical sewage drudge from manhole to machine mode in cities
• National Gati Shakti Framework
• Rs 2.7 lakh crore to the Ministry of Road Transport and Highways

Digital Push

• Rs 4,795.24 crore for the Digital India Programme
• 30 Skill India International Centres
• Open-source digital public infrastructure for farmers
• New national digital library for children and adolescents
• DigiLocker for use by businesses and charitable trusts
• 100 labs to develop apps using 5G services to be set up in engineering institutions
• 3 centres of excellence for artificial intelligence in top institutions
• National data governance policy- Simplified KYC process
• Digital Ecosystem for Skilling and Livelihood (DESH) Stack e-portal
• Permanent Account Number (PAN) will be used as a common identifier for all digital systems

Technology

• Battery energy storage systems of 4000 MWh will be supported
• ‘Make AI work for India’- Three Centers of Excellence for Artificial Intelligence
• Green Credit programme for EV charging
• One crore farmers to get assistance to adopt natural farming
• Green Hydrogen Mission
• ₹35,000 crores for priority capital investment toward energy transition and net zero objectives

Criticisms

There is widespread criticism, mainly from the opposition, that the budget is corporate-friendly, anti-poor and exclusion of the mass majority of the country. Principal opposition party Congress called it Over promise and under=deliver budget. Certain states were ignored and received nothing from the budget. The medical sector which India is a leader in, has been ignored here. They also raise the question of welfare. Even the question of whether last year’s promises were fulfilled or not remains a question.

Analysis

We can see that there is a massive push for infrastructure, development, transportation etc. Especially given that there is an election season coming up later this year, starting from Karnataka in the south to Rajasthan in the North, the government has enhanced the spending after two successive pandemic years.

The special mention of tribals indicates the political push ahead of the crucial election season. When the world is grabbed by the post-pandemic uncertainty and the anxiety of a recession, the fundamentals of the Indian economy remain strong. Despite the Russia-Ukraine war and the fears of the ghost of inflation, India till now looks forward to keeping its consistency in beating inflation.

The post-withdrawal of Agri reforms last year, the government has tried to include a lot of incentives for the agricultural sector. The reduction of custom duty costs on mobile phone parts and EV parts will boost Make In India. Like last year, this is a digital budget with a lot of push for technology and digital initiatives. This is an important push for progressiveness and modernisation, which India has been craving for years.

There is no strong change of policy in the case of cryptocurrency and other forms of digital assets. Enough importance has also been given to the fight against Climate Change through the use of technology. The reduction in Income Tax is a relief for the middle class. We hope India will achieve good economic growth and this budget will pave for a better future.

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