Tax-Capex double engine in Union Budget 2023-24 - Hindustan Times
close_game
close_game

Tax-Capex double engine in Union Budget 2023-24

By, New Delhi
Feb 02, 2023 04:41 AM IST

India’s vision for Amrit Kaal “includes (a) technology-driven and knowledge-based economy with strong public finances and a robust financial sector”, Sitharaman said in her 87-minute-long speech

Finance minister Nirmala Sitharaman on Wednesday presented a Budget that continued her government’s emphasis on capital investment, with a record 10 lakh crore spend planned in 2023-24, sought to encourage taxpayers to spend more with tax cuts, and announced a 35,000 crore expenditure on energy transition even as she managed to reduce the fiscal deficit to 5.9% from 6.4% this year. She did all this without any major cut in the spending of major ministries or any sharp hikes in tax rates, but with significant increases in key schemes such as the Pradhan Mantri Awas Yojana (housing) and the National Drinking Water Mission.

Nirmala Sitharaman, Union minister for finance and corporate affairs along with the ministers of state for finance, Pankaj Chaudhary and Dr. Bhagwat Kishanrao Karad and the senior officials arrived at Parliament ahead of presenting the Union Budget 2023-24 in New Delhi, India, on Tuesday. (Hindustan Times)
Nirmala Sitharaman, Union minister for finance and corporate affairs along with the ministers of state for finance, Pankaj Chaudhary and Dr. Bhagwat Kishanrao Karad and the senior officials arrived at Parliament ahead of presenting the Union Budget 2023-24 in New Delhi, India, on Tuesday. (Hindustan Times)

“This budget will fulfil dreams of an aspirational society including poor people, middle-class people, farmers,” Prime Minister Narendra Modi said after the Budget was presented. It “infuses new energy to India’s development trajectory”, he added. Both the PM and the finance minister referred to Union Budget 2023-24 as the first budget of Amrit Kaal, the government’s term for the 25 years in the run-up to 2047, the country’s 100th year of Independence.

Also Read | No income tax up to 7 lakh, revised tax slabs for new regime

The Opposition targeted the government for a reduction in the expenditure on welfare schemes, and some analysts said its revenue projections for 2023-24 were optimistic, but the general consensus was that the Budget had ticked all the boxes: addressed key political constituencies (women, tribals, farmers, promoters of small entrepreneurs, the middle-class) ahead of the 2024 general elections without being overtly populist; focused on productive spending; and maintained some level of fiscal discipline.

India’s vision for Amrit Kaal “includes (a) technology-driven and knowledge-based economy with strong public finances and a robust financial sector”, Sitharaman said in her 87-minute-long speech, adding that the “economic agenda” underlying this revolved around “facilitating ample opportunities for citizens, especially the youth, to fulfil their aspirations; providing strong impetus to growth and job creation; and strengthening macro-economic stability”.

The minister further broke this up into four “transformative” opportunities — economic empowerment of women; a scheme to integrate handicraft artisans with MSME supply chains, tourism, and green growth — and seven priorities: inclusive development; reaching the last mile; infrastructure and investment; unleashing the country’s potential; green growth; youth power; and the emphasis on the financial sector. The Budget’s main thrust involved plans and schemes under each of these — from a 35,000 crore allocation for energy transition to AI labs; from an agriculture accelerator fund to enhanced agriculture credit of 20,000 crore; from decentralised storage for farm produce to 157 new nursing colleges; and from a national digital library for children to a 66% increase in the allocation for the government’s flagship housing programme.

But the number that got industry excited was the 10 lakh crore capital expenditure (including grants-in-aid to states the number comes to 13.7 lakh crore, 4.5% of GDP), including a massive 2.4 lakh capital outlay for Indian Railways and 100 “critical transport infrastructure projects” involving government spend of 60,000 crore.

“The continued thrust on capital expenditure will boost overall economic productivity, crowd in private investment, and drive growth through a multiplier effect. Capex spending is budgeted to rise steeply for the third year in a row. Capex spending budgeted at 10 lakh crore in FY24 as compared to budgeted print of 7.5 lakh crore in FY23, implies over 33% rise in FY24 BE over FY23 BE. This is in line with CII recommendations,” CII director general Chandrajit Banerjee said in a statement.

Public investment has powered the economy since the pandemic, but the government is hoping its efforts will “crowd-in” private investment, and to this end, announced in the budget a clutch of measures to make it easier to do business in India — from a common business identifier (the PAN) to a unified filing process; from relief for MSMEs to the next phase of e-courts; and from a DigiLocker for businesses to a voluntary settlement schemes for contractual disputes.

“CII welcomes the Budget for new India which addresses the growth imperatives without compromising on the fiscal prudence path. Through a slew of measures in forward-looking areas encompassing green growth, digital infra, urban rejuvenation among others, we are happy to note that the Budget lays the road map for preparing India for the Amrit Kaal, the next 25 years up to India@100,” CII president Sanjiv Bajaj said.

The government has managed to balance its books by assuming lower food and fertiliser subsidy — the first from the merging of the free foodgrain scheme launched during the pandemic with the existing food security scheme, which was announced previously. It has also assumed lower spends on the government’s flagship job guarantee programme MGNREGS, although it is committed to spending more on this should the demand arise.

On the consumption side, the government expects tax sops, aimed at the lowest and the highest end of the tax-paying spectrum to help. Individuals with an income up to 7 lakh will not pay tax if they opt to be assessed under a new tax regime introduced in 2020, the finance minister said; similarly, individuals with an income in excess of 5 crore, will, if they opt for this tax regime, see their surcharge on tax go down to 25% from the existing 37%, taking their effective tax burden to 39% from 42.7%.

“Faced with the conflicting aims of supporting growth while maintaining macro stability, finance minister Nirmala Sitharaman stuck to the script, allowing for modest consolidation of the deficit, while keeping productive capital spending growth elevated,” Rahul Bajoria, MD & Head of EM Asia (ex-China) Economics, Barclays, said.

Despite assuming a conservative 10.5% nominal growth rate, the government expects its tax revenue to increase (from 30.43 lakh crore in 2022-23 revised estimates to 33.6 lakh crore in 2023-24 in terms of gross tax receipts). These estimates assume a higher tax buoyancy (the number of times tax increases for a given increase in income) of almost 1, compared to the 0.8% assumed in the last Budget.

“The Budget was able to tread the fine line between fiscal consolidation and growth support. It budgeted a lower fiscal deficit for FY24, while providing a sizeable capex push… On the overall fiscal math, the government has budgeted no change in revenues as a percentage of GDP in FY24. It has assumed a 0.7% of GDP cut in the subsidy bill, the savings from which have been used to fund the 0.7% of GDP higher capex. The 0.5% of GDP saving in other (non-subsidy, non-interest-bill) current expenditure is budgeted to fund the fiscal consolidation,” Pranjul Bhandari, Chief Economist India and Indonesia, HSBC, said.

Elevate your career with VIT’s MBA programme that has been designed by its acclaimed faculty & stands out as a beacon for working professionals. Explore now!

See more

Stay updated with the latest India News on Budget 2024 Live, including Income Tax Budget 2024 Live coverage, Budget 2024 Stock market Live reactions, and key highlights. Follow our live updates to get real-time insights and detailed analysis of Budget 2024.

SHARE THIS ARTICLE ON
SHARE
Story Saved
Live Score
OPEN APP
Saved Articles
Following
My Reads
Sign out
New Delhi 0C
Wednesday, July 24, 2024
Start 14 Days Free Trial Subscribe Now
Follow Us On