The Union Budget is always regarded as a welfare and growth manifesto. Although it occurs annually, the quantum of expectations inclined toward each of them is insurmountable. To the common man, it is a ticket to increasing their living standards, and to the rich, it is an avenue to resolving their financial dilemmas. This year’s budget gives due importance to consolidating the fiscal deficit which is the difference between total revenue and total expenditure of a government in a financial year, in tandem with increasing capital expenditure. It also emphasizes facilitating the ease of doing business and boosting the savings of the salaried class.
Being the first Union Budget to be presented in the prosperous period of “Amrit Kaal,” the budget didn’t disregard the vision of how the economic stature of the country molds around India@100. This budget is also critical for the current government because it is their final full-fledged budget before the general election next year. So let’s focus on how the government intends to execute these objectives and how they envision bringing out an entirely developed nation. Here are 5 important steps towards a booming and auspicious Amrit Kaal.
Nudging the fiscal deficit below 4.5% by FY26
This year’s budget was very much in line with the estimate for moving toward a fiscal deficit of below 4.5% by FY26. The government has given due importance to the upliftment of agriculture, infrastructure, digitization, green initiatives, ease of doing business, and personal taxation, but these were stipulated insofar that it aligns with the fiscal deficit target of FY26. The aggregate fiscal deficit is still in the range of 9% to 10% of GDP, so to stabilize the economy, it is imperative to continue the fiscal consolidation process in tandem with the increase in public investment through capital expenditure.
Intriguingly, the government has limited its fiscal deficit to 6.4% of the GDP, despite a sharp uptick in food and fertilizer subsidies. To achieve the target of 4.5%, this year the deficit should fall by 1.9% points to reach the slab of 5.9%. The Finance Minister was of the view that an effortless fiscal adjustment would be palpable in the coming two years, owing to the perpetual growth in capital expenditure.
Transitioning to the new tax regime while giving leeway to opt for the old regime
This year’s tax slab has witnessed a drastic change as the government announced that people earning up to Rs. 7 lakhs a year are exempted from tax payments. The budget conspicuously pushes the new tax regime as the default tax payment system while giving the option to choose the old tax regime for those who want the benefits of tax exemptions and deductions on investments and expenses, such as HRA (House Rent Allowance).
Those opting for the new tax regime can henceforth avail themselves of a wholesome of Rs. 50,000 as the standard deduction, and those who earn an annual income up to Rs. 7 lakhs and Rs. 10 lakhs can save an amount of Rs. 33,800 and Rs. 23,400, respectively. This move by the government is to assuage the tax burdens of the middle class and innocuously augment the disposable income of salaried citizens so that it aids in stimulating higher consumption. The government also slashed the surcharge from 37% to 25% for those with a salary of Rs. 5.5 crore a year. This is a substantial step toward mooting an investment-intensive economy.
Renewing the thrust on capital expenditure
Capital spending has increased for the third year in a row, as the government emphasizes growth through investment. The capital expenditure increased to Rs. 10 lakh crore, which is 3.3% of GDP and 33% higher than the previous year’s allocation. It also consolidates growth through infrastructure development while completely stabilizing inflation. The multiplier effect of capex will increase demand, resulting in a crowding in of private investments.
The government has given the primary focus to affordable housing, wherein PMAY (Prime Minister Awas Yojana) received an allocation of over Rs. 79000 crores this fiscal year as compared to Rs. 48000 of last year’s allotment. The states can now avail themselves of 50-year interest-free loans and thereby facilitate their capex needs. The government also allocated a healthy amount for the railway, rural and urban infrastructure development, and green energy. It also put forth the revival of 50 additional airports, heliports, and advanced landing grounds to improve the regional air network. In a nutshell, the budget allocation was the highest capital expenditure outlay ever, and it revived the vitality of fiscal consolidation through investment and growth.
Big focus on Green Energy
The budget for 2023 encompasses green growth and green energy, which were among the ‘Saptarishi‘—the seven pillars of the budget that would steer India through Amrit Kaal. The provision of Rs. 35,000 crores for energy transformation and net zero emissions would indeed help the nation achieve its goal of net zero emissions by 2070. With the country’s population set to overtake China in a matter of time this year, the transition to green alternatives from the current reliance on fossil fuels is an imminent requirement. Taking all this into account, the budget for 2023–24 devotes a fair amount of room for green industrial and economic transitions.
The government intends to implement several programs for green fuel, green buildings, green equipment, green mobility, and green farming. These green growth efforts will help reduce the carbon intensity of the economy and will provide large-scale green job opportunities. To make electric vehicles (EVs) and storage systems cheaper, the budget proposes to exempt custom duty on the import of capital goods and machinery, as they are required to manufacture lithium-ion cells used in EV batteries. Also, battery energy storage systems with a capacity of 4000 MegaWatt hours will be supported with viability gap funding to encourage investment. A special boost was given to solar projects and other renewable energy sources as well.
Women Centric Reforms
Women contribute to 18% of the country’s GDP and with better opportunities for women, the rate can still improve. Women in India now actively play a part in the upliftment of education, sports, politics, media, art and culture, service sectors, science, and technology, etc. Women entrepreneurs in India are significant in advancing the economic growth of the country. Growth targets of India can’t be achieved without them, as they comprise about half of India’s population. Acknowledging these facts, the Budget 2023-24 also gave due regard to burgeoning their economic potential.
To begin with, the Mahila Samman Saving certificate, which is a one-time small saving scheme for women, has been introduced. The scheme will be available till March 2025 and offer a fixed rate of interest at 7.5 percent. Under this scheme, a deposit of up to 2 lakhs can be made either in the name of a woman or a girl child for a maximum of two years. Besides, the scheme also entails a partial withdrawal option to help women in their adversities, thereby making it an important financially beneficial scheme for Indian women. Apart from this, the Union budget 2023 has enabled women’s self-help groups (SHGs) to reach the next stage of economic empowerment by providing them with raw materials and helping them in branding & marketing of products. Women SHGs have the potential to play a transformative role for women, so prioritizing rural income growth and financial independence can augur well for the development of women’s economic conditions.