Finance Minister Nirmala Sitharaman has presented a powerful Budget for 2023-24. The Budget came at a time of high uncertainty and at the back of a year driven by global headwinds, including the lingering war in Ukraine, the resurgence of Covid-19, slowing global growth and demand, and tight fiscals. The Budget has successfully recognised and taken measures to address these concerns and has also gone beyond this to lay the roadmap for making India a Viksit Rashtra by 2047.
In line with CII recommendations, the capex thrust of the Government has continued with a sharp rise of 33 per cent in the budgetary allocation to Rs 10 lakh crore in FY24 as compared to Rs 7.5 lakh crores in FY23. With this, the Capex to GDP ratio is budgeted to rise to 3.3 per cent in FY24 from revised estimates of 2.7 per cent for FY23 and a steady increase from a long-term average of 1.7 per cent of GDP. This is expected to have a multiplier effect on growth next year and will help to crowd-in private investments, which are already seeing incipient signs of recovery. The Budget has reiterated the Centre’s push for cooperative federalism by continuing with the Rs 1 lakh crore interest-free loans scheme for state capex next year. This aligns with CII’s recommendations and shall help build synergies to boost growth.
The infrastructure sector, which builds public assets that have a multiplier effect and create jobs for millions, has rightly been a priority area of this year’s Budget. Given the importance of State governments in this process, the 50-year interest-free loans to State governments have been extended for one more year with an enhanced outlay of Rs 1.3 lakh crores. Importantly, the Budget has proposed the introduction of an Urban Infrastructure Development Fund to which the Government will be providing Rs 10,000 crores per annum.
While enhancing public capital expenditure, the Budget recognises maintaining fiscal prudence as a sin quo non for achieving sustainable growth. The Budget sticks to the fiscal target of 6.4 per cent for FY23 because of higher revenue buoyancy. Further, in line with CII’s recommendations, it looks to follow a glide path for fiscal deficit to reach 5.9 per cent in FY24 and to 4.5 per cent by FY26. A budgeted tax-to-GDP ratio of 11.1 per cent through increased tax compliance and broadened tax base, combined with trimmed subsidy spending of 1.3 per cent of GDP in FY24 compared to 2.1 per cent in FY23, will help achieve this path of fiscal stability.
The tax structure in the new personal income tax regime introduced in 2020 with six slabs now changed to five with the increase in tax exemption limit to Rs 3 lakh will provide a major relief to all taxpayers. This combined, with the enhanced in the rebate limit of personal income tax to Rs 7 lakh from the current Rs 5 lakh will boost disposable income and increase consumption. This has been a long-standing demand of CII.
The Budget has continued the momentum of the previous Budgets in pushing India towards becoming a global manufacturing hub. In line with CII recommendations, more than 39,000 compliances have been cut and 3,400 legal provisions have been decriminalised for the Ease of Doing Business.
This has been combined with the introduction of PAN as the common identifier, the launch of Entity DigiLocker as well as the higher budgetary allocation for the Phase III of the e-Court Project. The Budget has supported manufacturers through relief in customs duty on key mobile phone components not manufactured in India, like a camera lens, open cells of TV panels used in TV manufacturing, and lithium-ion cells. This relief will deepen domestic value addition and boost the manufacturing sector to cater to domestic and foreign markets.
Chandrajit Banerjee Director General, CII