Budget 2023: Mighty dragon slayer of ills holding back the Indian economy

Until now, the middle class was told they were important and nice, but got the second place all the time. That changed on Wednesday with Sitharaman's five tax announcements...

Published: 01st February 2023 03:30 PM  |   Last Updated: 01st February 2023 10:07 PM   |  A+A-

Nirmala Sitharaman

Finance Minister Nirmala Sitharaman with the Budget Papers outside Finance Ministry in New Delhi on Wednesday. (Express Photo by Parveen Negi)

Fifth time brings a fortune. No one ever said that.  

But on Wednesday, Finance Minister Nirmala Sitharaman fired up her fifth budget, precisely making the point.

Budget 2024 covered all bases right from the poor to the middle class to the rich. It promised to never leave the barrel of wheat and the jar of oil empty for poorer households, contains the magic election pudding of long-awaited tax sops, a jaw-dropping jump in capital expenditure, and yet sticks to a market-friendly fiscal deficit of 5.9%.

The unconventional mix of populism and growth as the length and breadth of the budget, makes the NDA government's last full budget before the general election, a mighty dragon slayer of all the ills holding back the Indian economy -- slow growth, slack in private investments, weak household consumption and high unemployment.

Critics and the opposition may see it more as electoral than economic, but clearly, a do-little, or a do-nothing budget at this juncture was as good as Sitharaman writing the first lines of her party's own obituary. She was both need- and duty-bound to respond to the sensitive realities of a desperate nation.

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The Rs 45-lakh crore expenditure budget for FY24, translates to a 11% increase over FY23. Total receipts were pegged at Rs 27.2 lakh crore, while borrowings are estimated at Rs 15.4 lakh crore. On the face of it, Budget 2024 seems mahoosive in its own way and packs the movie-music adrenaline and stamina of the Oscar-bound Naatu-Naatu song in good measure.

Until now, the middle class was told they were important and nice, but got the second place all the time. That changed on Wednesday with Sitharaman's five tax announcements, some of which may leave them with a feeling of winning a lottery.

The star among the five includes the increase in tax rebate for income up to Rs 7 Lakh under the 2020 Concessional Tax Regime (CTR). The expectation was under Rs 5 lakh and none were expecting Sitharaman to go all the way to Rs 7 lakh. With this one deft stroke, Sitharaman essentially made CTR the default tax regime. Tax experts see two trends hereon. One, the exemptions under Section 80C and other tax-saving investments may become redundant. Two, the old structure may soon be sent to the shredding machine.

The revised personal income tax regime will have 6 income slabs as against 7 earlier, starting from income of Rs 0-3 lakh paying zero tax, followed by Rs 3-6 lakh taxed at 5%, Rs 6-9 lakh at 10%, Rs 9-12 lakh at 15%, Rs 12-15 lakh at 20%, and above Rs 15 lakh at 30%.  


While at it, she also reduced the surcharge on high income earners from 37% to 25%, taking the tax rate to 39%. Currently, the highest personal tax rate is at 42% -- the highest in the world.

For senior citizens, the maximum deposit limit was increased from Rs 15 lakh to Rs 30 lakh.

Markets may have missed the pre-blitz budget rally, but raised their glasses high on Wednesday. Sensex jumped a jaunty 1,000 points, while Nifty neared 17,900 soon after the tax announcements.

Ever since Sitharaman flashed the I-feel-you card, recalling her middle-class roots last month, expectations peaked so much that the topic even reached the talk jockeys. But no tax sop is self-financing and the Wednesday's middle-class bonanza will be costly, but Sitharaman isn't intimidated by the price tag. The total revenue foregone on account of all tax measures (direct and indirect) is estimated at Rs 35,000 crore in FY24.

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Budget 2024's another killer blow against weak growth is the capital expenditure. At Rs 10 lakh crore, she heaped another layer of capex cream, rich and thick. That's a straight 33% increase over FY23 -- the highest-ever annual jump. The effective capex will be Rs 13.7 lakh crore, or 4.5% of GDP. The government's repeated thrust on capex is a clear indication of what will drive India's growth not just next fiscal, but in the medium-term.

As Sitharaman rolled out the numbers, she took a long pause allowing enough time for party colleagues to indulge in table-thumping, and launching the Modi-Modi chant. Keeping up with the spirit of spending, she announced a Rs 2.40 lakh crore capital outlay for the railways, which is 9 times the allocation made in FY14.

Sitharaman's capex pitch has absolutely no rivals. A rupee of capital spending has a potential GDP multiplier of 3.25 times, while revenue expenditure has less than 1, but no finance minister in India's history ever went to the extent Sitharaman did, even in the heat of the 1991 and 2009 economic crises.

That said, the real test is no longer about the increase in allocation, but the extent to which they translate into tangible outcomes. In fact, encouraging her state peers to focus on capex, she allowed a one-year extension of the 50-year interest-free loan to states, tied to capex projects.

Amid fears of high fiscal deficit, Sitharaman cut it fine at 6.4% of GDP for FY23, pegged it at 5.9% for FY24 and renewed her vows to meet the 4.5% target by FY26. Each 0.1% point increase in deficit adds an additional Rs 30,000 crore to the nation's debt. And anything above 6% should have warranted the market's wrath. By adhering to the deficit targets despite a mighty capex allocation, Sitharaman may have won some silent admirers, including dire fiscal hawks.

The budget speech tapped on all the right notes of job creation, infrastructure push, financial sector reforms, credit guarantee for MSMEs, ease of doing business, making PAN a common identifier for businesses, tax holiday extension for startups from 7 to 10 years, a first-ever scheme for traditional artisans and R&D fillip to the pharmaceuticals sector.


Agriculture, healthcare, infrastructure all got due share, unless the fine print unpacks any nasty surprises. Some of major misses include the long-awaited rationalisation of LTCG that remained untouched, much to the disappointment of investors, while the FM didn't even venture on privatisation, banking reforms, or crypto currencies.

Unlike in the past, Wednesday's speech seemed somewhat easygoing with the floor breaking into laughter, twice. If Sitharaman's slip of the tongue while announcing the replacement of political, err, polluting vehicles invited a short sitcom-style laughter, we also saw another rare smile among the benches when the FM reached the tax proposals that we 'all were waiting for'. Both were snappy enough to fit in a five-second clip on social media.

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The opposition did disrupt initially with Bharat Jodo slogans as Sitharaman began her speech, and barring one or two occasions, Sitharaman was in polite company for the rest of the time. The speech was devoid of any poetic flourishes, while a few election-bound states did get a specific mention.

Critics may dub it as a 'Giveaway Budget', but on the face of it, Budget 2024 appears to have adopted a death or glory approach. With eyes firmly set on the upcoming elections, but not losing sight on the extremely long-term outlook of India@100, Budget 2024, perhaps, hopes that the measures and the monies will allow India's growth elephant to raise its trunk in hunger, fight its way out of difficulties and morph into an Asian tiger regaining its supremacy.


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