Business News at 09:30 am on 2nd February 2023

In its last full Budget before the general elections a little over a year away, the Narendra Modi 2.0 government displayed courage by eschewing populism and kept on top of macroeconomic stability, in the face of external headwinds. Finance minister Nirmala Sitharaman clung to the ideas of high-quality fiscal correction and a durable, investment-led, “green” growth with a decisive thrust on digital infrastructure, as she presented the Budget for financial year 24 in Parliament on Wednesday. The Budget, therefore, lacked any meaningful consumption booster. Despite a rejig of the exemption-free personal income tax regime, its adoption by large sections of taxpayers is still doubtful. A cut in the highest surcharge on income tax may provide a modicum of support to consumption, which is seen to be very weak, in the second half of this fiscal, if not beyond. The fiscal deficit target for the next fiscal has been cut to 5.9% of GDP, against 6.4% in financial year 23. The minister also reaffirmed her resolve to bring down the gap to below 4.5% by financial year 26. The deficit target for next year is contingent on an assumed tax buoyancy of 1, higher than 0.8 this year. This looks difficult, given the likely slowdown in economic growth.

Speaking of tax structure, The new tax regime has been made far more attractive with the Budget introducing several key changes, including a bigger rebate, introduction of standard deduction for pensioners and salaried taxpayers, and an increase in the exemption limit. In a move to simplify the structure, the number of slabs has been cut from six to five. What may push individuals to opt for the new regime is the chunky rebate; from Rs 5 lakh this has been raised to Rs 7 lakh under Section 87 of the I-T Act. The exemption limit has been raised to Rs 3 lakh from the existing Rs 2.5 lakh. The tax rate for incomes between Rs 3 lakh and Rs 6 lakh is just 5%. The highest tax rate of 30% kicks in only for incomes of Rs 30 lakh and above. A back of the envelope calculation shows the new regime could turn out to be better if a person’s salary is more than `15 lakh and the deductions are less than Rs 4.25 lakh. As Surabhi Marwah, tax partner, EY India, pointed out, if the deductions amount to more than Rs 4.25 lakh, and the income is more than Rs 15 lakh and less than Rs 5 crore, it would make sense to stick to the existing regime.

Let us have talk on Market, Adani Enterprises on Wednesday called off its Rs 20,000-crore follow-on public offering. Adani Enterprises said it would return the FPO proceeds and withdraw the completed transaction, given the unprecedented situation and the current market volatility. Given the unprecedented situation and the current market volatility, the company aims to protect the interest of its investing community by returning the FPO proceeds and withdraws the completed transaction, the company said in a statement. The decision was taken by the board of directors of the company, at a meeting held on Wednesday, in the interest of shareholders. The issue had managed to scrape through on Tuesday with help from foreign portfolio investors and subscriptions from wealthy investors, including family offices. The Adani Enterprises FPO had garnered bids for about 50.8 million shares against the offer size of 45.5 million shares on the final day, with an overall subscription of 1.12%.

Meanwhile, The boost to consumption stemming directly from the proposed revision in personal income tax and from indirect measures such as the increase in infrastructure capex and scrappage of old vehicles will likely benefit the automobile, consumer goods and consumer durable segments. Rajesh Jejurikar, ED of auto and farm sectors, Mahindra & Mahindra, said the Budget has struck the right balance between growth and fiscal prudence. He said, quote, “The reduction in income tax will put more money in the hands of consumers, driving consumption and growth in the economy,” unquote. The auto industry is expected to grow at a CAGR of 7% over the next few years, thanks to factors such as rising disposable income, strong demand for cars and trucks accruing from increasing government focus on infrastructure development. The scrapping of old central and state governments vehicles will definitely generate demand for new vehicles.

Lastly, Finance minister Nirmala Sitharaman’s last full-fledged Union Budget before the 2024 Lok Sabha elections is a progressive, growth-oriented one that promises to put more disposable income in the pockets of the consuming class, particularly the middle class, while focusing on building a new India with its heavy focus on capital expenditure.