UNDISPUTEDLY, THE UNION Budget is one of the most anticipated annual events. India has consistently embarked on numerous reforms bringing about structural changes. In my opinion, finance minister Nirmala Sitharaman rightly focussed on key factors that align with the larger vision of the government; boosting economic growth, employment generation, encouraging savings and investments, and fiscal consolidation.
The government needs to be commended for keeping the fiscal deficit in line with the Budget Estimates of 6.4% of the gross domestic product (GDP). Buoyant direct and goods and service tax (GST) collections were the reasons for successfully keeping the fiscal deficit under check. Gross tax collections in FY23 have outperformed the Budget Estimates target by more than 10%.
By assuring that the fiscal deficit will be reduced to 5.9% in FY24 and further reduced to 4.5% in FY26, the finance minister has shown that fiscal consolidation remains a focus area.
The government’s measures to steadily increase the tax base, bringing in greater transparency and enhancing investor confidence are paying dividends. The government needs to be lauded for its Ease of Doing Business (EoDB) initiatives. According to the finance minister, over 39,000 compliances and 3,400 provisions have been reduced and decriminalised.
The focus on the salaried class needs to be applauded. The government rationalised income taxes by extending the benefits of standard deduction and also by reducing the surcharge rate for high income earners from 37% to 25%. This measure will reduce the maximum tax rate from 42.7% to 39%. These along with other measures are aimed at boosting the Indian economy as rising disposable incomes will promote savings and aid consumption.
Pradhan Mantri Awas Yojana (PMAY), which includes affordable housing, got a boost with an allocation of Rs 79,000 crore. A rapidly growing country like India with a large young population needs more homes at affordable price points which would enable more households to become homeowners. Another notable feature was the establishment of the Urban Infrastructure Development Fund that will be managed by the National Housing Bank. The aim is to create urban infrastructure in smaller cities. This is a laudable move as construction of housing and the development of surrounding infrastructure should go hand in hand.
By significantly increasing the capital expenditure for the third year in row and by increasing it by 33% to Rs 10 trillion (or 3.3% of the GDP) over the previous year, the Budget has sent strong signals that India is equipped to absorb large amounts of investments. According to me, one way to ensure economic growth without spiraling inflation is to build infrastructure.
Overall, this was an excellent Union Budget which aims to set India on the right course. Continual reforms have been a priority for the government that will help India achieve sustained economic growth and move towards a $5-trillion economy by 2025.
Author is Vice chairman & CEO, HDFC. Views are personal.