By Aniruddha Sarkar
Though it’s quite customary to have a wish list from every industry before every year’s budget, I feel Budget 2023 would be very important from multiple points of view. It’s coming at a time when the world is grappling with concerns on recession and slowdown, issues of inflationary pressure, and geo-political concerns which warrant spending more on securing your defence forces. Also, this being the last full budget before the elections in 2024, the government would be on the front foot on reforms and pushing for growth in the economy across sectors. I believe that the budget would have a two-pronged focus. One would be to increase household income for the middle-class and lower-income groups. The Second focus would be to take India into the next stage of growth into becoming a $5 trillion economy over the next 4-5 years.
With regard to increasing household income, we believe this could see again as a two-pronged approach. One would be to increase the Direct Tax exemption slabs for the middle class where existing slabs could be increased higher thereby increasing the disposable income in their hands. The second would be to provide more tax relief with regard to home loan repayment which would thereby also provide the much-needed push to the Real Estate sector which is one of the key sectors for economic activity and growth. However, the flip side of this is that the top tax bracket could see some more pain coming along their way. Also, we could see the limit under 80C also being increased as it has largely remained untouched for a long time.
Coming to the second key focus area for the budget with regard to taking India into achieving the $5 trillion target, I feel government would front end capital expenditure and infra spends in order to build capital assets and at the same time also address job creation goals for the government. Also further incentivizing domestic manufacturing through incentives could be seen coming up in the budget. As the world sees a rebalance of power and economic growth centers, the seed planted through PLI schemes and tax incentives needs to be carried ahead further by attracting more capital expenditure from the private sector too. We could see more focus from the government to promote green energy and sustainable energy sources.
From an equity investor’s perspective, I think a major thing to look out for would be a change to the LTCG tax rate or tenure of holding for equity. Either of the two could be tinkered with to bring more parity with the taxation of other asset classes. This would surely be seen negatively by the market in the near term in an environment where returns from equities in the last 12 months have been dismal. However, I think the government has made it clear on various forums that in a calibrated manner they plan to do away with the differential treatment given to different asset classes and bring in simplicity and uniformity. In order to promote the startup ecosystem further in the country, we could see some tax benefits for the unlisted equities for the PEs and VCs in the country.
All in all, I am of the view that the budget will have a positive tone to it and be more growth-focused and less of a socialistic budget. Though we could see some customary PM schemes being launched but that would be within the regular scope and size of budgetary allocations. India has definitely come a long way from the earlier times when the government used to wait for the budget to make all important announcements. What we see today is announcements and policy changes being made during the entire year as and when decisions are made and that is in my opinion the right thing to do.
(Aniruddha Sarkar, Chief Investment Officer, Quest Investment Advisors. The views expressed in the article are of the author and do not reflect the official position or policy of FinancialExpress.com.)