Future reforms are likely to be smaller

The Budget continues with the process of improving business conditions.

Budget 2023, Union Budget, manufacturing sector, economic growth, capital outlay, Automotive sector, PLI scheme, National Green Hydrogen Mission, EV sector, Toy manufacturing, corporate tax, PAN, GST Tribunals
With all global eyes on India’s budget, the FM pronounced a pro-growth agenda.

By Prashant Jain

IT IS WIDELY agreed that the next two decades belong to India. Unlike stock markets, where majority opinion is often wrong, in real life it is often right. Great outcomes are often a result of favourable environment, capability and effort. India currently has a very conducive external environment and is well-prepared to capitalise on this opportunity.

It is evident India has made broad-based economic and social progress. This has largely been a result of proactive reforms.With big reforms behind,  future reforms are likely to be smaller. The Budget has to be evaluated in this backdrop. The Budget carries forward this process of striking a balance between continued improvement in the business climate and social good.

The key highlights of the Budget are stability in taxation and policy framework, continued momentum in capital expenditure (higher by 33%) and steady progress in fiscal consolidation. As has been the practice in recent times, revenue and expenditure assumptions are realistic.

Expenditure growth adjusted for fall in subsidies is realistic. The Budget continues with the process of improving business conditions. Several initiatives were taken; notable are reduction of more than 39,000 compliances and decriminalisation of 3,400 legal provisions.

It is remarkable average processing period for income tax returns has reduced from 93 days in FY14 to 16 days now and more than 45% returns were processed within 24 hours. The Budget has given some relief to taxpayers across the board, tweaked customs duties to encourage local value addition and is supportive of continued build in digital infrastructure and green initiatives.

In summary, a great Budget that disappoints no one and takes India forward to capitalise on the historic opportunities within our reach.

The Indian economy is uniquely positioned in the post-Covid world. While Covid caused immense hardship, it has opened up several big opportunities for India. On one hand, West and China are aging at a time when India’s working age population is growing. In today’s world where remote work has higher acceptability, this opens up a large offshoring opportunity for a variety of jobs, thus facilitating rapid job creation in services. On the other hand, India has gained competitiveness in manufacturing and has one of the lowest wages in Asia. This, along with geopolitical issues, gives India a second window of opportunity to accelerate its share in manufacturing.

These two concurrent opportunities, along with steadily improving business climate, and healthy corporate and bank balance sheets that augur well for capex revival, should lift India’s growth rate for the next decade or two. India is likely to emerge as the third largest economy in a few years and more importantly, should remain the fastest growing amongst the large economies for many years. India and Indians look to the future with confidence and optimism.

Author is CIO, 3P Investment Managers, Views are personal.

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First published on: 02-02-2023 at 03:50 IST