Union Budget 2023-24: In its last full Budget before a year-away Lok Sabha elections, the Narendra Modi-led BJP government showed courage of balancing between populism and pragmatism. Finance Minister Nirmala Sitharaman started her speech calling it the first Budget in Amrit Kaal, a candid reference to change for the better that will lead India to a $20,000 trillion economy in the next 25 years.
From the creation of jobs, economic empowerment of women, capital expenditure, boosting infrastructure, underlining sunrise sectors, focussing on technology and green growth, to the simplification of tax laws, the Finance Minister’s kitty has something for everyone making it ‘Sabka Budget’.
In an effort to create a brighter and more prosperous future for all Indians with the backdrop of global headwinds and climate crisis, the Budget outlined seven key priorities, that are christened as “Saptrishi”, which puts spotlight on: inclusive development, reaching the last mile, infrastructure and investment, unleashing the potential, green growth, youth power, and financial sector.
Sitharaman walked a tightrope balancing between the political populism and economic prudence as she has stayed the ground on three key points: fiscal consolidation, government’s capital expenditure and personal income taxation.
The proposed fiscal consolidation is, as experts feel, “superior”, as it aims at a sharper cut in the revenue deficit from revised 4.1% of the current financial year to 2.9% for the next fiscal. The revenue deficit is aimed at 48.7 percent of the fiscal deficit in the financial year 2023-24, a sharp lower than the 79.7 per cent reached in financial year 21. The government has targeted capital expenditure at a robust 3.3 per cent of the GDP, that is Rs 10 trillion, vis-a-vis 1.7 per cent in the financial year 20.
Sitharaman pegged the Centre’s fiscal deficit for 2023-24 at 5.9 per cent of GDP, down from 6.4 per cent in the FY 2022-23 and 6.7 per cent in FY 2021-22. The Finance Minister has managed it by not adding any new schemes to the list of the Centre’s popular measures like PM-Kisan or MGNREGA, as such a move involves financial implication. Lower outlay on MGNREGA (Rs 60,000 crore earmarked for FY 2023-24 in comparison with Rs 89,400 crore of the current fiscal), keeping government spending at the same level for PM-Kisan, and no further increase in direct income support to farm households, currently Rs 6,000 per annum, will help the ruling establishment save in expenditures which will give space for the fiscal consolidation.
Government’s capital expenditure
The Modi 2.0 government in Budget jacked up capital investment sharply by 33 percent to Rs 10 trillion, compared to Rs 7.5 trillion in fiscal 23, to bolster the growth of the Indian economy. The substantial increase in Capex is seen as the government’s efforts to boost growth potential, job opportunities, and crowding-in investments. Such a move could insulate India’s economy from global headwinds.
The Finance Minister has budgeted for Indian Railways, which is billed to be the lifeline of the nation, at the highest of Rs 2.40 trillion, which is nine times higher than that of 2013.
Here is a glance at the allotment of funds for various railways projects:
- Doubling of railway tracks – Rs 30,749 crore
- Computerization – Rs 425 crore
- Track renewals – Rs 17,296.84 crore
- Traffic facilities (Yard remodelling and others) – Rs 6,715 crore
- Railway research – Rs 61.50
- Rollick Stock – Rs 37,581 crore
- Leased assets (Payment of Capital Component) – Rs 22,228.57 crore
- Signaling and Telecom – Rs 4,198.22 crore
The Modi government stressed on regional air connectivity with a huge budgetary boost for 50 new airports, water aerodromes, heliports and advanced landing grounds. The Budget allocation for the National Highways Authority of India has been enhanced by 14% to Rs 1.62 trillion compared with Rs 1.42 trillion of the financial year 23. The newly established Urban Infrastructure Development Fund has potential to bring reform for building cities of tomorrow in the face of urban migration. The allocation for the PM Awas Yojana has also been increased by 66% to Rs 79,000 crore.
Personal income taxation
In a significant announcement, Sitharaman proposed that annual incomes up to Rs 7 lakh will be free from taxation. A tweak in the tax regime has been welcomed by middle class people. The move could also benefit new entrants in the job markets. The Finance Minister introduced standard deduction in the new tax regime for salaried employees. A salaried person having an income of Rs 15.5 lakh or more will get benefit of Rs 52,500 as standard deduction. The tax relief for salaried class will enable them to increase discretionary spending. Increasing purchasing power of people will ameliorate the pace of economic growth of the country.