Union Budget 2023-24

The Economic Survey 2022-23, a precursor to the Union Budget, highlights the triple whammy of the COVID pandemic, Russia-Ukraine conflict and the looming worldwide surge in inflation as factors which have hit the global economy since 2020. In this scenario, the survey forecasts a somewhat muted 6% to 6.8% economic growth for India in real terms for F/Y 24 despite which it is still set to retain its status as the world’s fastest growing economy. It further highlights inflationary pressures, a widening current account deficit, monetary tightening in developed markets, currency pressures and India’s perennial bugbear – an uncertain monsoon as areas of concern.
In this background, while the annual Union Budgetary exercise may have lost some of its sheen in terms of the Indirect Tax proposals (with the introduction of the Goods and Services Tax), it is still looked forward to with heightened expectation for the polity’s world-view of the economy, policy initiatives, the general political direction and for the fiscal, monetary and economic initiatives all of which combined do intimately affect the lives of the citizens of what is arguably the biggest democracy and now the most populated country in the world with the added complexity arising out of the merging of the Rail and Union Budgets thrown in for good measure. The suspenseful excitement only got magnified given the fact that this was the last Budget before the General Elections 2024 and expected to deliver a strong political message.
Being the first budget of India’s “Amrit Kaal”, the seven priorities – Inclusive Development, Reaching the last mile, Infrastructure and Investment, Unleashing the potential, Green Growth, Youth Power and the Financial Sector akin to the “Saptarishi” (the seven sages of ancient India who guide humanity on the path of Dharma) seems to blend societal balance and needs, financial stability, economic growth and environmental sustainability thereby guiding India to a brighter future. Talking about specifics, the gradual reduction of the fiscal deficit and the reiteration of the intention to bring it below 4.5% of the GDP in 2025-26 is a welcome commitment to fiscal prudence, of course, suitably calibrated with the constantly churning dynamics of both the domestic and external environment.
The expectations of this Budget being populist, keeping in view the general elections have been thankfully belied and an attempt made to marry good economics and prudent politics to deliver a package which can be termed pragmatic. The increased capital investment outlay and the gentle prod to the private sector to do likewise is bound to have a multiplier effect on employment generation, increased disposable incomes and wholesome economic growth with inclusivity as its fulcrum. The various initiatives while reaffirming the federal structure of the country also aim at capacity augmentation by providing opportunities for skilling, upskilling and reskilling. The digitization process dovetails with the focus on ease of doing business and finds expression in initiatives such as setting up of three Centres for Artificial Intelligence, bringing out a National Data Governance policy, setting up of Entity Digi Lockers, a Unified filing process etc.
On the taxation front, the tweaks in the customs duty rates seems to be intended to serve broader social purposes (increases in taxes on cigarettes for instance) or to deal with items of conspicuous consumption and, of course, in some, yet critical, cases to encourage domestic value addition/production, import substitution and export competitiveness. The real action is on the Direct Taxes front, specially personal income-tax with reliefs both under the old and new regimes of taxation, reduction in the highest rates of surcharge and a more than eight fold increase in the exemption available for receipts from leave encashment. The proposal to bring payment to entities falling within the definition of “MSME” within the ambit of s.43B, it is hoped, will substantially mitigate the recovery issues and liquidity problems faced by this sector, of course with the accompanied baggage of increased compliance and record keeping.

Economists, politicians and lay persons may debate endlessly on the pros and cons of this budgetary exercise but it seems to have the unrequited potential to lead India into the “Amrit Kaal” while unleashing the prospects of sustained economic growth.