In the last full-fledged budget of the Union Government, the Finance Minister has adhered to the principles of economic growth and development that have shaped the administration’s approach over the last few years:
- preference for long-term infrastructure creation with its associated multiplier effect over short-term relief and dole-outs
- leveraging technology to build solutions from and for India across sectors and at scale,
- measures to enhance green transition and adoption,
- reforms-linked fiscal management approach for the state, and
- actions that can enhance India’s global share in manufacturing and global value chains.
With the General Elections scheduled next year, this budget was anticipated to be high on populism. However, it cannot be termed so as even though there have been measures to provide relief to middle-class taxpayers, this is not a constant theme across the Budget.
The Indian economy is doing well and as IMF most recently pointed out, being a bright spot globally, it augurs well that the measures contained in the Union Budget support the post-pandemic economic growth, with scope for additional interventions in the short-term as the global situation evolves. Both the Economic Survey and the Union Budget have looked at medium term and that is also the spirit of the Amrit Kaal, the 25-year journey for India@100 as a modern, developed nation, which the Government has taken to the masses as well.
The Budget Session of Parliament began on 31st January; the first part will conclude on 13th February. The Parliament will re-convene on 12th March for the second part of the Budget Session that will conclude on 6th April.
The Budget adopts the following seven priorities (‘Saptarishi’)
- Inclusive Development
- Reaching the Last Mile
- Infrastructure and Investment
- Unleashing the Potential
- Green Growth
- Youth Power
- Financial Sector.
The Budget also noted the steps that have been taken by the government to promote industry and investment while reducing import dependency and improving export competitiveness. From unity malls to roads and rural push and tax sops, the 2023 budget is banking on fuelling domestic demand and public investments to propel growth even as the global economy seems to be headed for a recession. India’s GDP growth is estimated at 7% for FY23.
In terms of notable specifics, the capex outlay is being increased steeply by 33% to Rs 10 lakh crore, which would be 3.3% of the GDP. When it comes to reforms, for enhancing ease of doing business, over 39,000 compliances have been done away with and over 3,400 legal provisions have been decriminalised. For furthering trust-based governance, the Government has also introduced the Jan Vishwas Bill to amend 42 Central Acts.
In terms of macroeconomic indicators, the Government has stuck to the fiscal deficit roadmap in the Budget with a target of 5.9% in FY24 and adhering to the target for the current year.
Industry Watch: Key Announcements by Sector
- Agriculture Accelerator Fund will be set up to boost agriculture startups by young professionals to bring in affordable solution to challenges faced by farmers. The Fund will provide modern technology and would increase productivity and profitability.
- The government will launch the ‘Aatmanirbhar Clean Plant Programme’ to improve the availability of disease-free quality planting material for high-value horticultural crops at an outlay of INR 2,200 crore.
- Indian Institute of Millet Research will be supported as a centre of excellence.
- For farmers, especially small and marginal farmers, and other marginalised sections, the government is promoting cooperative-based economic development model. A new Ministry of Cooperation was formed with a mandate to realise the vision of ‘Sahakar Se Samriddhi’ (Prosperity through Cooperation).
- To realise this vision, the government has already initiated computerisation of 63,000 Primary Agricultural Credit Societies (PACS) with an investment of INR 2,516 crore. In consultation with all stakeholders and states, model bye-laws for PACS were formulated enabling them to become multipurpose PACS.
- A national database is being prepared, and with this, massive, decentralized storage capacity is to be set up. This will help farmers store their produce and realize better prices for their produce.
- Government will also facilitate the setting up of a larger number of cooperative societies, primary fishery societies, and dairy cooperative societies in uncovered villages in the next 5 years.
- India’s cotton productivity is 40% lower than the global average. A Cluster-based, value-chain approach for extra-long staple cotton under PPP will improve productivity and exports.
- Over the next 3 years, one crore farmers will get assistance to adopt natural farming.
- 10,000 bio input resource centres will be set up.
- PM PRANAM (PM Programme for Restoration, Awareness, Nourishment and Amelioration of Mother Earth) will be launched to incentivize States and Union Territories to promote alternative fertilizers and balanced use of chemical fertilizers.
- Digital public infrastructure for agriculture will be built as an open source, open standard and interoperable public good. This will enable inclusive, farmer-centric solutions through relevant information services for crop planning and health, improved access to farm inputs, credit, and insurance, help for crop estimation, market intelligence, and support for growth of agri-tech industry and start-ups.
- For realizing the vision of “Make AI in India and Make AI work for India”, three centres of excellence for Artificial Intelligence will be set-up in top educational institutions. Leading industry players can partner in conducting interdisciplinary research, develop cutting-edge applications and scalable problem solutions in the areas of agriculture, health, and sustainable cities. This will galvanize an effective AI ecosystem and nurture quality human resources in the field.
- To unleash innovation and research by start-ups and academia, a National Data Governance Policy will be brought out. This will enable access to anonymized data.
- A National Digital Library for children and adolescents will be set up for facilitating the availability of quality books across geographies, languages, genres and levels and device-agnostic accessibility. States will be encouraged to set up physical libraries for them at panchayat and ward levels and provide infrastructure for accessing the National Digital Library resources.
- One hundred labs for developing applications using 5G services will be set up in engineering institutions to realise a new range of opportunities, business models, and employment potential. The labs will cover, among others, applications such as smart classrooms, precision farming, intelligent transport systems, and health care applications.
- Mobile phone production in India increased from 5.8 crore units valued at about INR 18,900 crore in 2014-15 to 31 crore units valued at INR 2,75,000 crore in last fiscal year. The Relief in custom duty on import of certain parts of mobile phones like camera lens and batteries has been extended by another year.
- Manufacturing components set up till 2024 to get tax slab of 15%.
- Documentation availability will be the focus for the DigiLocker expansion for the fintech sector, The fintech sector has been facilitated by digital services, PM Jan Dhan Yojana, Indian Stack and UPI.
3. Logistics and Infrastructure
- The Economic Survey ahead of the budget presentation had applauded the Railways' efforts for recovering in both the passenger and freight segments after the Covid pandemic. It had also credited the government for a substantial increase in funds.
- The government has listed capital expenditure — investment in large infrastructure projects — among its focus areas.
- A capital outlay of INR 2.40 lakh crore has been provided for the Railways. This highest ever outlay is about 9 times the outlay made in 2013-14.
- One hundred critical transport infrastructure projects, for last and first mile connectivity for ports, coal, steel, fertilizer, and food grains sectors have been identified. They will be taken up on priority with investment of INR 75,000 crore, including INR 15,000 crore from private sources. This is likely to help the railways too, specifically with its freight business.
- Fifty additional airports, heliports, water aerodromes, and advanced landing zones to be revitalised to improve regional air connectivity.
- A newly established ‘Infrastructure Finance Secretariat’ will assist all stakeholders for more private investment in infrastructure, including railways, roads, urban infrastructure, and power, which are predominantly dependent on public resources. he Harmonized Master List of Infrastructure will be reviewed by an expert committee for recommending the classification and financing framework suitable for Amrit Kaal.
4. Green Mobility and Energy
- The Government is implementing several new programmes for green fuel, green energy, green farming, green mobility, green buildings, and green equipment, and policies for efficient use of energy across various economic sectors. These green growth efforts help in reducing carbon intensity of the economy and provide for large scale green job opportunities.
- An outlay of INR 35,000 crore towards the country's transition to cleaner energy and achieving India's goal of net zero carbon emission by 2070 has been announced in the budget.
- The inter-state transmission system for evacuation and grid integration of 13 GW renewable energy from Ladakh will be constructed with investment of INR 20,700 crore including central support of INR 8,300 crore.
- For encouraging behavioural change, a Green Credit Programme will be notified under the Environment (Protection) Act. This will incentivize environmentally sustainable and responsive actions by companies, individuals, and local bodies, and help mobilize additional resources for such activities.
- States will be allowed a fiscal deficit of 3.5 per cent of GSDP of which 0.5 per cent will be tied to power sector reforms.
- The recently launched National Green Hydrogen Mission, with an outlay of INR 19,700 crores, will facilitate transition of the economy to low carbon intensity, reduce dependence on fossil fuel imports, and make the country assume technology and market leadership in this sunrise sector. The aim is to reach an annual production of 5 MMT by 2030.
5. Promoting an inclusive industry
- PM Vishwakarma Kaushal Samman (PM VIKAS) announced: The new scheme is focused towards to improving the quality, scale, and reach of artisans’ products and integrating them with the MSME value chain. The scheme will include not only financial support but also access to advanced skill training, knowledge of modern digital techniques and efficient green technologies, brand promotion, linkage with local and global markets, digital payments, and social security.
- Entity DigiLockers will be set up for use by MSMEs, large businesses, and charitable trusts. This will be towards storing and sharing documents online securely, whenever needed, with various authorities, regulators, banks, and other business entities.
- States will be encouraged to set up a Unity Mall in their state capital or most prominent tourism center or the financial capital for the promotion and sale of their own ODOPs (one district, one product), GI products, and other handicraft products, and for providing space for such products of all other states.
- For business establishments required to have a Permanent Account Number (PAN), the PAN will be used as the common identifier for all digital systems of specified government agencies. This will bring ease of doing business; and it will be facilitated through a legal mandate.
- For obviating the need for separate submission of same information to different government agencies, a system of ‘Unified Filing Process’ will be set-up. Such filing of information or return in simplified forms on a common portal, will be shared with other agencies as per filer’s choice.
- To encourage indigenous production of Lab Grown Diamonds (LGD), a research and development grant will be provided to one of the IITs for five years. The customs duty on the seeds for use in the manufacturing of rough lab-grown diamonds has also been done away with i.e. zero from the earlier 5%.