Key Takeaways from Union Budget 2023-24

Published by Sharekhan Education | February 3, 2023

Amit Pathak | Sharekhan Education

Union Budget 2023-24 builds on the vision of a technology-driven and knowledge-based economy in the 25-year lead-up to India @100. The budget has outlined seven pillars of priorities: Infrastructure & Investment, Green Growth, Reaching the last mile, Inclusive development, Unleashing the potential, Youth power and financial sector. The broad economic agenda is to facilitate opportunities, provide a strong impetus for job creation, and strengthen macroeconomic stability.

Growth Estimates:

India’s GDP growth forecast for FY24 is pegged at 6.5%. The government expects to comfortably meet its fiscal deficit target of 6.4% for FY23E. Additionally, it has set the target for FY24E at 5.9%. The government is progressing well to meet its earlier guidance of 4.5% by FY26E. The government has set a disinvestment target of Rs. 51,000 crores for FY24. It has revised the estimates for FY23 to Rs. 50,000  crores from the earlier target of Rs. 65,000 crores.

Focus on Infrastructure & Investment:

The budget clearly focuses on sustaining Investment cycle. Total effective capital expenditure is pegged at Rs 13.7 lakh crore for FY24E vs Rs 10.5 lakh crore in FY23RE, a healthy 33% increase. Urban Infrastructure Development Fund (UIDF)  created with annual allocation of Rs. 10,000 crores. The government has allocated Rs 2.4 lakh crores to the Indian Railways. This is the largest allocation in almost a decade. The government has also allocated Rs 5.93 lakh crore to the defense sector, representing a 12.9% increase over the previous financial year’s budgetary estimate of Rs 5.25 lakh crore.

The government would set up an Agricultural Accelerator Fund aimed at enhancing agricultural productivity. It aims to increase credit to agriculture by 11% to Rs.20 trillion. The government has allocated Rs. 9000 crores for the Credit Guarantee scheme for MSMEs, aiming to provide additional collateral-free credit of Rs. 2 trillion. The  budget outlay for the Pradhan Mantri Awas Yojana (PMAY) is being increased by 66% to Rs 79,000 crores for promoting affordable housing. The government has reduced customs duties to promote exports and boost productivity in manufacturing, including electronics, electricals, green mobility, chemicals, and petrochemicals.

On taxation front, key changes include No income tax liability for income up to Rs. 7 lakhs annually and for income above Rs. 5 crore maximum tax rate has been reduced from 42.7% to 39% via change in surcharge tax rate from 37% to 25%. Income from life insurance policies with annual premium above Rs. 5 lakhs would be taxable provided the money is not received on the death of the person insured.

Conclusion:

The budget seems to achieve the desired balance between economic growth and fiscal prudence. It has the necessary elements to sustain the ongoing corporate profitability rebound in coming quarters.

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