A POCKET-ANALYSIS OF BUDGET 2023
Budget 2023 opens the gates for India to an ‘Amrit Kaal’ (path to the next glorious 25 years). Although independent for 75 years, India suffers at the hands of poverty and poor economic infrastructure which the 77th union budget aims to provide a remedy for.
This year’s budget is a vision for the next 25 years which aims to strengthen the nation in terms of technology, knowledge and public finance. In a nutshell, it is another move towards the making of Atmanirbhar Bharat (self-reliant India). The economic agenda for achieving this vision focuses on three things: first, facilitating ample opportunities for citizens, especially the youth; second, providing a strong impetus to growth and job creation; and finally, strengthening macro-economic stability.
The Indian economy contracted by 6.6% due to the global pandemic but started a mild recovery from the second quarter of the last fiscal. The rise in demand for services has led to a gradual increase in the IT sector. Domestic demand symbolised as private final consumption expenditure has shown a gradual improvement, growing on an average of 7.4% in post-covid duration.
The Indian economy was strained by the Ukraine war, worsening India's growth-inflation mix. In addition to the already rising price of wheat globally, it pushed up our import bill for both energy and fertilisers, thus contributing to the rising inflation of about 8.39% and lower growth for India. Owing to such a rise in the prices of the commodity market, including gold, the equity market turned volatile.
While the Ukraine war has put a strain on India’s economic prospects, the same war has also created a vacuum in the grain exporting market. Potential opportunities in telecommunication and the aviation industry present themselves, ready to be exploited. The US-China trade tensions resulted in numerous opportunities for south-east Asian nations, waiting to be grabbed by India.
With so much affecting the nation’s economy, will the budget comply with the foundation laid in the previous budget? Being the last budget before the upcoming union elections, is this a bold political move?
BUD-GET THE BUDGET
In the 75th year of our Independence, the world recognised the Indian economy as a ‘bright star’. This Budget hopes to build on the foundation laid in the previous year, where a prosperous and inclusive India is envisioned, in which the fruits of development reach all regions and citizens, especially our youth, women, farmers, OBCs, Scheduled Castes and Scheduled Tribes. The fifth Union Budget’s take on the daunting dilemmas of the nation’s economy is one to look into.
The budget scores Grade A in its allotment to the education sector as its allocation increases to ₹1,12,899.47 crore, by around 13%. This is the highest-ever allocation to the education sector, paving the way to transform India into a “knowledge-based economy.”
The highest share from the education kitty was, as per the convention, allocated to the school education department at ₹68,804.85 crore, allowing the PM Poshan Scheme to shift gears. At the same time, the higher education segment received ₹44,907.62 crores, which will help boost the funding to several central institutes.
Overall, the Union Budget 2023 unveils some key actions to overcome the learning losses of the Covid-19 pandemic, fueling the digitization of education and driving uniform delivery of education in the country. These announcements are expected to fast-track the implementation of NEP 2020 and achieve its end objectives.
Despite this, considering the overall share of education in the pie, it is quite conclusive that the larger goals are still distant.
Reinforcing the importance of infrastructure, the government has included ‘Infrastructure and Investment’ as one of the seven priorities. To further the infrastructural development, the Union Budget, for the third consecutive year, has proposed to raise the Capex by 33 per cent to ₹10 lakh crore and a continuation of a 50-year interest-free loan to state governments to incentivize infrastructural development. While infrastructural expenditure has risen, it still only accounts for 3.5% of the GDP. Is this allocation enough to keep up with India’s lofty goals for economic growth?
Investments in infrastructure and productive capacity have a large multiplier impact on growth and employment. After the subdued period of the pandemic, private investments are growing again, doubling in the last quarter. The budget takes the lead once again to ramp up the virtuous cycle of investment and job creation.
Boost to green mobility
The budget supposedly aims to further India’s path on its destination towards 'panchamrit' (five-commitment plan) and net-zero carbon emission by 2070, to usher in a green industrial and economic transition. The budget provides ₹35000 crores for private capital investments towards achieving the same. Custom duty exemptions are being extended to the import of capital goods and machinery required for the manufacture of lithium-ion cells for batteries used in EVs, providing the impetus to green mobility. The government’s clear indication of green growth as a pillar of development is a welcome move.
Being the first budget after COVID-19 became endemic in the country, one would have expected a little more focus on the health sector. This year's budget is said to be futuristic with a focus on medical research and paves the way for achieving universal health coverage.
Some key proposals include the opening of 157 new nursing colleges and dedicating multidisciplinary courses for medical devices. A new program is also launched to promote research in pharmaceuticals. The government has proposed to work in a mission mode to eliminate sickle cell anaemia by 2047. The walls of the parliament echoed with loud claps on 1st February 2023 by being very optimistic about the fact that the world is not going to face another pandemic anytime soon, but what if there is a different story being written in the bigger picture?
The agricultural sector, the most significant source of income for the central and state governments, is usually referred to as the powerhouse of India owing to its vitality towards economic growth. This year the government has aimed to build accessible, inclusive and informative solutions for farmers. A new Horticulture Clean Plant Project, to boost the production of high-value horticulture crops, is to be launched. A concrete step has been taken to make India a global hub for millet. The agriculture credit target is to be increased to INR 20 lakh crore with a focus on animal husbandry, dairy and fisheries. A new Agriculture Accelerator Fund is also set up to encourage innovative agri-startups by young entrepreneurs in rural areas.
In a country where almost 88 lakh crore rupees are unregistered, i.e., black money, the general public is not as concerned about the reduction in their tax liability as they should be due to the new tax regime.
Instead of having the 7 tax slabs ranging ₹2.5 lahks each in the old tax scheme, the government now divides the income into 6 slabs with the division unit being changed to Rs. 3 lakhs as a part of the new tax scheme. Furthermore, the rebate limit has been extended to Rs. 7 lakhs. But will this change truly provide a sigh of relief to the public?
Due to the extension of the rebate limit, a significant proportion of the population will be exempted from personal tax. In addition to that, the difference of Rs. 50,000 between the slabs will also reduce a significant percentage of tax for the lower income groups.
Over the years people chose the old regime over the new one, but the modifications made in the new regime in the budget 2023 will turn the tables. For the first time, the benefits reaped by the new regime will outshine the old ones even after availing due deductions. Hence, it is expected that taxpayers will shift from the old to the new regime. Conclusively, the presentation of income tax, in the end, was like a dessert. But is the budget considering the loss in government revenue and the resulting increase in expenditure?
Considering the tax and other major steps taken in this budget, how far will the economy go?
Author: Priyansh Kotiya, Riya Sethi, Palak Bansal
Illustration By: Jasmehar Kaur and Kashish