A Clever Budget That Does Not Abandon The Path Of Prudent Fiscal Management

By Nilaya Varma

Budget 2023, the last full budget before the election dance in the world’s largest democracy has attempted to play the music for everyone, especially those who will be critical in re-electing the current government - women, tribals and the urban middle class. It has also given the markets something. Large borrowing plan of the government, no change in capital gains tax, no inheritance tax and enough reference to ease of doing business and de-criminalization of statutes. Our analysis of Budget 2023 sees 7 themes.

1. Investing and Roadmap for the AMRIT Kaal – The Prime Minister is keen to see his personally legacy enshrined in how India develops in another 25 years. Many of the initiatives including in agriculture modernization (crop pattern changes), teachers training, availability of skilled people including nurses etc will take time but will define what India becomes in 2047. Budget 2023 makes that clear

2. Direct Tax changes to aid short term consumption – The gloomy global market that will impact exports and resilience needed to be offset by boosting domestic consumption. The tax proposal will surely help more in an election year!

3. Betting on Infrastructure for near term job growth and long-term competitiveness of the Indian Economy – There is universal consensus that investing in Infrastructure is about Investing in Future. The higher allocation (substantial) is clearly aimed at this. In our view this is also the only way to address the challenges of creating jobs (albeit low paid and hard job) in the near future. Creating jobs for skilled and educated workforce will continue to be a challenge. IFSC GIFT city (in Gujarat) is also going to be at the centre of raising global funds for the infrastructure sector.

4. Formalization of the Indian Economy continuous and getting expedited – Common and centralized address management, common business identifier and expansion of Digi locker will also help in accelerating formalization of Indian economy that will help target subsidies better and make tax evasion more difficult. Benefits of this are evident in the growing GST collections.

5. Clearly a budget that sees elections ahead – The mention of NE, tribals, vulnerable, allocation of a large scheme for Karnataka, significant expansion of the credit guarantee program for MSME and settlement scheme for contracts in disputes, focus on Women SHGs, makes it clear that elections are here. This is also expected in a democracy.

6. India is serious on leveraging opportunities arising out of Climate Change – In the context of G20 and the PM’s own stated goal of putting India at the forefront of climate change, the allocation towards hydrogen mission, supporting greening of the economy and its transition is continuation of the initiative started last year.

7. The future will be data and Integrated Data – The government has been clear about leveraging data to plan and execute its vision. The proposed national data governance policy and using common identifier to integrate government program and pilot program to be initiated by NITI to move away from input based to result based allocation is a clear sign.

Disclaimer: Devil always lies in the details of allocation and more importantly utilization to convert intent to reality and hence we will have to wait to see what gets done this year.

Author is CEO and co-founder of Primus Partners