Budget 2023: Growth & manufacturing focus within fiscal consolidation theme

Echoing Finance Minister Nirmala Sitharaman’s statement that India's fiscal 2024 budget will follow the spirit of the earlier ones, economists expect it to be a pragmatic, rather than a populist, budget, even though this is the last full budget before the 2024 general elections.

India's budget is likely to continue to focus on capital expenditure as a growth driver and give an impetus to manufacturing while continuing with the post-pandemic fiscal consolidation, Kirtika Suneja & Yogima Seth Sharma report.

1. Growth orientation

• Budget will try to limit the hit on India’s economy due to global slowdown.
• Global slowdown dragging down exports and industry.
• Russia-Ukraine crisis, monetary tightening key concerns.

Key suggestions

• Boost capital expenditure further from current 2.9% of GDP to near 3.5%.
• Rationalise personal income-tax rates to lift demand.
• Bring down peak GST rate from 28% .
• Improve ease of doingbusiness.
• Urban employment guarantee programme.

2. Manufacturing boost

• Budget expected to continue the focus on domestic manufacturing revival.
• Sluggish exports pulling down manufacturing.
• Pockets of weakness in demand relating to rural sectors.
• PLI schemes for labour-intensive sectors likely in budget.
• 27 sectors in Make in India 2.0 focus.

Key suggestions

• Extend 15% corporate tax on fresh investment to all sectors.
• Increase cash flow lending to MSMEs without collaterals.
• Change classification norms for MSME NPAs.
• Reduce taxes on electric vehicles.
• RoDTEP scheme for all sectors to enhance exports.

See also: Biggest changes the world saw since India got its last Budget

3. Fiscally responsible

• Budget expected to continue to focus on post-Covid fiscal consolidation
• Economists expect FY24 fiscal gap at 5.5-5.8% of GDP.
• Food & fertiliser subsidy bill likely to be lower.
• High nominal growth could keep taxes robust.
• FY24 gross tax mop-up seen 14-16% higher vs FY23 BE.
• A resurgence in the pandemic is a key risk.
• Financial turbulence and sharper-than-expected global slowdown other risks.

Key suggestions

• Speed up asset monetisation and privatisation.
• Attempt to reduce subsidies and revenue expenditure