Finance Minister Nirmala Sitharaman on Wednesday delivered a pragmatic, part-populist yet growth-oriented budget, giving a special big push for capital expenditure and warming the hearts of middle-class income taxpayers with tax slab overhaul ahead of the 2024 general elections and nine state assembly elections this year.

The income tax relief measures were particularly targeted at the middle class, and senior citizens through rejig in basic income exemption limits and a reduction in the number of income tax slabs from six to five. Put simply, a citizen earning income up to ₹7 lakh need not fork out any income tax in the new tax regime.

In her fifth consecutive budget, the last full-fledged budget of this government, amplifying the tone of populism towards the middle class, Sitharaman rejigged income slabs are ₹0-3 lakh —Nil; ₹3-6 lakh —5 percent; ₹6-9 lakh —10 percent; ₹9-12 lakh —15 percent; ₹12-15 lakh —20 percent and ₹ 15 lakh and above —30 percent.

Sitharaman also announced special savings schemes for women and enhanced the savings limits (up to ₹30 lakh) for senior citizens in certain schemes.

GDP growth

Given the global headwinds and macroeconomic uncertainty arising from geo-political uncertainties especially the Russia-Ukraine conflict and developments in China, the Centre has budgeted nominal GDP growth at 10.5 per cent for 2023-24, lower than the 11 per cent growth budgeted last fiscal.

Although the budget last year had projected 11 per cent GDP growth, the actual nominal growth in the current fiscal is expected to be around 15 per cent and tax revenues also show a bump up of over 15 per cent.

The Centre has, in recent years, been adopting a conservative strategy of underestimating growth and finally over-deliver on the budget levels.

Capex boost

Sitharaman, on expected lines, announced a whopping 33 per cent increase in capital expenditure outlay for the Central government in 2023-24 to ₹10-lakh crore as against the current fiscal’s budgeted level of ₹7.5-lakh crore.

At the budgeted level of ₹10-lakh crore, the Centre’s capex would be 3.3 per cent of GDP and the amount will be almost three times what was spent in 2019-20, Sitharaman highlighted. States that spend more on capex will also be incentivised, according to Sitharaman.

It may be recalled that the Centre had in 2022-23 increased the outlay by 35.4 per cent to ₹7-lakh crore as against the previous year’s level of ₹5.54-lakh crore.

Centre has in recent years been betting big on a capex-led growth strategy and this is also reflected in the latest budget. From a level of ₹3-lakh crore in 2018-19, the budgeted annual capex has been systematically going up and touched ₹10-lakh crore in the latest budget.

Sitharaman also announced that the Centre would do capital spend of ₹35,000 crore towards energy transition in line with global commitments made by the country.

The latest budget is heavily focused on pushing green growth and also encouraging policies for efficient use of energy and providing large green job opportunities.

Fiscal consolidation

Sitharaman also had some good news for the investor community and market watchers by reining in the fiscal deficit at the budgeted level of 6.4 per cent of GDP for the current fiscal.

For 2023-24, the latest budget has pegged the fiscal deficit target at 5.9 per cent of GDP and this could be manageable given the huge revenue jump that has been pencilled in for the next fiscal.

Sitharaman also reiterated the government’s commitment to achieving a fiscal deficit target of less than 4.5 per cent of GDP by 2025-26.