Finance Minister Nirmala Sitharaman has given yet another remarkable Budget, balancing growth with fiscal prudence.
A 33 per cent year-on-year increase in the capital investment outlay, pegged at ₹10-lakh crore, will lead to massive infrastructure creation across the nation. It was refreshing to see that while subsidies as a percentage to government expenditure have halved in the past nine years, the percentage of capex has nearly doubled during this period underlining the government’s sagacious handling of public finances.
While the Budget focused on growth through productive capital spending, India’s fiscal deficit is still expected to remain at 6.4 per cent of the GDP in FY23, and is on target to narrow further to 5.9 per cent and 4.5 per cent in FY24 and FY25, respectively.
The Budget has nudged taxpayers to switch to the new direct tax regime. The incentives offered under the new tax regime is expected to increase spending and spur consumption demand. The combination of higher capital investment and rise in consumption demand will augur well for the long-term growth of the Indian economy. Allowing foreign banks to conduct acquisition financing from GIFT City is a welcome step and will attract many more banks to set up offices in GIFT IFSC. Recognising ODIs (Offshore Derivative Instruments) as valid contracts will give a fillip to the securities market.
The dual Budget proposal for a single-window clearance for IFSCA, SEZ, RBI, SEBI and GSTN at GIFT City, and the inclusion of arbitration law will draw global institutions from the BFSI sector here. This will further augment GIFT City as of one of the leading international financial centres of the world. Creating property tax governance reforms and ring-fencing user charges on urban infrastructure in cities will surely strengthen the municipal bonds markets in India.
What is noteworthy in the Budget is its clear ESG focus. Among the seven priority sectors enunciated, emphasis on green growth aligns with India’s net-zero commitment.
The outlay of ₹35,000 crore for green energy transition, green mobility, viability-gap funding for battery technology, improvement in pump storage systems, and action plan for establishing a green hydrogen ecosystem are welcome steps towards aiding India’s transition to a low-carbon economy.
Continuing India’s efforts towards enabling sustainable development, apart from green initiatives, the Budget is also focused on creating an inclusive economy, extending fiscal benefits to cohorts like women, tribal communities, artisans and craftsmen and underprivileged sections of society.
With its focus on enhancing quality of education, providing access to water and sanitation, affordable housing and skill development, the government is creating a holistic ecosystem to financially empower these cohorts and reduce income inequality in the country.
The government is committed to creating jobs and self-employment and has earmarked funds to promote entrepreneurship and support small enterprises. In a relief to the MSME sector, the Credit Guarantee Scheme for MSMEs has been extended with an infusion of ₹9,000 crore.
A great deal of emphasis has been placed on skilling individuals across technology, tourism, education and healthcare. The setting up of three Centres of Excellence for AI in top educational institutes of the country is a step in the right direction. The Finance Minister upgraded the Pradhan Mantri Kaushal Vikas Yojana (PMKVY) scheme to include training lakhs of youth over the next three years in new-age courses like AI, robotics and 3D printing.
Overall, India’s first Budget in the ‘Amrit Kaal’ is growth oriented and progressive, which has neatly identified key priority areas and has laid a clear execution roadmap that will augment India’s global competitiveness and lead to a sustainable economy which we are all proud of.
The writer is President and India Country Head, Bank of America