There have been umpteen reasons to be apprehensive in 2023, more so while framing the Budget — US Federal Reserve’s unbridled aggression, rising cost of funds, intensifying war between Ukraine and Russia and China’s Covid crisis to name a few. Yet, in a backdrop like this, the government has decided to go bold and big on capex and chosen consistency in a world characterised by randomness and volatility. The following themes stand out:

Capex-led growth: It has taken the onus on itself to step up the accelerator on public infrastructure to drive growth. A strong and continued focus on public capital expenditure holds merit given its higher multiplier to growth, absence of other sustainable growth drivers and the current dire global backdrop.

Doubling down on public capex, which has higher multipliers as compared to consumption, can help spur growth, jobs and incomes that will be supportive of broader consumption. Capital investment outlay is being increased steeply for the third year in a row by 33 per cent per cent to ₹10-lakh crore, which would be 3.3 per cent of GDP. This will be almost three times the outlay in 2019-20.

Fiscal consolidation: The government has also stuck to fiscal discipline and transparency. It has managed to achieve the 6.4 per cent target for FY23 despite many challenges during the year. More importantly, it aims to lower the fiscal deficit to 5.9 per cent of GDP. This, fiscal restraint, in a way supports consumption, by lowering inflation while reducing debt as a higher fiscal deficit raises the demand for goods and services, and inflationary pressures.

A lower fiscal deficit cools aggregate demand and inflation and lowers the pressure on the RBI to tighten. It alleviates the ‘crowding out’ pressure for the private sector and fiscal discipline helps enhance India’s financial stability standing, attract foreign inflows and stabilise the rupee.

The Government stuck to the path of fiscal consolidation steadfastly starting from FY14 barring the pandemic hit years where the path got reversed. The Finance Minister has said that the government will continue with the path of fiscal consolidation and intends to reach a fiscal deficit level below 4.5 per cent of GDP by 2025-26.

Greener growth: India is championing green and sustainable growth at the global stage with the greenest of Budgets so far with ₹35,000 crore for priority capital investments towards energy transition and net zero objectives, and energy security. The Budget strives to incentivise environmentally sustainable and responsive actions by companies, individuals, and local bodies.

Relief to the spending, saving class: The Budget has announced an increase in the rebate with limit increased to ₹7 lakh in the New Tax Regime from ₹5 lakh earlier. The number of slabs has been reduced to five from six earlier. Moreover, for big earners, the highest effective tax rate has been reduced from 42.7 per cent to 39 per cent by way of lower surcharge.

The government also announced an increase in the deposit limit for the senior citizens savings scheme (SCSS) from ₹15 lakh to ₹30 lakh. The Budget announcement follows the government in January increased the interest rates for SCSS deposits from 7.6 per cent to 8 per cent. These should keep a floor under consumption in a politically sensitive year.

Pragmatism vs populism: The government has displayed risk-taking ability via avoidance of any policy induced shocks: Importantly, there is also an element of risk taking — note, most people expected the Budget to be populist with nine State elections and the run up to General Elections.

It also did not try to tinker around with the capital gains taxation which had quite a few people nervous. However, the government has resisted the temptation to go down the path of rocking the boat with policy-induced shocks and has probably saved on some ammo for the future, that is, the vote on account Budget next year!

The writer is Group chief economist, Mahindra & Mahindra. Views are personal