Top 5 things to expect from Union Budget FY23-24
On 1st February – Wednesday, Mrs. Nirmala Sitharaman will present the Union Budget for Financial Year 2023-24. The features of the budget in FY22-23 highlighted the Amrit Kaal, the goals which were focused on growth with inclusive welfare. It also emphasized on the importance of technology for development, gradually transitioning to green energy, and encouraging private investments. The holistic infrastructure development approach was underlined with PM Gatishakti, which was driven by seven engines i.e., Roads, Railways, Airport, Ports, Mass Transport, Waterways, and Logistics Infrastructure. The expectation from Budget 2023 will largely follow on this commitment which has a long-term impact on the social economy of India. The following are the expectations which are on the minds of individuals and Inc.
Continuity in Four Priorities of the Government
The current budget should emphasize the programs under the ‘PM Gatishakti’ and highlight the execution achievement in the last one year. There should be continuity in the policies to support these goals to boost the overall reach of India.
This development should focus on ‘Inclusive Development’ across the sections/geographies. The focus on ‘Productivity Enhancement’ will be a key area, by providing skilling programs to adapt with changing trends. The ‘Financing of Investments’ should involve private/individuals by enabling route to invest in government related projects by way of securities and green bond.
Expectation for Balanced Delivery
While the development and welfare schemes are imperative, the government should not undermine the importance of over leverage. The fiscal deficit for the current financial year was pegged at 6.4 per cent of the GDP, which was funded by borrowing. The focus of the government should be to narrow down the deficit, and take a balanced approach between growth and welfare. The market will closely track fiscal targets for the next financial year. The continuity of the PLI schemes for the wider sectors will also boost the employment opportunities for the rural population.
Expectations for Salaried individuals
There’s been no major changes in the income tax front for the salaried individuals, apart from the introduction of a new tax regime without any exemptions. So, it is likely that the government will announce changes in the income tax to cheer the working populations. Following are the key expectation:
- Increase the exemption limit u/s 80C from Rs. 1.5 lakhs at present to Rs.2.5 or 3 lakhs
- Rationalization of tax rate in favour of middle-class population
- Changes in the tax slab
- Increase the limit of standard deduction from Rs. 50,000 to Rs. 100,000
The exemption limit u/s 80c has stood the same for a long time since FY15, while the inflation rate jumped by 46 per cent in the same period. There’s also a need to rationalize the tax rate to support mid-income earners, and increase the standard deduction to tackle spiking inflation in recent periods.
Simplify the Treatment of Financial Asset-Class
The complexity of capital gain tax is also a talking point among domestic as well as foreign investors. The different holding period for different asset-class will be the centre focus, in order to bring parity in treatment. Following are the likely:
- Decrease the duration for debt/fixed-income instrument instruments from 3 years to 1 year to qualify as long-term investment.
- Increase the exemption limit on LTCG (long-term capital gains) for the equity-based instrument.
- More clarity and accessible to invest in government bonds or green bonds with tax benefit.
Policy Support to Boost the Key Sectors
A positive outcome through the PLI (Production-Linked Incentive) scheme is likely to see an increase in the allocation by the government to boost the manufacturing growth, and increase the export volume. The current allocation of Rs. 1.97 lakh crore is expected to see a hike of 20-30 per cent in the current budget.
Key sector/industry to see increase in allocation:
- Boost Manufacturing sector to create employment: It is one of the key drivers of the Indian economy which offers employment opportunities to various classes of population. The incentive from the government will be imperative support to turn India into a manufacturing hub, and get a competitive edge on a global market.
- Infrastructure and Capex Spending: The allocation of Rs. 5-10 trillion for the infrastructure growth was the highlight of the past budgets. The increase of capex spending at the rate of 35 per cent year-on-year underlined the importance of the infrastructure to spur the overall growth of the Indian economy. The market will closely track the progress of the past projects and its commitment to support on a long-term basis.
- Education and Digital Innovation:There’s a need to skill or re-skill the individuals to compete with changing world order. To boost the talent in the technology or innovation field, it will need a cohesive platform to acquire those talents. The expectation will be to increase the allocation for skill development and improve the quality of education.
There are other industry/sectors which are vital to Indian economy. The ‘National Health Mission’ under healthcare industry saw an allocation of Rs. 37,800 crores in last budget. It is expected to see similar support from the government to be dominant player in the global market. The defence industry will also be a key pillar of the development to adapt to new regime of warfare. It is expected to see similar allocation to speed up the modern projects.