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Invest Guide April 2023

Budget 2023 – Laying The Foundation of Vibrant India

The final full budget for the current administration was announced today by Finance Minister Ms. Nirmala Sitharaman. She concentrated on and built the budget announcements around seven crucial government priorities. The administration, as anticipated, continued to prioritise capital spending, governance, and technology through a number of announcements and allocations. In terms of fiscal management, the FM stuck to the strategy of balancing fiscal restraint with economic growth.

The seven main categories under which the FM announced her budget were -

  1. Inclusive Development
  2. Reaching the Last Mile
  3. Infrastructure and Investment
  4. Unleashing the Potential
  5. Green Growth
  6. Youth Power
  7. Financial Sector

Important details and announcements pertaining to the Inclusive Development Priority -

The government decided to focus on the demands of the agricultural, healthcare, and educational sectors under the slogan Sabka Saath Sabka Vikas. The major announcements made during the budget that fall under this priority include:

  • Agricultural acceleration fund - Create an agricultural accelerator to provide funding for cutting-edge start-ups in the industry.
  • Funding that is specifically aimed at the horticulture, animal husbandry, dairy, and fisheries industries totals Rs 20 lakh crore.
  • Provide readily accessible storage facilities to assist farmers in better managing their crop storage.
  • As part of its plans to establish the Indian Institute of Millet Research in Hyderabad as a global centre for millets, the government also coined the term "Shri Anna" for millets.
  • The government is considering constructing 157 new nursing colleges as part of the improvements to the healthcare system.
  • The budget discussed establishing a national digital library for kids and teenagers as part of its emphasis on education.
  • The District Institute of Education and Training will be established, which will also modernise teacher training.

Important developments and highlights related to Last mile Priority -

In order to better direct resources towards the goal of "reaching the last mile," the government established the Ministries of AYUSH, Fisheries, Animal Husbandry and Dairying, Skill Development, Jal Shakti, and Cooperation. These efforts received further push from this budget in the form of the subsequent initiatives.

  • A budget of Rs 15000 crores has been set aside for the next Pradhan Mantri PVTG Development Project.
  • For the 3.5 lakh indigenous pupils served by the Eklavya Model Residential Schools, more instructors are being hired.
  • The expenditure for the Prime Minister Awas Yojana has increased 69% to Rs 79000 crores.

Important announcements and highlights related to the infrastructure and investment priorities -

Increases in economic activity and the number of people employed are amplified by spending money on infrastructure and other forms of productive capacity. Notwithstanding the lull caused by the pandemic, private investment is on the upswing once more. The Budget has assumed leadership in accelerating a number of projects and has developed measures for investment and employment development. The emphasis of the major announcements was on infrastructure and investment.

  • The capital expenditure outlay has been budgeted at Rs 10 lakh crore for the first time. This represents a 33% growth.
  • This record-breaking appropriation of Rs 2.4 lakh crore will be the largest ever made to the railways.
  • By establishing an Urban Infrastructure Development Fund, urban infrastructure can be created in Tier 2 and Tier 3 cities.
  • To increase regional aviation connectivity, 50 more airports, heliports, water aerodromes, and advanced landing fields will be revived.
  • The 50-year, zero-interest lending programme for state infrastructure projects will be maintained.

Important updates and announcements pertaining to the priority unleashing the Potential -

"Good governance is essential to the advancement of a country."

"Our government is committed to establishing a transparent and responsible administration which works for the betterment and welfare of the common people," The FM quoted the Prime Minister when making allotments under this priority. Important declarations made under this pillar were

  • Three artificial intelligence (AI)-based centres of excellence are being established in educational institutions to create AI-based solutions for many industries, including healthcare and agriculture.
  • For improved justice delivery, phase 3 of the electronic courts will be introduced.
  • 100 5G laboratories are being setup for app development.
  • Companies and nonprofit entities will soon be able to use a DigiLocker service that will be specifically designed for them.

Important announcements and highlights related to the pillar of green growth -

This government has long placed a priority on green and sustainable growth. By 2070, we intend for our nation to emit zero carbon. The following were the key details of budget announcements made under this pillar:

  • With a budget of R 19,700 crores, the recently established National Green Hydrogen Mission aims to produce 5 MMT of green hydrogen year by 2030.
  • A Green Credit Program will be announced in accordance with the Environment (Protection) Act in order to promote behavioural change. This would encourage ecologically responsible behaviour on the part of businesses, people, and local organisations while also assisting in the mobilisation of additional resources for such efforts.
  • 500 new "waste to wealth" facilities will be built as part of the GOBARdhan (Galvanizing Organic Bio-Agro Resources Dhan) programme to advance the circular economy.
  • In an effort to lessen pollution brought on by older automobiles, the government is also allocating extra funds for the State and Central governments to trash obsolete vehicles.
  • The government also intends to encourage 1 crore farmers to practise natural farming.

Important announcements and highlights related to the pillar "Young Power" -

The government has developed a national education policy, placed a priority on skill development, and established economic policies that support large-scale job creation and employment possibilities in order to empower our youth and assist the "Amrit Peedhi" in realising their aspirations.

  • There will be the introduction of a single Skill India portal.
  • Direct Benefit Transfer under a pan-India National Apprenticeship Promotion Program will be implemented to give stipend support to 47 lakh youth in three years.
  • 50 locations will be selected and developed to increase tourism.
  • States will be urged to establish a Unity Mall in their state's capital, most significant tourist destination, or financial centre for the marketing and sale of their own ODOPs (one district, one product), GI items, and other handicraft products, as well as for providing space for such products of all other states.

Important news and announcements pertaining to the financial sector -

Financial inclusion on a large scale, improved and quicker service delivery, simple access to credit, and participation in financial markets have all been made possible by financial sector reforms and creative technology use. These initiatives are to be further by this Budget through the following significant announcements.

  • To encourage financial inclusion and digital lending, establish a national financial information registry. With an investment of Rs 9000 crores, revamp the credit guarantee programme for MSMEs.
  • Unclaimed dividends and stock will be made accessible through a centralised online system.

The Budget Deficit and Management for Fiscal Year 2023–2024 -

  • States will be permitted a deficit of 3.5% of the GSDP, of which 0.5% will go toward changes in the electricity sector.
  • The estimated fiscal deficit for FY 2023–24 is 5.9% of GDP.
  • By 2025–2026, the fiscal deficit should drop to below 4.5%.

Modifications to Indirect Taxes -

A more straightforward tax system with lower tax rates lessens the burden of compliance and enhances tax management. In light of this, the government has suggested lowering the number of basic customs duty rates on goods—aside from textiles and agriculture—from 21 to 13. The basic customs duties, cesses, and surcharges on some commodities, such as toys, bicycles, cars, and naphtha, have been slightly altered as a result.

Which things are getting more expensive?

  • Cigarette taxes have increased by 16%.
  • The compounded rubber import tariff was raised from 10% to 25%.
  • Gold bullion products face an increase in their base customs charge.
  • Tariffs for electric chimneys for kitchens went up from 7.5% to 15%.
  • As the government hikes customs charge from 60% to 70% in the budget, fully imported luxury cars and EVs will cost more.

What tends to become more affordable?

  • Due to reduced import taxes, cell phones built in India will cost less.
  • Duties on TV panel components made up of open cells have been reduced to 2.5%.
  • There will be a reduction in the basic customs charge imposed on seeds used in the production of lab-grown diamonds.
  • To encourage exports, the customs tax on shrimp feed will be cut.

Alterations to the tax rates for personal income -

The government has recommended several modifications to the personal income tax rates in an effort to streamline the tax system and ease tax administration.

Under the New Tax Regime, anyone who earns up to Rs 7 lakh is eligible for a tax rebate under Section 87A. Thus, everyone earning up to Rs. 7 lakh will not be required to pay income tax.

The 5 Biggest Changes to Individual Tax Rates -

There are now only five instead of six tax slabs under the new system. These are the most recent tax brackets and the structure of the tax system.

The New Tax System Has Updated Slabs -

  • Rs 0-3 lakh - tax-free
  • 3-5 lakh rupees at 5%
  • 6–9 lakh rupees at 10%
  • 9-12 lakh rupees at 15%
  • 12–15 lakh rupees at 20%
  • Amounts over 15 lakh at 30%
  • For individuals who choose the New Tax System, the Standard Deduction will be available.
  • For people with incomes over Rs 5 crore, the highest surcharge rate of 37% is reduced to 25%.
  • Non-government workers can now cash out their leaves without paying taxes on amounts up to Rs 25 lakh.

Corporate tax changes -

  • 15% corporation tax incentives are being extended to new businesses that start manufacturing through March 2024.
  • Increased exemption thresholds for presumptive taxation for both individuals and corporations.
  • The advantages that come with a company's date of establishment are extended by one more year for new businesses.
  • The previous loss carry forward limit of seven years from the date of incorporation has been increased to 10.

It is difficult to steer the economy through such tumultuous waters while pursuing long-term strategic goals, upholding fiscal responsibility, and maximizing opportunities presented to India in this difficult but historic decade.

This budget will reassure economic stakeholders both domestically and internationally. By contributing, as anticipated, at least a fifth of the rise in global GDP between now and the end of the 2024s, it keeps India well on the route to a sustained period of growth.

Private investment, which hasn't exactly been vibrant for much of the Modi years, has been called out by critics. While some of this is true, it's important to remember the surrounding circumstances.

The economy was in crisis when the BJP-led government took office in 2014, and many businesses had balance sheets that were over leveraged. For private investment, the environment was unfavourable.

The banking industry underwent a concerted clean-up, which was accompanied by a significant infrastructural drive and eventually, lower corporate tax rates. This made it possible for the businesses to pay off debt and straighten out its financials, setting it up for future investment.

At that point, the conflict and the pandemic's protracted unravelling both began. Private investment will lag in 2023 due to the recession that will affect several developed nations and the precarious state of the global economy.

In a year with a general election, businesses typically are cautious about making capital investments. In the summer of 2024, some 18 months from now, things might be drastically different. According to the most recent projections, a third Modi government would already be in power. The worst of the global economic recession would be over, if current expectations pan out. An enormous increase in private investment is anticipated.

The Modi-Sitharaman combination was astute and pragmatic in predicting that public investment would need to be front-loaded and support the economy for just a little bit longer. India will inevitably experience an increase in corporate investment as well as stronger GDP growth as it moves into the 2023.

If this happens, Modi's next term will begin during an extremely strong economic expansion. That is the cornerstone and core wager of this budget.