A Growth-Oriented, Inclusive Budget

Finance Minister Nirmala Sitharaman has delivered a growth-oriented and inclusive Budget that aims to fulfil the aspirations of one of the fastest growing major economies in the world. 

The finance minister has desisted from presenting a populist budget ahead of 2024 general elections and targeted a lower fiscal deficit for FY24. She has unveiled measures to create better infrastructure, improve 'ease of doing business,' encourage pharma innovation, spur domestic consumption and galvanise climate action through a thrust on green economy and energy transition.

Fiscal Discipline Maintained

The finance minister must be commended for sticking to the path of fiscal consolidation by targeting a half percent reduction in fiscal deficit to 5.9% in FY24. She has also reiterated her commitment to meet a medium-term goal of reducing the deficit further to under 4.5% by FY26.

Hiking Outlay on Infrastructure 

To stimulate a virtuous cycle of investment, the FM announced a 33% hike in capital investment outlay to Rs 10 trillion for FY24. She also announced several other measures for infrastructure creation, including a capital outlay of Rs 2.40 trillion for the Indian Railways, given a push for revival of air transport infrastructure, continued the 50-year interest free loan to state governments for another year, and proposed a Rs 10,000 crore per year Urban Infra Development Fund for Tier 2 & 3 cities.

The speedy and efficient implementation of these projects can help kick-start a multiyear capex cycle in India by crowding in private capex investments. 

Improving 'Ease of Doing Business'

The World Bank has ranked India 63rd among 190 countries in terms of 'ease of doing business.' 

To improve on this and increase confidence among local and foreign investors, the FM announced several measures to improve the business environment of the country. Notable developments include reducing more than 39,000 compliances, decriminalizing more than 3,400 legal provisions, and introducing the Jan Vishwas Bill to amend 42 Central Acts. She also spoke about setting up a system of 'Unified Filing Process' for removing the need for separate submissions of same information to different government agencies. 

Boosting Research & Innovation in Pharma

The Indian pharmaceutical industry needs to focus on emerging opportunities across novel biologics, biosimilars, mRNA and other new-generation vaccines, orphan drugs, anti-microbials, precision medicines, cell & gene therapies etc., which account for two-thirds of the global pharma value pool. Developing these new, cutting-edge therapies is a complex and lengthy process. The scientific, technical and regulatory bars are considerably higher, making drug development difficult, more time consuming and very expensive. 

Exponential investments in R&D, manufacturing and digital transformation are needed for this transition up the pharmaceutical innovation value chain. The Indian pharma industry has for long been urging the government to prioritise schemes that boost research in these "moonshot" areas.

The finance minister has sought to address some of the pharma and healthcare industry's demands by announcing a new program for promoting research and innovation in pharmaceuticals through Centers of Excellence. The encouragement offered to the industry to invest in R&D in specific priority sectors is also very welcome and the industry awaits the details of the incentives to be announced. 

The opening of select ICMR (Indian Council of Medical Research) for research with public and private medical faculties is a positive move to enhance industry-academia linkages. The proposal for "dedicated multidisciplinary courses" for medical devices will ensure availability of skilled manpower.

The proposed Centers of Excellence for Artificial Intelligence could lead to healthcare innovations that offer patients in India more personalized risk assessments, diagnoses, and treatments.

Making Health a Priority

Budgetary allocation for healthcare in FY24 has gone up by 13% to Rs 89,155 crore. Of this, Rs 2,980 crore has been marked for health research, while the balance Rs 86,175 crore will be utilised for centrally sponsored schemes and establishment expenditure. 

Given the recommendation of the National Health Policy 2017 to increase public healthcare expenditure to 2.5% of GDP by 2025, the outlay seems to be gradually trending towards the target. Central and state governments' budgeted expenditure on the health sector had reached 2.1% of GDP in FY23 (Budget Estimates). 

To address the shortage of nurses in the country, the Budget has done well to announce the setting up of 157 new nursing colleges. Trained human resources are critical for achieving better outcomes and increasing access to high quality healthcare in India. 

The mission to eliminate sickle cell anemia by 2047, which will involve screening, awareness creation and counselling, was also a key announcement in this year's Budget.

Tax Relief

The FM has also sought to spur private consumption by providing income tax relief to the salaried and middle class, including an increased threshold for personal income taxes for citizens who have opted for the new tax regime. Those with an annual earning of under Rs 7 lakh will not have to pay income tax anymore under the new regime. The tax measure is expected to boost consumption, as it will put money into the hands of people at a time when inflation has been eroding disposable incomes. 

Separately, she proposed the rollout of a next-generation Common IT Return Form to further improve taxpayer convenience.

Focus on 'Going Green' 

In her Budget speech, the FM underlined the government's commitment to pushing the energy transition agenda and achieving net-zero emissions target by 2070 though an allocation of Rs 35,000 crore towards this goal.

The Budget also provided some relief for electric vehicles, gave a boost to ethanol production and outlined new programs on bioenergy, hydrogen and battery energy storage systems. 

The highlight was the Green Credit Program that seeks to incentivise companies, individuals and local bodies that adhere to sustainable practises under the Environment Protection Act and will help mobilize additional resources for such activities.

She also allocated additional funds to replace old vehicles and ambulances used by both central and state governments.

Conclusion

In Budget 2023, the FM has unveiled several key measures for the creation of a conducive physical, financial, research and regulatory ecosystem that can deliver a $10-trillion economy by 2035.