Bahubali Budget Or Populist One: Decoding Sitharaman's Roadmap For Amrit Kaal

"Honorable Speaker, I present the Budget for 2023-24. This is the first Budget in Amrit Kaal," said Union Finance Minister Nirmala Sitharaman on 01 February while standing tall in Parliament wearing a handwoven ilkal silk red saree. 

As soon as Sitharaman finished her 87-minute speech which turned out to be her shortest one so far, the reaction of industry leaders started flooding in. As usual, the majority of them went gaga over the budget and termed it as growth-oriented, future-focused and more. 

The majority of business leaders welcomed the budget and noted that it is a roadmap of nation-building with a continued focus on public expenditure on infrastructure, sustainable economic growth and encouraging consumption demand while staying on the course of strict fiscal prudence. 

“This budget is a Bahubali budget. With one arrow multiple targets are shot. Fiscal prudence is achieved with a lower deficit and path set till FY26. Consumption is supported through tax cuts and investment outlay is enhanced. The budget could have focussed more on asset monetisation but that can be pursued otherwise also depending upon market conditions," said Nilesh Shah, Managing Director, Kotak Mahindra Asset Management Company. 

Indian economy—

Sitharaman said that the Indian economy is on the right track and despite a time of challenges, it is heading towards a bright future. The current year’s economic growth is estimated to be at 7 per cent which is the highest among all the major economies. 

As per Economic Survey 2022-23, India is likely to witness gross and domestic product (GDP) growth of 6.0 per cent to 6.8 per cent in 2023-24.

However, the International Monetary Fund (IMF) said that India's growth is set to decline from 6.8 per cent in 2022 to 6.1 per cent in 2023. Though the country will remain the fastest-growing large economy in 2023 and 2024. 

"I rate this budget as a prudent and well-balanced one. It is conservative fiscally, bullish on India and practical on its digital framework capabilities to build better public governance. This budget is one, where there is something for everyone. The previous two budgets had Covid-19 worries. But this year has additional geopolitical concerns, issues of Russia Ukraine war which has impacted inflation globally," said Srinath Sridharan, Author, Policy Researcher and Corporate Advisor. 

What's in—

Centre is going to spend Rs 10 lakh crore on longer-term capital expenditure in 2023-24, extending a strategy adopted to revive growth in the aftermath of the Covid-19 pandemic. Notably, the number was higher than the Rs Rs 7.5 lakh crore allocated in the Union Budget 2021-22 and the highest on record.

However, the year-on-year (YoY) hike of 33 per cent is only marginally lower than the previous year's 35 per cent jump.

''Thirty-three per cent jump in the capital expenditure to Rs 10 lakh crore clearly demonstrates the government's resolve to help India remain the fastest growing economy in the world, despite global headwinds,'' said Sumant Sinha, President ASSOCHAM. 

Sitharaman also said that the Centre will grant customs tax reductions on the import of specific parts such as camera lenses and concessions on the import of lithium-ion batteries to stimulate mobile phone manufacturers in India.

"The reduction in the amount of the interest-free capex loan to the states dominated the mild downward revision in the GoI's capex in the FY2023 RE relative to the budgeted figure. Moreover, the step-up in the interest-free capex loan to the states in FY2024 budget estimates (BE) relative to FY2023 RE, accounts for around a quarter of the proposed incremental capex by the GoI," added Aditi Nayar, Chief Economist, ICRA. 

The Centre has proposed raising the basic customs tax on kitchen chimneys from 7.5 per cent to 15 per cent and lowering the tariff on heat coils from 20 per cent to 15 per cent. It has also recommended lowering the basic customs duty on components and TV panels to 2.5 per cent in order to encourage value addition in TV manufacturing.

The government also increased the income tax rebate limit from Rs 5 lakh to Rs 7 lakh and now the new tax regime will be the default tax regime. The FM announced, "Tax for income of Rs 0-Rs 3 lakh is nil, for income above Rs 3 lakh and up to Rs 5 lakh will be taxed at 5 per cent, for income of above Rs 6 lakh and up to Rs 9 lakh will be taxed at 10 per cent and for income above Rs 12 lakh and up to Rs 15 lakh to be taxed at 20 per cent and above 15 lakh at Rs 30 per cent."

Also, Prime Minister Awas Yojana has seen a 66 per cent increase in its funding, from 47,500 crores in the previous year to 79,000 crore. 

"This is a major highlight of the budget, as it provides much-needed financial assistance to countless low-income households. The generous fund allotment will allow for the improvement of existing resources and provide improved urban housing options to a large portion of the population, said Saket Dalmia, President, PHD Chamber of Commerce and Industry. 

Bahubali budget or populist one— 

Soon after the budget, Modi's opponents also jumped in and slammed the government for its "limited" focus on important sectors such as education and health.

Congress leader Rahul Gandhi tweeted, "Mitr Kaal Budget has no vision to create jobs, no plan to tackle mehngai (inflation), no intent to stem Inequality. One per cent richest own 40 per cent of wealth, 50 per cent poorest pay 64 per cent of GST and 42 per cent of youth are unemployed, yet, the PM doesn’t care. This budget proves govt has no roadmap to build India’s future."

Delhi Chief Minister Arvind Kejriwal alleged that there is no relief from inflation in this budget. On the contrary, this budget will increase inflation. There is no concrete plan to remove unemployment. It is unfortunate to reduce the education budget from 2.64 per cent to 2.5 per cent. Reducing the health budget from 2.2 per cent to 1.98 per cent is harmful.

While talking about what is missing in the budget, Sridharan said that the budget could allocate more funding to public health. As the most populous nation, any public health scare is a strategic national weakness. Public health would need to be built over years, and we should start investing more in it. 

"I think we have not addressed any policy incentives to startups. With the angel tax introduction to foreign investors also, we might have added salt to the injury," added Sridharan. 

Sridharan believes that it is a popular budget for a populous nation. But it’s not a populist budget. If one brings a proposal occasionally or rarely for people's development, it can then be called populist. 

"The FM as a minister has a political role to deliver. This budget, within its fiscal constraints, is an excellent one. But as a statement of proposed accounts of the government of India, actual execution of plans and delivery of proposals need the bureaucracy to deliver efficiently," he added. 

NIlaya Varma, Co-Founder and CEO, Primus Partners also said that it is a clever Budget that does not abandon the path of prudent fiscal management and at the same time puts money in the urban middle class to boost near-term domestic demand against a weak global outlook. Many other initiatives will take time to show results and are steps toward the government's vision for Amritkal.

"Industry is a bit disappointed as Industry was expecting announcements related to Incentives for domestic design,  Expanding the PLI scheme, and Strengthening the supply chain which was the need of the hour. We hope the government will consider our request in the next budget and support the industry in becoming a global manufacturing hub and achieving the Atmanirbhar Bharat dream, " said Mandeep Arora, MD & co-founder, UBON. 

What is Next: India's Amrit Kaal—

Sitharaman's budget hopes to build on the foundation laid in the previous budget and the blueprint drawn for [email protected] "We envision a prosperous and inclusive India, in which the fruits of development reach all regions and citizens, especially our youth, women, farmers, OBCs, Scheduled Castes (SC)," the minister added. 

Meanwhile, amid India’s rising global profile, the Modi government is focusing on wide-ranging reforms and sound policies, implemented through Sabka Prayas  "Our vision for the Amrit Kaal includes a technology-driven and knowledge-based economy with strong public finances, and a robust financial sector. To achieve this, Jan Bhagidari through Sabka Saath Sabka Prayas are essential, a hopeful Sitharaman added.