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Budget 2023: Low on surprises, high on ambition

Tax revision will garner headlines and some votes come poll season

nirmala-budget-rep-pti A man watches the live telecast of Union Budget 2023-24, in Kolkata | PTI

One for the masses and one for the bosses. Finance Minister Nirmala Sitharaman has pulled a rabbit out of the red bahi khata-wrapped tablet. It is digital for the masses, with a healthy dose of tradition thrown in.

But the real magic would be in making it walk and talk, and walk the talk.

There weren’t too many surprises—nice or nasty—in the Narendra Modi government’s last full-fledged budget before general elections (next year's budget would only be a vote-on-account on the eve of poll announcement).

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Even the whiff of personal income tax revisions which will put more money in the pocket of taxpayers in the coming financial year was already blowin’ in the wind, right from the finance minister’s by-now famous “I am also a middle class person and I understand their pains” speech a couple of weeks ago.

While the tax revision will garner headlines and some votes come poll season, there is a larger strategy at play as far as the macro economy is concerned. The raising of capital expenditure is in tune with the intent displayed in previous budgets on infrastructure like roads and ports. The outlay on capital spending has been increased by Rs 10 lakh crore, which now accounts for 3.3 per cent of GDP.

So, what is the big idea behind this budget? It is more or less the same as last time, but now super charged with a soaring ambition. With Covid behind us and the worst of inflation seemingly under check, the government is now emboldened to spend even more, despite the gaping fiscal deficit. On construction, roads, airports, agriculture and startups, even while reducing duties on sunrise sector staples like lithium ion and open cell panels. Then there are incentives like providing easy loans for small businessmen and cutting tax on the big boys of business.

The hope? The flooding of the system with money will trickle down the value chain to sustain the economy. And hope, continuing hope, that the private sector chips in in equal measure, especially with further ‘ease of doing business’ measures like revision and decriminalisation of more corporate laws.

At least in spurring India Inc to play ball, the Modi-Sitharaman combine is flying on hope against hope. The expectation of a private sector capex on the heels of the government’s massive infra push last time did not mostly materialise, at times even leading the frustrated FM to ask what else she should do and what the private sector is waiting for. By continuing on the same part, the hope is that it will be different this time around.

Could it be this budget? The massive push on infra is this time spread across more areas, compared to the emphasis last time which was more on ‘Gati Shakti’ and related infra spending. Now, the Indian economy is clearly on a resilient and upward trajectory—inflation and geo-strategic worries like Ukraine and China apart, and the confidence is that it could be third time lucky this time around (if you take the Aatmanirbhar Bharat announcement after Covid as the first push).

The push this time is equally across the rural economy and green energy. With India’s net zero carbon target of 2070, green measures, like the ones ranging from support for Green Hydrogen Mission, incentives for battery storage, are likely to be a regular fixture in upcoming budgets, as well. Customs duty reduction on items like lithium ion and open cell panels is an important element in electric battery technology, and is a pointer to the direction.

At the end of the day, in a year with assembly polls in nine states, followed by the big one next summer, most budget announcements had one eye firmly on the hustings. While the Rs 5,000 crore dole out to Karnataka was apparent enough, many of the other measures, especially bigger outlay for anything from housing to agriculture, are a clear clarion call aimed at Lok Sabha 2024.

Of course, not to forget the income tax revisions. Even at a few thousand rupees, it is sure to warm the cockles of the present government’s biggest constituency—the urban youth and the lower middle classes. After all, who doesn’t love a few extra bucks in their pocket? But the largesse is equally aimed with one eye on any possible financial headwinds of spurring private consumption, even in the face of price rise and bank interest hikes.

Of course, while the political aspect of it (read: upcoming elections) seems taken care of, Sitharaman’s bigger balancing act would be in taming the fiscal deficit. She had made promises, despite all the big spending hoopla to tame this gap between government spending and government earning. After spiralling to nearly 10 per cent in the aftermath of Covid, it has been brought down to 5.9 per cent now, she informed the Parliament in her budget speech.

Not only that, it will go down to 4.5 per cent in three years time, she has promised. It will be a tall order to fulfil even in the best case scenario, though—Sitharaman just needs to think back to last year, when she based many projections based on the then international price of oil, only to see it shooting up within days as the war in Ukraine broke out.

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