Union Budget (India) 2023 - Expectations

India’s Union Budget 2023 is set to be presented on 01-February 2023. This is the last full budget by the current government, before going for the general election in 2024. The budget is expected to address the country’s pressing economic issues and lay out a roadmap for India’s growth and development in the coming fiscal year.

The three words that have summarized the Central Government’s focus in the past three fiscals: Support à Recover à Growth. During its worst phase, the Govt. announced a stimulus package to support and recover the Indian economy. Now, the focus is shifted to growth.

The COVID-19 pandemic severely impacted the Indian economy. However, with the Government’s expansionary fiscal measures and stimulus, the Indian GDP bounced back in FY 22 with a V-shaped recovery. For FY23, despite global inflationary pressure, tightening of liquidity by central banks, and sharp appreciation of the US dollar, the GDP was still growing positively. India witnessed the following GDP growths - 

2020-21: negative 6.6%

2021-22: 8.7%

2022-23: 7%

The Economic Survey presented today has projected a GDP growth of 6-6.8% for the fiscal year 2024.

For the upcoming budget, the government should take steps to achieve the target of USD 5Tn GDP in the next couple of years.

1. Infrastructure: The government should commit capital expenditures for infrastructure development and build ports, roads, airports, and other infrastructure. The upscaling and balancing of the infrastructure and the digitization of agencies to make them work not in silos but in synchronization.
2. PLI Scheme: An extension of the Production Linked Incentive Scheme is highly anticipated, given the fact that it reaped impressive results across 14 sectors, helping boost ‘Atmanirbar Bharat’. The scheme has received an excellent response and an extension will give an impetus to domestic manufacturing and growth.
3. Renewable Energy: India is the among the world’s largest producers of renewable energy, but we still have a long way to go. Despite a significant push from the government, solar installation in India has not taken the uptick to attain the desired momentum. To meet the 2030 Solar Mission Target, the government should announce tax benefits for companies installing solar panel plants and for taxpayers installing solar rooftop power systems.
4. Tax Benefits (Individuals): The extant limit of INR 1,50,000 under section 80C of the Act was last revised by the Finance Act 2014. Given the rate of inflation since then, it is the need of the hour to re-consider the limit and provide relief to the assessees especially the lower income group.  Similarly, the present limit of deduction under section 80D of the Act seems insignificant as compared to the amount spent on medical insurance. Even the medical expenditure incurred in Covid as well as post-Covid era are humungous and have immensely affected the pockets of a common man.
5. Standard Deduction (Salaried Individuals): A standard deduction of INR 50,000 is provided for individuals while calculating salary income. While there are limited avenues for a salaried individual to deduct from salary, person carrying on a business/profession are allowed to debit various expenses in their profit and loss account during calculation of income under the head ‘profit and gains of business or profession’. Notably, even the salaried individuals must incur various expenses such as travelling expenses, communication expenses etc. for which they are not allowed any deduction, although the same is incurred during employment. Keeping into consideration that the major portion of personal income-tax collection comes from the salaried class, it is prudent to expect some relief to salaried class.
6. Direct Tax: Tax concessions for partnership firms, Limited Liability Partnerships and foreign companies are expected, in line with the corporate tax rate cuts of 2019.
7. Agricultural Sector: The sector which continues to be the backbone of the economy has been hit hard by the pandemic and the government is expected to announce measures to support farmers and rural development. This could include increasing investment in irrigation and rural infrastructure, providing subsidies for farm equipment, and strengthening the supply chain for agricultural products.
8. Unemployment: The unemployment rate in India has been on the rise due to the pandemic and the government is expected to announce initiatives to support small and medium-sized enterprises, which are another backbone of the Indian economy. This could include tax incentives, subsidies, and credit guarantees to help these businesses survive and grow.

The Union Budget 2023 is expected to provide a comprehensive plan for growth and development while balancing the need for stimulus to revive, support and escalate the progress in the various sectors like Agriculture, Infrastructure, and Financial Services, among others.