India’s Finance Minister Nirmala Sitharaman presented the Union Budget for 2023 on February 1, 2021. The budget proposed several changes in taxation and spending, with the aim of growing the economy and creating jobs. We will also discuss some of the key takeaways from this budget
The most significant change was the introduction of a tax on higher premium products, which life insurers fear will result in a 10–12% hit to their top lines. In the new tax regime, those with income up to 7 lahks a year will not pay tax.
Banks, for the very first time, can finance M&A activity within Indian borders at GIFT City. To promote evidence-based research in Ayush systems through Ayush research councils, the budget also emphasized research. Furthermore, the capital expenditure was increased by 10 lakh crore, a 330% increase from last year and four times more than the allocated amount in 2016. Moreover, the budget also proposed the creation of 157 new nursing colleges.
The budget proposes several changes to the taxation system, such as reducing the personal income tax rate for that earning between Rs. 5–15 lakh. This will provide relief to those in the middle-income bracket, allowing them to save more money. Additionally, the budget proposes to reduce the corporate tax, which is expected to promote investment and trigger job creation.
The budget also proposes several incentives to encourage investments in the manufacturing sector. These include duty exemptions, tax holidays, and the creation of a fund to promote the development of the sector. This will encourage the growth of manufacturing, leading to more job opportunities.
The budget seeks to promote the growth of the agricultural sector by boosting the availability of credit and increasing the minimum support price. This will help farmers increase their productivity and earn more money, leading to an overall improvement in the sector. It also proposes to provide loan guarantees to small farmers, as well as setting up a fund to promote innovation.
The budget also seeks to promote digital infrastructure and financial inclusion. To this effect, the budget proposes to set up a fund for the long-term financing of digital infrastructure projects and to establish a system for the promotion of digital payments. This will allow more people to access banking and financial services, which will increase overall financial inclusion.
On the flip side, the budget does not provide much relief to the unorganized sector. It does not propose any measures to improve their access to credit, nor does it provide any incentives to help them increase their productivity. This is a missed opportunity, as the unorganized sector plays a vital role in India’s economy.
Overall, India’s budget for 2023 seeks to promote the growth of the economy through taxation and investment incentives. It seeks to reduce the burden on the middle-income bracket, as well as provide incentives to the manufacturing and agricultural sectors. However, it does not provide enough relief to the unorganized sector, thus missing an opportunity to further boost economic growth.
By Zenia Garg (Research Associate, Nevat Investments)
