Union Budget 2023: A pro-growth, populist budget; feel sectoral leaders

The Union budget 2023 has raised the bet on spending and upped the capex target by 33 per cent. It also places a lot of emphasis on infrastructure and focuses on the middle-class, while providing a lot of impetus to consumerism


Union Finance Minister, Nirmala Sitharaman, announced a big budget today ahead of the general elections next year. “This is the first budget in Amrit Kaal,” said the FM, kicking off the Modi Government’s final full budget.

“The world has recognised the Indian economy as a ‘bright star’. Our current year’s economic growth is estimated to be at 7 per cent. It is notable that this is the highest among all the major economies. This is despite the massive slowdown globally caused by COVID-19 and a war. The Indian economy is therefore on the right track, and despite a time of challenges, heading towards a bright future,” said the finance minister in her budget speech.

According to economists, the Union Budget 2023 has built on the foundation that had been laid in the previous budgets- fiscal prudence without compromising growth.

“The fiscal deficit is expected to consolidate by 50bps to 5.9 per cent in FY24 with a vision to consolidate to 4.5 per cent by FY26. A massive increase in the capex outlay alongside the reduced tax liability on personal income tax is a twin approach to boost both infrastructure and consumption spending,” says Namrata Mittal, CFA & Senior Economist, SBI MF.

According to her, the nominal growth expectations look a tad optimistic. “The long-term capital gains tax has been left untouched, allaying the fears of the equity market. Inclusiveness has been catered to without losing an eye on the transition to a green economy. The gross borrowing number budgeted for FY24 is pegged at Rs 15.4 trillion, which is marginally better than the street expectations. Prima-facie, Budget 2023 should be cheered by the equity and fixed income market alike,” she points out.

Also Read: Union Budget 2023: Real estate sector hopes for industry status this year

Madhavi Arora, Lead Economist – Emkay Global Financial Services adds in, saying, “The budget has ensured that the fiscal impulse is maximised to improve potential growth, while signalling an adherence to medium-term fiscal sustainability. This requires continued financial sector reforms and better resource allocation.”

According to her, the expenditure focus has been on the rural sector, welfare, infrastructure, PLIs, and energy transition. Capex spend has picked up significantly to 3.3 per cent of the GDP and is almost a double of the pre-pandemic prints. “This especially implies a larger fiscal multiplier on employment and growth and will support the crowding in of the still lacking private capex,” she elaborates.

It’s a populist budget—India Inc.

Reacting to the Union Budget announcements, India Inc. feels that it’s a populist and pragmatic budget.

CA and finfluencer, Shreya Jaiswal says, “Considering the high inflation rate of the country, the global recession, the post-pandemic recovery, and the upcoming 2024 elections, Budget 2023 is the perfect example of a populist budget. From promoting MSMEs to continuing to drive the start-up ecosystem in India and favouring domestic tourism over international tourism, the government is also betting big on India emerging as a superpower amid the global recession.”

Dr. Samantak Das, Chief Economist and Head of Research and REIS, India, JLL feels that this budget has sought to build on the roadmap laid down by the previous budgets.

“It has given more money into the hands of individuals and households which would, to a large extent, ease out the increasing pressure on account of the home loan EMIs and the rising home prices. The increase in the allocation for the PMAY by a significant 66 per cent would help to continue the capital flow under the CLSS and other related schemes. Addressing the need for creating sustainable cities of tomorrow through urban planning, ease of land availability and promoting TOD schemes will be key towards sustainable development moving forward. The focus on overall infrastructure development and on Tier 2 and 3 cities will be key to overall economic development. This budget is a balanced one for the economy, but it has missed out on some of the key demands of the real estate sector,” he says.

Revamped credit scheme to provide collateral-free credit

In her fifth budget, the FM has proposed that there should be a special focus on the MSME sector. The government has announced a revamped credit guarantee scheme to provide MSMEs with more collateral-free credit. Last year, it was proposed that the credit guarantee scheme for MSMEs be revamped. The revamp scheme will go into effect on April 1, 2023, with a corpus infusion of 9,000 crores. This will allow for an additional two lakh crores of rupees in collateral-free guaranteed credit. Furthermore, credit costs will be reduced by about 1 per cent.

Besides that, the government has implemented several reforms aimed at boosting the growth of the MSMEs in India, while also aiming to improve their international competitiveness.

Also Read: Union Budget 2023: Recommendations for MSME Sector

Ashish Aggarwal, Director, Acube Ventures says, “The assistance being given to the MSMEs continues in line with last year’s expectations from the budget. This budget has provided wings to India’s growth story with the special focus that it has displayed on increased expenditure on investments, employment and ease of doing business. The revamped credit guarantee scheme will enable MSMES to avail themselves of an additional collateral-free credit of Rs 2 lakh crores and will also lower the cost of credit by 1 per cent. This comes off as a great piece of news for the MSMEs that are still recovering from the impact of the pandemic. The Union Budget 2023 has stood up to the expectations of most people with its supportive measures aimed at democratising credit and speeding up financial inclusion.”

Raghunandan Saraf, Founder & CEO, Saraf Furniture, adds in, “The infusion of Rs 9,000 crores into the corpus of the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) should allow for a better and broader scheme implementation, as well as improved claim meeting. This decision is expected to offer a significant benefit to India’s MSME sector. Supplemental collateral-free credit is expected to aid MSMEs in meeting the obstacles posed by the global pandemic, allowing them to continue to grow and create employment. It could be a positive step in safeguarding the well-being and expansion of India’s MSME sector.”

According to Delphin Varghese, Co-Founder and Chief Business Officer at Adcounty Media, “The Vivad Se Vishwas scheme 2.0 provides a ray of light to failed MSMEs. MSMEs will receive 95 per cent of their performance security from the government under this scheme in cases of failures to execute contracts. The credit guarantee programme for MSMEs had a rocky start, but by getting banks on board and encouraging them to lend, the scheme has helped to reduce stress in the sector.”

“Calling MSMEs the “growth engines of the economy”, the FM has extended the benefits of presumptive taxation to micro-enterprises with a turnover of up to Rs 2 crores,” he adds.

Weighing in, Amit Gupta, MD, SAG Infotech says, “The existing legislation will be changed to make compliance easier – a single point of contact for SEZ, GSTN, and IFSC registration will be established. Under Vivad se Vishwaas, MSMEs Relief, In the event of non-performance, the government will reimburse 95 per cent of their contract money to provide relief. The PAN will be used as a unique identifier for all the digital systems of the government’s agencies.”

KYC norms to be simplified

The FM has announced that the KYC process will be simplified by adopting a ‘risk-based’ instead of a ‘one size fits all’ approach. The financial sector regulators will also be encouraged to have a KYC system which is fully amenable to meet the needs of Digital India.

“This budget is very exciting, especially for the fintech world. It is going to take us into another orbit,” opines Milan Ganatra, CEO & Founder, 1SilverBullet.

Also Read: Businesses should adopt sustainable, green practices: Goyal

“Firstly, making the PAN a unified document will go a long way. Secondly, introducing a digital locker for non-individuals is an extremely major step, allowing non-individuals to go fully digital which was a big challenge, i.e., opening a bank account and corporate transacting will no longer be a hindrance. So, in the coming financial year, we’ll see a massive level of development all over and I assume that at this pace, we will not see any paper in 2025. Hence, paper consumption should go down and the entire economy will become digital. I’m very excited and looking forward to some massive changes,” he says.

Abhishek Dev, CEO and Co-Founder, Epsilon Money Mart says that simplifying the KYC process, using the PAN as a common business identifier and the enhanced use of DigiLocker are all welcome steps towards the important objectives of the simplification of investment, the lowering of taxation and the increased financial inclusion of individuals and businesses.

Matthew Foxton, India Regional President & Executive Vice-President, Branding & Communications-IDEMIA, also feels that the adoption of a unified KYC process, utilising DigiLocker and making the PAN as the primary means of identity verification, is a positive step forward. “It will increase financial accessibility for marginalised communities,” he points out.

“I am pleased to see the focus that the Union Budget has put on strengthening the digital ecosystem. India’s digital advancements in this decade have been remarkable, especially the integration of the digital infrastructure and the identity framework. Establishing a strong national identity system is crucial as it boosts security, drives economic growth, and strengthens social unity,” he adds.

Impetus to AI infrastructure

The government aims to create a strong AI ecosystem in India and train skilled AI professionals. For this, the FM intends to establish three “Centers of Excellence for Artificial Intelligence” in prestigious academic institutions. These centres will be collaborative efforts between educational institutions and leading industries to research and develop practical AI applications in agriculture, health, and sustainable cities.

Reacting on these announcements, Amit Relan, Founder and CEO, mFilterIt, says, “AI will change the face of India and aid in establishing a stronger foundation for a “Digital India”. It will increase efficiency, improve decision-making and accelerate economic growth in sectors like healthcare, education, agriculture and finance through automation, data analysis and predictive modelling,”

For the country to be able to maximize the benefits of AI, it will be essential for the public and private sectors to work together to ensure that the use of AI aligns with the country’s values and priorities and to address the ethical, legal and social implications of AI, he further suggests.

Also Read: First Covid, now layoffs: Indian professionals undergo tremendous stress, anxiety

Sujit Patel, Founder and CEO, SCS Tech, feels that these measures will transform India into a digital society and for that to happen, it is important to focus on digital transformation and cyber security solutions. “The budget report evaluates how AI will be used to boost India’s economy, along with proposals for numerous fields where AI can be deployed. Not only will this increase the effectiveness and productivity of the industry but will also optimise the process of the completion of tasks. Additionally, this will create new jobs and avenues for numerous start-ups and businesses to provide solutions in industries like utilities, education, health, agriculture, and smart cities,” he asserts.

Focus on consumerism

Reacting to the budget, retail player Arvind Mediratta, MD & CEO, METRO Cash & Carry India, says that the budget is pro-growth with a credible roadmap. “The amount of inclusiveness in this budget from the medium to long-term perspective, especially given the global inflationary market, will help maintain fiscal discipline, lead to capacity building and help accelerate India’s growth prospects. The announcement about decriminalising 3400 legal provisions may not be quantifiable in terms of numeric value but is a huge positive step towards reducing the compliance burden and enhancing the ease of doing business.  Also, the much-awaited income tax slab change is a huge tax relief for the salaried middle class and will help boost spending and consumption,” he says.

Another player, Sagar Gupta, CEO and Founder, EKKAA Electronics, says that the budget clearly highlights the requirement of measures to boost consumption and consumer demand.

Talking specifically about the Led TV and consumer electronics industry, he says, “The government recently reduced the custom duties on the essential components of LED TVs. This is great news for consumers and businesses alike. By reducing prices, businesses can attract more customers and increase their profits. This can help businesses to grow and create more jobs, helping the industry to expand and invest on its manufacturing capabilities, infrastructure, education and training. This will give industry the much-needed push and time to invest in semi-conductor manufacturing within the country, along with enabling it to make products that are attractive to the global market.”

For consumers, this not only means that they can now purchase LED TVs at a lower price, but it also means that now they have more money to spend on other goods and services. This helps to stimulate the economy and create more jobs, he adds.

Something for all

According to most industry leaders, this Union Budget has something for everyone. Anil Joshi, Managing Partner, Unicorn India Ventures says, “As expected, the budget has something for everyone. The FM has touched every aspect of society. The focus has been on supporting growth and continuing the expenditure on infra building. While the budget seems populist, it has been made possible only due to the strong performance of the economy in general.”

Many sectoral leaders are of the unanimous opinion that this year’s budget focuses on inclusive development, fostering growth and job creation while keeping the macro-economy in a stable yet growth-oriented mode.

However, there are others who feel that the budget is more consumer  centric. The reduction in income tax rates will encourage a higher number of people to file their returns along with endowing them with higher net disposable incomes, which in turn will benefit the entire economy of the country by increasing consumption.

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