Introduction
2023 seems to be the year when India can finally look beyond COVID outbreaks and its subsequently induced economic slowdown, as we move into our “Amrit Kaal”. The 2023 Union Budget is the last full-fledged budget of the Modi 2.0 cabinet before the national elections in 2024. This is a make-or-break moment for the Modi government, determining the future of the ruling Bharatiya Janata Party.
While COVID-19 may seemingly be something of the past, the budget still has multiple challenges to navigate such as inflation, rising unemployment and supply chain issues. It includes the complexities that the year-long Russia-Ukraine war may have brought to India's trade relations. The budget must also find a way forward to reverse the slowdown in the growth of the Indian economy. [1]
On February 1st 2023, Finance Minister Nirmala Sitharaman presented the Union Budget 2023-24 on a positive note with a fiscal deficit for 2023-24 at 5.9 per cent of the GDP, well below the 6.4% budgeted for 2022-23. For the first time since the fiscal year ending March 2020, the government was able to reduce the deficit to less than 6% while also increasing the proposed expenditure to ₹45 lakh crores, an increase of 7.5% over that of the 2022 budget of ₹39.44 lakh crores. [2]
Highlights of the Union Budget 2023
The Union Budget 2023 largely follows up on the 2022 budget and improves upon it. It sets 7 priorities which act as the ‘Saptarishi’ and complement each other to guide the country to the ‘Amrit Kaal’. They are – inclusive development, infrastructure and investment, reaching the last mile, unleashing the potential, green growth, youth power, and the financial sector. [3]
Priority 1: Inclusive Development
Agriculture and Cooperation
To achieve a combined goal of agricultural and green growth, the Atma Nirbhar Clean Plant Program was announced, with an outlay of ₹2,200 crores.
With a substantial 11 per cent hike, the agricultural credit target is set to ₹20 lakh crore with a focus on animal husbandry, dairy and fishery to diversify the income sources of those employed in the agriculture sector.
To round it off, the government plans to invest ₹6,000 crores in enabling the activities of fishermen, fish vendors and MSMEs under a new sub-scheme of the PM Matsya Sapada Yojana.
Health
Fresh with memories of the healthcare crisis in the last few years, the government made substantial increases in the budget for improving public health. The health sector was allocated ₹89,155 crores and the AYUSH ministry ₹3,647 crores- an increase of approximately 13% and 28% respectively, over last year’s budget.
Funds of ₹6,835 crores were provided towards the establishment of 22 new All India Institute of Medical Sciences (AIIMS).
There was an increase in budget allocation of the National Health and National Digital Health Missions, National Tele Mental Health Program, and other autonomous bodies. [4]
Education and Skilling
The 2023-24 budget is focused significantly on education, with a record high of ₹1.12 lakh crores set aside for revamping teacher training through innovative pedagogy, curriculum transaction and continuous professional development.
The PM-SHRI (Pradhan Mantri Schools For Rising India), a new scheme which seeks to significantly improve government-run schools, was launched with a budget allocation of ₹4,000 crores to develop 14,500 model schools across the country over the next few years.
An exception to the general trend of increased funding, the outlay for research and innovation was reduced to ₹210.61 crores in 2023-24 in comparison to ₹218.66 crores in 2022-23. [5]
Priority 2: Reaching the Last Mile
With a bold target and substantial allocation of ₹15,000 crores, the government launched the Pradhan Mantri PVTG (Particularly Vulnerable Tribal Groups) Development Mission to ensure PVTG families have housing with all basic facilities such as electricity, clean water, etc.
As a long-term three-year plan to reach the last mile in terms of education and upskilling, the central government plans to reach 3.5 lakh tribal students by recruiting 38,800 teachers and support staff for the functioning of 740 Eklavya Model Residential Schools. [6]
One of the Modi government’s oldest schemes, the PM Awas Yojana, received a significant funding boost of 66 per cent to over ₹79,000 crores.
Priority 3: Infrastructure & Investment
Capital investment by the government received a big boost with a steep increase for the third year in a row by 33 per cent to ₹10 lakh crores.
The most significant capital investment was in the railways, with the highest-ever capital outlay of ₹2.40 lakh crores.
To accompany this high investment in railways and take full advantage of it, ₹75,000 crores have been allocated for the creation of about 100 critical transport infrastructure projects, for last and first-mile connectivity for ports, coal, steel, fertiliser, and food grains sectors to aid in the creation of its accompanying infrastructure.
Additionally, the government announced plans to revive 50 aircraft landing sites, comprising airports, heliports and water aerodromes per the government’s long-term regional connectivity scheme, UDAN.
Priority 4: Unleashing the Potential
Under Mission Karmayogi, the Centre, States and Union Territories are to revamp and increase digitisation in capacity-building plans for civil servants including launching an integrated online training platform, iGOT Karmayogi.
To enhance the ease of doing business, more than 39,000 compliances have been reduced and more than 3,400 legal provisions were decriminalised.
Significant focus was given to developing applications using new-age 5G technology in engineering institutions to realise a new range of opportunities, business models, and employment potential. The labs will cover, among others, applications such as smart classrooms, precision farming, intelligent transport systems, and healthcare applications.
Priority 5: Green Growth
₹35,000 crores of priority capital investment was allocated towards achieving India’s commitment to net zero carbon emission by 2070. Out of this, ₹19,700 crores were allocated for the Green Hydrogen Mission.
The government has also proposed mangrove plantations along the coastline and salt pan lands under the MISTI initiative (Mangrove Initiative for Shoreline Habitats & Tangible Incomes) that would employ existing resources like the MGNREGS and CAMPA funds.
The Amrit Darhohar scheme was introduced to conserve wetlands by promoting their optimal use which will be implemented over the next 3 years.
The new PM-Pranaam (PM Programme for Restoration, Awareness, Nourishment and Amelioration of Mother Earth) is a major initiative for green agriculture promoting alternative fertilisers and balanced use of chemical fertilisers. [7]
Priority 6: Youth Power
Keeping up with the evolving industry landscape, a novel strategy is being devised under the Pradhan Mantri Kaushal Vikas Yojana 4.0, to be launched over the next 3 years. It aims to equip a significant number of young individuals with contemporary competencies required for Industry 4.0 such as AI, robotics, mechatronics, IOT, 3D printing, drones, and soft skills.
To keep up with the changes in the industry, the Pradhan Mantri Kaushal Vikas Yojana 4.0 is to be updated to skill lakhs of youth in new-age courses for Industry 4.0 like coding, AI, robotics, mechatronics, IOT, 3D printing, etc. over the next three years.
30 Skill India International Centres will be set up across different States to ensure the youth have sufficient skills for international opportunities.
Tourism
A pilot initiative is set to be launched for re-envisioning the tourism experience across approximately 50 destinations, encompassing aspects such as physical and virtual connectivity, specialised tourist guides, elevated standards for food streets, and heightened measures for tourist security.
Under the Vibrant Villages Programme, border villages also get a focus in terms of tourism infrastructure and amenities.
States will be encouraged to set up a Unity Mall in their state capital, their most prominent tourism centre or financial capital, for the promotion and sale of their indigenous products.
Priority 7: Financial Sector
A revamped credit guarantee scheme for the MSMEs will take effect from 1st April 2023 through an infusion of ₹9,000 crores in the corpus. This would enable additional collateral-free guaranteed credit of ₹2 lakh crores. Further, the cost of credit will be reduced by about 1 per cent.
A one-time new small savings scheme, Mahila Samman Savings Certificate, will be made available for two years up to March 2025. It will offer a deposit facility of up to ₹2 lakhs in the name of women or girls for a tenure of 2 years at a fixed interest rate of 7.5 per cent with a partial withdrawal option.
The maximum deposit limit for Senior Citizen Savings Scheme was enhanced from ₹15 lakhs to ₹30 lakhs, to accommodate the government’s forecast of increased income among the citizens.
A national financial information registry will be set up, to facilitate the efficient flow of credit, promote financial inclusion, and foster fiscal stability.
Tax
The government designated the new tax regime as the default tax system, providing some much-needed clarity concerning the prior existence of two equivalent tax regimes. Nevertheless, citizens can opt for the old tax regime, which remains unchanged.
No tax on income up to ₹7 lakhs a year in the new tax regime (with the tax rebate included)
New tax rates are
₹0-3 lakh - nil
₹3-6 lakh - 5%
₹6-9 lakh- 10%
₹9-12 lakh - 15%
₹12-15 lakh - 20%
above ₹15 lakh- 30%
With the rising popularity of online games involving the use of money, the government proposes to provide for TDS (tax deducted at source) and taxability on net winnings at the time of withdrawal or the end of the fiscal year.
Miscellaneous
Consistent with the general trend of increased allocation the defence budget increased to ₹5.94 lakh crores from last year’s ₹5.25 lakh crores.
The Defence Research Development Organisation (DRDO) has been provided with ₹23,264 crores.
As an indication of the Indian economy being on the right path and having a bright future, the fiscal deficit is targeted to be below 4.5 per cent by 2025-26. [8]
Conclusion
The Budget 2023-24 was arguably the most important budget presented by the Modi government. It was necessary to counter the drop in India's growth rate to bounce back. With the previous COVID outbreak in India being more than a year ago, the public will not look favourably upon the COVID-19 pandemic being used as an excuse for the poor state of the economy any longer.
The government seemingly succeeded with the budget, at the very least in terms of public perception, with it being lauded by the general populace as well as international organisations. The tax cuts are expected to boost consumer sentiment and maintain growth in consumption by improving the disposable incomes of all.
The different parts of the budget work well to uplift each other. For example, the revival of 50 aircraft landing sites under the government’s UDAN scheme would not only boost transport infrastructure but also serve to boost tourism. Such big expenditure numbers will lead to capacity generation, public asset creation, opportunities for industry, and above all, gainful employment.
The emphasis on green growth in the budget resonates with India's net-zero goals as well as COP27 commitments and the updated Nationally Determined Contributions(NDCs). The budget clearly articulates the government’s strategy for economic development with a focus on sustainable development. This was much needed as India faces the grave reality of depleting natural resources as well as more frequent extreme weather events [9]
However, all is not hunky-dory. While the government has allocated significant funds towards infrastructure, healthcare, and education, some experts have pointed out that the budget may not adequately address the needs of these sectors. For example, the healthcare sector requires significant investments in research, equipment, and training of medical professionals, and the allocated funds may not be enough to address all these needs.
Additionally, there are concerns regarding the viability of the budget. While the budget proposed several measures to boost entrepreneurship and job creation, it remains to be seen how these measures will be carried out effectively. There have been concerns about the slow execution of previous budget proposals, and the government will need to ensure timely and efficient undertaking of the proposals in the current budget. The timely implementation is even more significant as the government continues to announce even more long-term schemes. While many of these schemes seem to be perfect, a long 3-year timeline set for their realisation raises concerns. The completion of such long-term schemes usually gets delayed and the general elections next year can change everything especially if the incumbent government is voted out of power.
Overall the Budget 2023 is an appropriate budget for an ambitious India, as we move towards the milestone of 100 years of independence; but it all depends on how the plans are executed, if we will truly have our ‘Amrit Kaal’.
Article by:
Ishaan Bhattacharjee,
Member,
PES MUN Society, RR Campus
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