Will Budget 2023 act as a catalyst for India to be the fastest growing economy?
- The economic downturn in China, the repercussions of the epidemic, the crisis between Ukraine and Russia, and global inflation all manifest significant challenges for the Indian economy.
The economic downturn in China, the repercussions of the epidemic, the crisis between Ukraine and Russia, and global inflation all manifest significant challenges for the Indian economy. Will Budget 2023 serve as a stimulus for helping India to become the fastest-growing economy since the Indian economy has started recovering from the COVID-19 pandemic outbreak. The Budget Session of Parliament will commence on January 31 and end on April 6, according to Union Minister Pralhad Joshi. On February 1, Finance Minister Nirmala Sitharaman will introduce the Union Budget 2023–24 in the Parliament. Here are the estimates presented by analysts regarding the economy's development in Budget 2023, likely to be presented in the Union Budget 2023–2024.
Ashwajit Singh, Managing Director, IPE Global said tightening global monetary policy, spill overs from the Russia-Ukraine war, India is already feeling the heat with reduced exports, industrial activity and soaring inflation. With growth expected to slow down to near 6.6% in FY 2023-24, the economy needs to be better cushioned.
As India begins its historic leadership at G20, the upcoming Union Budget presents an opportunity for the government to revive the economy. Ashwajit Singh looks forward to an attentive, holistic and forward-looking budget that:
1. Increasing social sector budgetary allocations to stimulate economic growth is something that has not been acknowledged enough in the last few annual budgets. With only 1.4% of the GDP spent on social protection against an average of 2.5% by low-middle income countries, Budget 2023-24 and further will be an opportunity to fix this.
2. SEBI’s latest framework on an envisaged ‘Social Stock Exchange’ also increases the scope for greater cash flow and investment opportunities in the sector. With conversations around gender and climate budgeting gaining ground, the new channels could catalyse progress where the social sector could play a big role.
3. Invests in an Urban Employment Guarantee Programme, along the lines of NREGA, to slash the ever-increasing rate of urban unemployment, banking on vocational training and upskilling to create a future-ready India
4. Continues to encourage Public Private Partnerships to bridge the widening fiscal deficit gap post-pandemic and thereby push growth. With the UN lauding the unique Indian model of SDG localisation, with its focus on PPP, India could turn it into a competitive advantage as it approaches the agenda-2030 deadline.
5. Fiscally steers India’s global thought leadership and domestic climate agenda into action. Tax holidays for climate tech enterprises and funnelling incentives for green bonds will enable a green and just transition aligned with low-carbon developmental pathways. With climate change cascading impacts across geographies and sectors, more budgetary allocation will be required for climate adaptation.
6. India has been witnessing renewed emphasis on urban development over the last few years. I expect Budget 2023 to take this momentum forward. With a greater emphasis on capacity building of water and sanitation sector, I look forward to sustaining the achievements made under AMRUT and SBM-U to achieve the objectives of the second iterations of these missions in a time bound manner.
What sectors should the government prioritise in the upcoming budget 2023?
Nadir Godrej, Chairman and Managing Director of Godrej Industries said “Global inflation, China's economic slowdown, the pandemic's aftereffects, and the conflict between Ukraine and Russia pose a great challenge for the Indian economy. Although there is wage-push inflation in core inflation, as this is only 25% of the basket and since commodities make up most of our inflation basket, and their prices are dropping globally, headline inflation is expected to be around 5%. The global slump poses difficulties for overall growth. Exports have fallen. Therefore growth must be prioritized. A larger budget deficit is acceptable, as long as the spending stimulates higher GDP growth. Spending on infrastructure has boosted growth, which has attracted private investment and promoted exports. Domestic development and the Gati-Shakti initiative will be very beneficial. The type of deficit should be our primary concern rather than the overall budget deficit. Any investment that fosters progress is appreciated. Subsidies should be cut, and direct transfers to the underprivileged should be made. There might be a temptation to interpret the budget as populist, and I hope that won't happen. The Union Budget for 2023-2024 provides an excellent chance to invest in women's empowerment. The government must increase its efforts in infrastructure, skill development, education, health care, financial inclusion, and other sectors critical to empower women. Investing in the workforce can help create jobs and raise women's wages, ultimately leading to improved long term economic growth that benefits the bottom of the pyramid.”
Mr. Vishal Bhatia, CFO, Balancehero India said “2022 saw India becoming one the fastest growing countries in the world. The wave of innovations, exponential growth and large-scale digitization of the financial sector has also had a positive impact on financial inclusion. The future holds tremendous potential, with the industry's market size predicted to reach $150 billion by 2025 and $200 billion in revenue by 2030. To continue this momentum and strengthen the economy further, we strongly believe the government must adopt some specific measures in the upcoming Union Budget. A very strong focus needs to be laid on priority sector lending- credit access should be granted to those who are otherwise deprived of the facility. In other words, measures should be directed towards ensuring that market participants have enough liquidity to support the new to credit customers. Further, the government should implement the necessary measures for improved partnerships with banks.”
“We expect that the budget will contain supportive initiatives that will enable cutting-edge lending systems that can guarantee high-quality performance while preparing for the upcoming wave of transformation. The government should broaden the eligibility criteria for tax reliefs to start-up employees to alleviate the tax burden that Employee Stock Ownership (ESOPs) borne by them. While, the industry is working on direct benefits to borrowers of personal loans in the form of tax benefits, they demand indirect benefits for fintech sector to be empowered with the ease of doing business. This would ensure that lenders extend these benefits to the end users. The government should allocate funds to stimulate the creation of new ideas that would foster paperless digital lending and stronger partnerships. To improve customer and business experiences, credit quality, and expedite the expansion of financial organizations, we anticipate that the government will place a greater emphasis on the creation of digital infrastructure,” said Mr. Vishal Bhatia.
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First Published:15 Jan 2023, 10:42 PM IST
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