Home / Opinion / Views /  Union Budget 2023-24: Prioritizing substance above show

This year's budget has pleasantly pleased us in a number of ways. First off, the growth in capital expenditure has been far more than expected. This would increase the share of capital expenditures in the overall budgetary spending by 9 percentage points over the course of five years, to 22% of total expenditures for the upcoming fiscal year. This is encouraging for the likelihood of exceeding 6% GDP growth in the upcoming fiscal year. 

Second, the budget has continued the gradual fiscal consolidation despite being the last complete budget before the upcoming general elections. Bond yields could be modestly reduced given that market borrowing plans are basically unchanged from last year. In addition to being advantageous for the nation's cost of capital, this would also be beneficial for the equities market because it would lower the discounting rate and open the door for higher equity valuation multiples. A prudent approach to spending would help monetary policy limit inflation as well. 

Third, while spending on agriculture, related activities, and rural development has not significantly increased in this budget, it has continued to exceed Rs.3 trillion. Spending on these accounts has rapidly increased during the last five years. A number of additional initiatives, such as public-private partnerships, technical advancement, supply chain and logistics development, and rural economic stimulation, have also been proposed. These actions are likely to boost rural demand, which in recent years has significantly underperformed urban demand. 

The budget numbers, if anything, appear conservative because the revenue growth rates for the current and previous financial years has been significantly stronger. It is assumed by the budget calculations that revenue and spending will increase by just over 10% in the next fiscal year. The rapid increase in food and fertiliser subsidies during the current year prevented the fiscal deficit for the year from being lower than the budgeted despite revenue growth being much stronger than budgeted. Barring such unexpected expenditure overrun in the next year too, we anticipate the actual deficit for the year to be lower than what has been budgeted.

The sharp increase in capital expenditures continues to be the budget's standout feature. Focusing on diverse infrastructure areas, such as railways, energy, roads, and water, is likely to usher multiplier effect on India's economic growth. Along with significantly expanding the public's investment outlays, the budget has also taken a number of initiatives to encourage corporate investment. The budget has made several attempts to improve operating business conditions, enhance access to financing, support domestic production through revisions to customs tariffs, and schemes for public-private projects in agriculture. 

Additionally, the budget has made an effort to ease direct taxation on both the lower and higher ends of the income distribution. These, along with the steps taken to revitalise rural demand, should aid improving private consumption. Supporting micro, small and medium-sized businesses through regulatory norm simplification, sustained credit guarantee, technology support and marketing and development initiatives would be beneficial for a recovery in both supply and demand. 

Overall, this budget appears to have achieved a balance between competing aims including fostering economic development while retaining fiscal consolidation, relieving taxpayers while bringing in healthy` revenue growth, and favouring investment-led growth without discouraging consumption. The budget has concentrated on sustaining India's accent in the global economic order at a time when the world economy is experiencing a tough patch and India is being seen as the brightest beacon of hope.

Mr. Anand Rathi, Founder and Chairman, Anand Rathi Group


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