The word ‘Amrit Kal’ is used by our honourable Prime Minister Shri Narendra Modi in Celebration of the 75th Independence Day, stating it’s time to bridge the gap between rural and urban India, reducing government intervention in one’s life and intense focus on building infrastructure.
She outlined significant priorities for the First Budget of “Amrit kal”
• Inclusive Development
• Reaching the last mile
• Infra and Investment
• Unleashing the potential
• Green growth
• Youth power
• Financial sector
The primary focus was laid down on Direct and Indirect taxes and changes in personal tax as well as covering all the sectors which play a vital part in India’s GDP growth.
Here are a few points from the budget
• To push the agriculture sector, the Government has increased the credit target limit to 20 lakh core with a significant focus on husbandry, dairy and fisheries. Also, it encourages 10 million farmers to incorporate natural farming. Easy availability of credit and managing supply-side issues will increase productivity in this sector.
• The primary mode of transportation in India, Indian railways, got a surprise from our FM by announcing 2.4 lakh crore of credit, nine times higher than in 2013-2014.
• The most talked about green growth by the Government is- thinking about EVs and how to give an extra PUSH to EVs as this is a need of an hour. To incentivize EVs, exemption on customs duty on imports of capital goods and machinery required for producing lithium-ion batteries for Electric vehicles has been extended. Such a reduction in the battery cost will lead to a reduction in EV prices.
• The Finance Minister stated, “We are implementing many programs for green growth across various economic sectors .they will help reduce carbon intensity and greater green jobs”.
• A significant area of concern is the fiscal deficit. Fiscal deficit is the difference between Government revenue and Government expenditure.
• The Government’s continued focus on fiscal consolidation will help in reaching a budgetary deficit below 4.5 per cent by 2025-2026; she stated, “We have adhered to this path, and I reiterate my intention to bring the fiscal deficit below 4.5 per cent of GDP by 2025-26” while she is expecting fiscal target for FY 23 to be around 6.4 per cent and for FY 24 around 5.9 per cent of GDP.
• Centre will continue to extend a 50-year interest-free loan to states, to be spent on capital expenditure within 2023-2024, stating states will be allowed a fiscal deficit of 3.5 per cent of GSDP, of which .05 per cent will be tied to the power sector reform.
• On a significant move to boost infra spending, Government will continue its focus on capital expenditure. The Center will hike capex outlay by 33 % to be around 10 trillion (2023-24). This is the most unexpected announcement in the Budget. In FY23, capital expenditure was 7.5 trillion. An increase this year will amount to 3.3 % of GDP.
• The Government also proposed the building of 50 new Airports for increased connectivity. 10,000 crores will be set aside for the development of urban infrastructure.
• Viewers were eagerly waiting to listen to this part, as every one of us is directly impacted by any tax amendments. This part of the Budget can be either a mood lifter or a spoiler. Luckily, to our surprise, FM lifted our mood and created euphoria for the middle class by presenting a new Income tax slab in this Budget.
New TAX Structure
• 0-3 Lakh Nil
• 3-6 lakh 5%
• 6-9 lakh 10 %
• 9-12 lakh 15%
• 12-15 lakh 20 %
• Above 15 Lakh 30 %
The new slab, as compared to the previous slab, is more attractive as it gives a more significant rebate.
Rebate limit under new tax regime to be increased from 5lkh to 7 lakhs. To make it simpler, any individual whose salary is less than 7 Lakh will not be given any income tax.
An individual with an income of 15 lakhs has to pay 1.5 lakh as tax under the new regime; the primary tax exceptions limit has been increased from 2.5 to 3 lakh, other than common exemptions like section 80 C and section 80 D cannot be availed.
This move will definitely bring cheer to the middle class, thus increasing more money in their hands, which will lead to further economic consumption. On the other side, it will reduce the incentive to invest in financial products or tax saving schemes like MF, Insurance etc. Thus promoting spending rather than saving.
Prime minister Narendra Modi has a key focus on the growth of startups in India, such that Jan 16 has been declared as Nation Startup day. On several platforms, he has been calling startups the backbone of India. To be inclined with the philosophy. Finance Minister has announced the extension of the benefit of forward carrying losses on a change of shareholding of a startup to 10 years of incorporation from 7 years.
Extension of income tax benefits till 2024. Also deployment of 100 joint commissioners to adjudicate small appeals and the pendency of cases
From a stock market perspective, Union Budget day is very important. The market is all about demand and supply; the companies performing well are always in order, which is a function of how well the economy is growing. Any amendments being done to the budget directly or indirectly have a major impact on the economy, and markets are considered a barometer to measure the health of an economy.
For example, any decrease in direct taxes will lead to an increase in disposable income, which will further push demand for various products and services. With the increase in demand, there will be an increase in production which will positively impact the economy.
Usually, market movements on Budget day are very volatile. Upswing and downswings happen with every other new announcement. We witnessed a similar kind of action this time too. Equity benchmarks Sensex and Nifty ended on a mixed note, with both indices corrected from day high. BSE Sensex climbed 158.18 points while 45.85 points defined Nifty.
From a market perspective, it was a well-planned Budget. Primary emphasis on Consumption and CapEx lifted the market mood. However, the market gave up early gains due to a change in focus from budget to the Adani-Hindenburg saga.
A Budget that is so thoroughly planned and visionary is likely to be a booster for markets. Going ahead, we expect a rally in a few sectors which are the major beneficiary of this budget. Sectors like Infra, Energy, Consumption and Defense can be out-performers. Current negative sentiments due to a controversial report can be a game spoiler for a while, but the moment this dust settles down, we might witness a major budget-backed rally.
To summarise this Budget, we are witnessing rising inflation and supply-side concern in an uncertain global environment. This looks like a pragmatic Budget. Government focus on the rural economy, capital expenditure and bringing in a new tax regime to push the consumption story will lead to more job creation.