Modi presents a people-friendly budget – boosts spending, cuts deficit in $550b ahead of 2024 election

India's government on Wednesday unveiled one of its biggest jumps in capital spending in the past decade in its budget for the coming year and said the fiscal deficit would fall, as it tries to create jobs while maintaining financial discipline.

"After a subdued period of the pandemic, private investments are growing again," Finance Minister Nirmala Sitharaman said as she presented the 2023/24 budget in parliament.

Total spending will rise 7.5% to Rs45.03 trillion ($549.51 billion) in the next fiscal year starting on April 1, according to Reuters. "The budget makes the need once again to ramp up the virtuous cycle of investment and job creation," she said. "Capital investment is being increased steeply for the third year in a row by 33% to 10 trillion rupees."

The capital spending increase to about $122.3 billion, which would amount to 3.3% of gross domestic product (GDP), will be the biggest such jump after an increase of more than 37% between 2020/21 and 2021/22. India's economy was "on the right track," Sitharaman said, despite the global slowdown because of the COVID-19 pandemic and the Russia-Ukraine war.

Sitharaman said the government would target a budget deficit of 5.9% of GDP for 2023/24, down from 6.4% for the current year.

The deficit plan will be aided by a 28% cut in subsidies on food, fertiliser and petroleum for the next fiscal year at Rs3.75 trillion.

 The government cut the spending on a key rural jobs guarantee programme to Rs600 billion – the smallest in more than five years – from Rs894 billion for this fiscal year.

No tax on income up to Rs700,000

Sitharaman announced new tax slabs for 2023-24, under which no tax would be payable for income up to Rs700,000 per annum under the new income tax regime. "Currently, those with an income of up to Rs500,000 don't pay any income tax. I proposed to increase the tax rebate limit to Rs700,000 in the new tax regime," Sitharaman said while presenting the Union Budget for 2023-24 in Parliament, according to Indo-Asian News Service.

A tax of 5 per cent would be levied on total income between Rs3 lakh and Rs6 lakh, 10 per cent tax would be imposed on income between Rs6 lakh to Rs9 lakh, it would be 15 per cent on income between the range of Rs9 lakh to Rs12 lakh. On the income range of Rs12 lakh to Rs15 lakh, 20 per cent tax would be levied, while tax would be 30 per cent on income slab of Rs15 lakh and above, the finance minister informed.

National Green Hydrogen Mission

Sitharaman also announced India's target to reach an annual production of 5 MMT by 2030. While mentioning the recently announced National Green Hydrogen Mission, she explained that it will facilitate the transition of the economy to a low carbon intensity and reduce dependence on fossil fuel imports. "It will also make country assume technology and market leadership in this sunrise sector," she added. The Finance Minister also proposed an allocation of Rs 35,000 crore for priority capital investments towards energy transition and net zero objectives, and energy security by the Ministry of Petroleum & Natural Gas. Highlighting the vision for 'LiFE', or Lifestyle for Environment, aimed at spurring a movement for an environmentally conscious lifestyle, the Minister added that the budget builds on our focus on 'Green Growth', which will guide us through the Amrit Kaal. She stated that Battery Energy Storage Systems with a capacity of 4,000 MWH will be supported with Viability Gap Funding. The Finance Minister also proposed a Green Credit Programme, to be notified under the Environment (Protection) Act for encouraging behavioural change by incentivising environmentally sustainable and responsive actions by companies, individuals and local bodies.

Atmanirbhar Clean Plant Programme

Sitharaman also announced the launch of the Atmanirbhar Clean Plant Programme with an outlay of Rs 2,200 crore to boost availability of disease-free and quality planting material for high value horticultural crops. Sitharaman said that an Agriculture Accelerator Fund will be set-up to encourage agri-startups by young entrepreneurs in rural areas.

The Central government on Wednesday said that to further provide impetus to green mobility, customs duty exemption is being extended to the import of capital goods and machinery required for manufacture of lithium-ion cells for batteries used in electric vehicles — a move hailed by the EV industry players.

Electric vehicles to get cheaper

Sitharaman in her Union Budget 2023-24 speech said that the subsidies on EV batteries will be extended for one more year, hence making EVs cheaper in the country.

The Central government on Wednesday said that to further provide impetus to green mobility, customs duty exemption is being extended to the import of capital goods and machinery required for manufacture of lithium-ion cells for batteries used in electric vehicles — a move hailed by the EV industry players. Sitharaman in her Union Budget 2023-24 speech said that the subsidies on EV batteries will be extended for one more year, hence making EVs cheaper in the country.

Customs duty on mobile phone parts, open cells of TV panels reduced

Paying heed to the consumer electronics industry's demand, the Centre on Wednesday reduced basic custom duty (BCD) on import of certain mobile phone parts and inputs like camera lens and continued the concessional duty on lithium-ion cells for batteries for another year. "The mobile phone production in India had increased from 5.8 crore units valued at about Rs 18,900 crore in 2014-15 to 31 crore units valued at over Rs 2,75,000 crore in the last financial year, as a result of various initiatives of the government, including the 'Phased Manufacturing programme'," she said during her Union Budget 2023-24 speech in Parliament. She also proposed to reduce the BCD on parts of open cells of TV panels to 2.5 per cent to promote value addition in the manufacturing of televisions.

New deposit scheme for women, limits on senior citizens increased

For commemorating Azadi Ka Amrit Mahotsav, a one-time new small savings scheme, Mahila Samman Savings Certificate, will be made available for a two-year period up to March 2025, Finance Minister Nirmala Sitharaman said while announcing the Union Budget 2023-24 on Wednesday. This will offer a deposit facility upto Rs2 lakh in the name of women or girls for a tenure of two years at fixed interest rate of 7.5 per cent with partial withdrawal option. For senior citizens, the maximum deposit limit for Senior Citizen Savings Scheme will be enhanced from Rs15 lakh to Rs30 lakh. The maximum deposit limit for Monthly Income Account Scheme will be enhanced from Rs4.5 lakh to Rs9 lakh for single account and from Rs9 lakh to Rs15 lakh for joint account.

India will set up 100 5G labs to develop new apps, services

With the 5G roll-out now gaining momentum in India, the Centre on Wednesday announced to set up 100 labs in the top engineering institutions to develop 5G apps and services. "To realise new opportunities, business models and employment potential, the 5G labs will cover applications such as smart classrooms, precision farming, intelligent transport systems and healthcare applications," said Sitharaman.

Data embassies on the cards

Sitharaman announced that the government will set up data embassies in the country to facilitate seamless digital transfers and continuity for other nations.

Data embassies create a new approach to securing data by leveraging diplomatic agreements bolstered by cloud technology solutions. A data embassy is a solution implemented by nation states to ensure a country's digital continuity with particular respect to critical databases. "We will facilitate the setting up of data embassies for countries looking for digital continuity solutions," Sitharaman said during her Union Budget speech in Parliament. Small countries around the world are turning to the concept of "data embassies" because they are in need of sovereign and resilient infrastructure. Estonia, one of the world's most mature countries in digital administration, authorised a data embassy in 2015.

Luxembourg, Monaco and some other nations have adopted the Data Embassy model. 38,800 teachers to be appointed; National Digital Library, 3 institutes for Artificial Intelligence to be set up The Centre will appoint 38,800 teachers and staff for 740 Eklavya Model Schools, Sitharaman announced. "A National Digital Library will be set up in the country. 157 new nursing colleges will be established. Three institutes of excellence will be established for Artificial Intelligence. 47 lakh youth will get the benefit of the National Apprentice Scheme," Sitharaman said.

The Finance Minister said that 157 new nursing colleges will be set up in collocation with the existing 157 medical colleges, established since 2014. Eklavya Model Residential School is a scheme of Government of India. This scheme is especially helpful in making the Scheduled Tribes educated all over India. This scheme is related to the Union Ministry of Tribal Affairs. The objective of the scheme is to ensure that tribal students get quality education in remote tribal areas. This year in the Union budget, the Centre has fixed a target of training 47 lakh youth in 3 years.

Market-linked debentures

Market linked debentures as an instrument will now be taxed as short term capital gains as some experts said it was being used for blatant tax evasion. The Union Budget 2023-24 carries an amendment in the Finance Bill to tax market linked debentures as short term capital gains.

Boost to diamond industry

Sitharaman's announcement of cutting import duty on raw material for lab-grown diamond seeds has boosted the morale of the industry. "This will not only grow the sector parallel to the real diamond sector, but will provide huge domestic employment," said Vijay Mangukiya, Regional Chairman of the Gems and Jewellery Promotion Council (GPEC). Mangukiya told IANS, "At present the lab grown diamond sectors' share is just 1 to 2 per cent of the overall diamond sector. After exempting 5 per cent customs duty on lab-grown seeds, domestic production will increase.

"Now the sector is hopeful that in the next two to three years its market share will increase to 5 per cent and sooner will be become independent and parallel market to real diamond." The Union government has announced a package for Research and Development for five years, which will give a jump to lab-grown diamonds. The other major boost to the diamond industry comes from the increase in customs duty on imported gold jewellery, which curtails the unhealthy competition to domestic jewellery market and will provide level playing field to the domestic market, he said.

Insurance policies

Insurance policies where the premium is over Rs5 lakh will no longer be tax exempt, as per the provisions in the Union Budget 2023-24. Kapil Mehta, Co-founder, SecureNow insurance Broker said the income from traditional insurances where the premium is over Rs5 lakh will not be tax exempt. While this will dampen the interest of individuals to buy high value traditional insurances, it will increase the focus on term plans and pure risk covers which is good. A concern is that it should not result in a significant shift towards purely investment oriented unit link insurances, Mehta said. Agencies