Focus on growth and manufacturing in the 2023 federal budget’s fiscal consolidation theme

by Mapping Returns
Finance Minister of India

Even though this is the final full budget before the 2024 general elections, economists anticipate it to be pragmatic rather than populist, echoing Finance Minister Nirmala Sitharaman’s declaration that India’s fiscal 2024 budget will follow the spirit of the preceding ones.

According to Kirtika Suneja & Yogima Seth Sharma, the Indian budget is likely to keep emphasising capital spending as a development engine and support manufacturing while maintaining the post-pandemic fiscal austerity.

1. The direction of growth

Budget will make an effort to lessen the impact of the global slowdown on India’s economy.

Exports and manufacturing are being affected by the global slump.

The Russia-Ukraine crisis and financial tightening are major worries.

Important pointers

Increase capital spending from the current 2.9% of GDP to close to 3.5%.

Increase demand through rationalising personal income tax rates.

Reduce the 28% peak GST rate.

simplify the business process.

initiative to ensure work in cities.

2. A boost to manufacturing

On-going emphasis on domestic manufacturing resurgence is anticipated in the budget.

Manufacturing is being impacted by sluggish exports.

pockets of rural sector-related demand weakness.

PLI programmes for labor-intensive industries are probably in the budget.

Focus of Make in India 2.0 is on 27 sectors.

Important pointers

15% corporate tax on new investments should be expanded to all industries.

More cash flow loans to MSMEs without collateral are needed.

Modify the criteria for classifying MSME NPAs.

the reduction of electric vehicle levies.

RoDTEP programme for all industries to boost exports.

3. being financially prudent

Expected budget to keep emphasising post-Covid fiscal consolidation

Analysts predict a fiscal imbalance in FY24 of 5.5–5.8% of GDP.

The cost of food and fertiliser subsidies should be lower.

High nominal growth might maintain strong tax revenue.

Compared to FY23 BE, the gross tax mop-up for FY24 was 14–16% higher.

One major concern is a return of the pandemic.

Other concerns include financial instability and a more severe than anticipated global slump.

Important pointers

accelerate the privatisation and monetization of assets.

Make an effort to cut back on subsidies and revenue spending.

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