Union Budget 2023: A constructive effort to boost economy or a futile exercise; Experts speak

Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank.

The Union Budget has adequately focused on the holistic development of the economy with special emphasis on infrastructure, MSME financing needs, affordable housing and consumers. The surge in capex spending if achieved will assure a significant multiplier effect on the overall medium term growth prospects of the economy. Further the personal income tax benefits may provide cushion to the weakening consumer demand. The overall reiteration on fiscal consolidation path along with inline market borrowings bodes well for the bond markets."

Raghunandan Saraf, Founder & CEO, Saraf Furniture

MSME credit assurance It was proposed last year to revamp the credit guarantee scheme for MSMEs. The revamp scheme, with a corpus infusion of 9000 crores, will go into effect on April 1, 2023. This will enable another two lakh crores of rupees in collateral-free guaranteed credit. Credit costs will also be reduced by about 1%. The infusion of Rs 9,000 crore into the corpus of the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) should allow for better and broader scheme implementation, as well as improved claim meeting. This decision is expected to offer a significant benefit to India's MSME sector, which is regarded as a major economic growth driver. Supplemental collateral-free credit is expected to aid MSMEs in meeting the obstacles posed by the global epidemic and allowing them to continue to grow and create employment. It could be a positive step in safeguarding the well-being and expansion of India's MSME sector.

Madhavi Arora, Lead Economist - Emkay Global Financial Services

“The budget has ensured, the fiscal impulse is maximized to improve potential growth, while signalling adherence to medium-term fiscal sustainability. This requires continued financial sector reforms, better resource allocation. Expenditure focus has been on rural, welfare, infrastructure, PLIs, and energy transition. Capex spend has picked up significantly to 3.3% of GDP and is almost double of Pre-Pandemic prints. This especially implies larger fiscal multiplier on employment and growth and will support crowding in of still-lacking private capex.

The tax benefits have been tweaked to encourage individuals to move towards new tax regime, and to provide relief to middle class, while maximum marginal rate has also been reduced to 39% from 42.7% to give relief to the highest income strata. While the government is foregoing effective revenue of Rs350bn, this could have a consumption multiplier effect albeit at the margin, in the economy that’s seeing fading consumption growth.”

Chirag Mehta, CIO, Quantum AMC

As expected, the budget is heavy on Capex (at 10 lakh crore, increase of 37% from FY23 revised estimates) which is needed to ensure the cyclical recovery continues. Infra (railways 2.4 lakh crore, 50 new airports and clean energy 35,000 crores) along with the Agri push will help the rural economy improve by boosting employment and incomes. Allocation to affordable housing of 79,000 crores, increase of 66%, will also help the housing market retain momentum. Incentives for local production in form of lower duties will also be helpful. Overall, this budget push on capex will ensure that the private capex greenshoots really sustain, help inclusive growth and make the economy become more resilient in light of the global slowdown.

Both Equity and Bond markets have reacted positively to the budget, as the thrust to maintain the cyclical recovery and largely maintain fiscal prudence has helped lift sentiments.

Karthik Srinivasan, Senior Vice President, Group Head - Financial Sector Ratings, ICRA.

"The union budget continued its focus on enhancing infrastructure development while adhering to the path of fiscal prudence network is positive for the financial sector. While the thrust on affordable housing was expected, the other announcements such as setting of a new subsidiary under EXIM Bank for refinancing for export financing and continuation of credit guarantee scheme for MSME lending in addition to digitalization of documents for MSME lending and computerization of agricultural cooperatives are likely to support credit off-take. The banking system could see more competition on deposits given the increase in investments limits across various small saving instruments amidst an environment of high credit growth. On the flip side, no recapitalization of the weak PSU general insurance companies was a surprise. The improved attractiveness of new tax regime will reduce the demand for tax-break induced investment products."

Gopichand P. Hinduja, Co-Chairman, the Hinduja Group

“When India is the lone shining star in the world facing threats of recession, Ms Nirmala Sitaraman has delivered a perfectly focused growth-oriented budget with massive capital investment outlays @ 4.5% of GDP while staying on track with the fiscal deficit reduction plan.

What is remarkable is the holistic, sustainable and inclusive approach taken covering every element of infrastructure and capability building and making the best use of the world-class digital public infrastructure.

The budget clearly reflects PM Modi’s long-term vision for India and it aims to engage with and carry every section of society towards the goal of a self-reliant and strong India.”

Abhay Bhutada, MD, Poonawalla Fincorp

"The 2023-2024 Union Budget presented by FM Nirmala Sitharaman showcases the government's commitment to putting people first and uplifting the nation's financial status. With a focus on 'janbhagidari' through 'sabka saath, sabka prayaas' and seven pillars, including green growth, youthpower, and infrastructure investment, this budget sets the foundation for a technology-driven and knowledge-based economy. The new tax slabs, with a reduced maximum marginal rate of 39% and an income rebate limit of Rs 7 lakh, empowers the middle class with more spending power, thereby elevating the country's economy. The government's continued support and commitment to the MSME sector are commendable, as it is crucial in driving the nation's economic growth. The improved credit guarantee scheme, along with reducing compliances will significantly help alleviate stress in the MSME sector. The digitization and expanded Digilocker services, along with The National Financial Information Registry, will enhance transparency in financial security and the sector at large. The budget paves the way for a brighter future for the citizens of India. We look forward to seeing its successful implementation and playing our role in helping the nation become a global leader in the financial industry."

Himadri Chatterjee, Head - Key Clients Group, 360 ONE Wealth

The budget aims to significantly lower the Fiscal Deficit which can buoy market inflows and potentially valuations. For our client segment - the HNIs and UHNIs, it could be seen as a mixed bag. On the positive side, there is a significant reduction in the Top income tax slab from 42% to 39% under the New Regime. However, three potential areas may lead to additional taxes: a. Cap of Rs. 10Cr. while claiming exemption u/s 54 and 54F (sale of Long Term asset), b. Potential tax incidence on Insurance claims above a certain threshold and C. Potential Short Term Cap Gains tax at MMR on MLDs sold/maturing after 1 Apr 23.

Sundararaman Ramamurthy, MD & CEO, BSE

“The Budget of 2023 continues from the earlier budgets which successfully guided India during one of the toughest periods for mankind, with a continued focus on Aatmanirbhar Bharat and Amrit Kaal. As a result of a consultative and inclusive process, suggestions and feedback received from various stakeholders, have been factored in, wherever possible. Various areas of national importance have received their due focus - MSME sector, Infrastructure building which fuels economic development, Ease of doing business which attracts foreign participation and domestic capital creation, Green energy, Tourism, export orientation using custom duty rationalisations, harnessing the power of youth, etc. ‘Shri Anna’ brings a novel concept to food safety, nutrition and self-sufficiency. Personal taxation has received its well-deserved attention too, bringing a smile on the face of the common man. To top it all, strict adherence to prudent fiscal management while keeping the pedal on the accelerator for long-term structural growth initiatives, which in our view, is the hallmark of this Budget.”

Prakash Chhabria, Executive Chairman – Finolex Industries ltd.

“We appreciate the budget's emphasis on promoting consumption and reviving the economy. The augmented focus on the agriculture sector will facilitate the farmers in smoothening of their operations , get more funds for inclusive rural development. The creation of agriculture infrastructure funds along with separate allocation for high-value horticulture will give the industry a much-needed boost. The industry would also gain from the 11% increase in the agriculture credit objective from Rs 18 lakh Cr to Rs 20 lakh Cr. We eagerly await the implementation of these measures and their impact on agriculture and farmer profitability. This budget also highlights separate focus on providing water connections & toilet facility to households. This will spur demand in the plumbing and sanitation segment. Additionally, a hike in capital expenditure by 33 per cent to Rs 10 lakh crore for infrastructure development and the allocation of Rs. 79000 Cr to affordable housing will act as a catalyst for building, construction materials and allied sectors.”

Yash Upadhyay, Chief Strategy Officer, 5paisa Capital Ltd

Seven focus areas or Saptarishi as mentioned by FM Nirmala Sitharaman - Inclusive development, reaching the last mile, Infrastructure and investment, unleashing the potential, green growth, youth power and financial sector is encouraging and will further empower world's 5th largest economy. A lot of focus has been emphasized on digital infrastructure, agritech and fintech startups and green growth. 33% growth in capex expenditure to Rs. 10 lakh Crore will make it almost 3.3% of our GDP. A particular highlight for me is the announcement of 3 centres of excellence for artificial intelligence to enable 'Make AI for India' and 'Make AI work for India', this just shows the government's focus on skill building in upcoming technologies. Recent success of ChatGPT and its use cases have already shown us how AI can revolutionize all sectors.

Yagnesh Dosshi, Co-Founder & Director, Raghnall Insurance Broking and Risk Management Pvt Ltd.

"We are disappointed with the recent budget announcement regarding the taxation of insurance premiums, as it will impact the high-value savings products that have been relied on by many customers. This, combined with the lack of increase in tax exemptions for premiums paid under health insurance, will negatively impact the growth of both savings and health insurance in India. Despite these setbacks, we remain committed to finding solutions and providing affordable insurance options to our customers while also adhering to regulations. We will also continue our efforts in promoting the importance of insurance and making it accessible to all.

Ravi Subramanian, MD & CEO of Shriram Housing Finance ltd.

The union budget 2023-24 is a prudent and growth-oriented budget. The higher capex outlay will have a huge multiplier effect across the economy. The income tax benefits announced will drive consumption by putting more money in the hands of the middle class. The enhanced outlay for the Pradhan Mantri Awas Yojana by 66% to Rs 79,000 cr is great news for affordable housing in urban areas. The Rs 10K cr Urban Infra Development Fund will be used for transforming urban planning and making cities more sustainable and will boost Housing and Housing Finance. Middle-income consumers have benefited significantly from this budget. I believe the announcements made will trigger a pick-up in credit offtake for affordable housing

Motilal Oswal, MD & CEO, Motilal Oswal Financial Services.

“The budget remains focused on long-term economic growth through capex and sops to boost consumption for the middle-income group. This would support strong corporate earnings with positive bias for sectors like infra, housing, cement, cap goods, auto, and tourism. Despite upcoming state elections, the government did not deliver a populist budget and tried to maintain fiscal prudence.”