Budget 2023 a balancing act with focus on prosperity and inclusiveness

Budget 2023: Raising of tax slabs along with reduction in peak surcharge shall result in around Rs 35,000 crore being saved by tax payers and hopefully being spent to boost consumption

The first budget of the Amrit Kaal (Budget 2023) is prudent against a tough macro backdrop of a high current account deficit (CAD) of over 3 per cent, global monetary policy tightening and recessionary fears.

Though, finance minister Nirmala Sitharaman (FM) has kept a sharp focus to maximise the impact of every rupee spent to generate a multiplier impact in the economy.

A 10 lakh crore outlay from the central government for capital investments lays the foundation for a strong multi year growth for the country during its Amrit Kaal. Together with an extension of 50 year interest free loans to state governments to boost capex, this is one of the highest push for capital investment in recent years.  

The FM has continued to direct spending towards improving the life of the people.The strong outlays for the Jal Jeevan Mishan to ensure drinking water for all and towards PM Avaas Yojna ensuring a shelter for all has continued unabated.

Tourism has been a focus area for the government in the last few years because of its potential to generate revenue (both domestic and foreign) and employment. The budget is targeting 50 destinations to be selected via a challenge mode this year to be developed as full fledged tourist spots for both foreign and domestic tourists. 

Urging states to develop a Unity mall in the state capital or other prominent tourist centres to promote one district, one product, GI products and other handicraft products shall also boost the earnings of locals and help employment generation at the grass root level.

Budget also aims to boost manufacturing in India and has seen a sharp increase in incentives to accomplish the same. The government is also incentivising creation of a future capabilities in areas of green hydrogen, chip manufacturing and artificial intelligence.

Amidst the focus to boost capital spends, the FM has not kept her sight away from being fiscally prudent and she has kept the fiscal deficit under control at 6.4 per cent of the GDP. Simultaneously, it has been ensured that spends are directed to better the life for the countrymen, especially the vulnerable.

Bulk of the spending is to uplift the poor and the neglected. The FM has continued her support for the free grain distribution benefitting 80 crore people for another year.

The boost in skill development and education is a focus area for the government that shall pave the way for future growth of the youth and in turn the country.

Middle class has also been a beneficiary of the budget with a little more money in the pocket. Raising of tax slabs along with reduction in peak surcharge shall result in around Rs 35,000 crore being saved by tax payers and hopefully being spent to boost consumption. 

At a time when the government will be going into general elections and many state elections coming ahead, the FM has refrained from the populist path and presented a balancing act.

Stock market closing down post budget in our view has little to do with the budget speech and more with the premium valuations India is trading at compared to its peers.

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Nilesh Shah is Managing Director at Kotak Mahindra Asset Management Company. Views are personal.