The Union Budget is one of the most anticipated annual events, where India has consistently embarked on numerous reforms bringing about structural changes. In my opinion, the Finance Minister this year rightly focussed on key factors that align with the larger vision of the government: boosting economic growth, employment generation, encouraging savings and investments, and fiscal consolidation.
The government needs to be commended for keeping the fiscal deficit in line with the Budget estimates of 6.4% of the Gross Domestic Product (GDP). Buoyant collections of direct tax and Goods and Services Tax were the reasons the government was able to successfully keep the fiscal deficit under check. Gross tax collections in the financial year 2022-23 have outperformed the Budget estimates target by more than 10%.
By assuring the nation that the fiscal deficit will be reduced to 5.9% in 2023-24 and further reduced to 4.5% in 2025-26, the FM has shown that fiscal consolidation remains a focus area.
Growing tax base, rationalising taxes
The government’s measures to steadily increase the tax base, bringing in greater transparency and enhancing investor confidence are paying dividends. The government needs to be lauded for their Ease of Doing Business initiatives. According to the FM, over 39,000 compliances and 3,400 provisions have been reduced and decriminalised.
The focus on the salaried class also needs to be applauded. The government rationalised income taxes by extending the benefits of standard deduction, and also by reducing the surcharge rate for high income earners from 37% to 25%. This measure will reduce the maximum tax rate from 42.7% to 39%. These, along with other measures, are aimed at boosting the Indian economy, as rising disposable incomes will promote savings and aid consumption.
Housing, infra go hand in hand
The Pradhan Mantri Awas Yojana scheme, which creates affordable housing, got a boost with an allocation of ₹79,000 crore. A rapidly growing country like India, with a large young population, needs more homes at affordable price points, which will enable more households to become homeowners. Another notable feature was the establishment of the Urban Infrastructure Development Fund that will be managed by the National Housing Bank. The aim is to create urban infrastructure in smaller cities. This is a laudable move as the construction of housing and the development of surrounding infrastructure should go hand in hand.
By significantly increasing the capital expenditure for the third year in row, increasing it by 33% over the previous year to ₹10 lakh crore (or 3.3% of the GDP), the Budget has sent strong signals that India is equipped to absorb large amounts of investment. According to me, one way to ensure economic growth without spiralling inflation is to build infrastructure.
Overall, this was an excellent Budget which aims to set India on the right course. Continual reforms have been a priority for the government that will help India achieve sustained economic growth and move towards a $5 trillion economy by 2025.
Keki Mistry is vice-chairman and CEO, HDFC Ltd