India: 5 key takeaways from Budget 2023

Union Finance Minister Nirmala Sitharaman, while presenting on Wednesday India’s last full budget before the general election next year, said the Narendra Modi government at the Centre will emphasise job creation and economic growth and lower the fiscal deficit.

Here are five key takeaways from the Budget 2023-24.

Greater emphasis on infrastructure development

In complete alignment with the government’s growing focus on infrastructure development since 2014, Sitharaman has announced increased spending on affordable housing projects by 66% to approximately $10 billion, and money for the construction of 50 new airports, aerodromes, and heliports to boost regional connectivity.

Government’s improved focus on cutting down fiscal deficit

During the Covid-19 pandemic, as the government increased spending on free vaccines and relief measures for the poor, the country’s fiscal deficit – the gap between what it earns and spends – rose to a record 9.3% in 2020-21.

The government, under the budget, is targeting a half percent reduction in its fiscal deficit, from 6.4% in 2022-23 to 5.9% this year.

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Relief for the middle classes

Ahead of crucial elections in the coming months, the government has announced a number of tax relief measures for the country’s vast middle class.

Indians who earn under 700,000 rupees ($8,500) are no longer required to pay income tax if they migrate to a new tax regime introduced in 2020. The government has also effectively reduced the maximum tax on personal income from 42% to 39%.

The move will put additional money into the hands of people amid inflation and is expected to eventually, boost consumption.

Reduced spending on welfare

While the budget has worked towards offering greater relief to the middle class, it doesn’t do much to improve the living standards of the country’s most vulnerable. The government has discontinued a free food programme introduced during the pandemic and has also slashed spending on the rural jobs programme by more than 30%.

Welcome news for small industries

In order to ease up the climate for doing business, the government has decriminalised more than 3,400 legal provisions and reduced 39,000 compliances for companies. A report published last year underscored that over 50% of the 1,536 laws that govern doing business in the country carry imprisonment clauses.