Union Budget 2023 Flashback: Key Highlights and Impact

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  • 30 Jan 2024
Union Budget 2023 Flashback: Key Highlights and Impact

As the Budget 2024 draws close, it's insightful to look back at the Union Budget of 2023, presented by Finance Minister Nirmala Sitharaman on February 1, 2023.

The Union Budget 2023 was the first budget in Amrit Kaal - signifying an auspicious time during which new work can be started. The term was introduced in 2021 during India's 75th anniversary where Honorable Prime Minister Narendra Modi laid the roadmap for the 25-year-long leadup to India at 100.

The 2023 budget was heralded as a pro-people and pro-market Budget. Let us look at the key initiatives and reforms it introduced and how it has laid the foundation for India's current economic trajectory.

The 2023 budget was presented at a pivotal time - as the 5th budget of the Modi 2.0 government and the last detailed one before the general elections.

Finance Minister Nirmala Sitharaman's presentation underscored India's strong economic position and its optimistic path towards a bright future.

The 'Saptarishi' Priorities

The budget was structured around seven key priorities, each critical in shaping the policy direction. These were:

  1. Inclusive Development: Focusing on equitable growth, ensuring benefits permeate all layers.

  2. Reaching the Last Mile: Aimed at enhancing accessibility to services and resources for remote regions.

  3. Infrastructure and Investment: Allocating significant resources for infrastructural advancements, laying a foundation for sustainable growth.

  4. Unleashing the Potential: Capitalizing on India's demographic and economic potential through various initiatives.

  5. Green Growth: Prioritizing environmental sustainability, aligning development with ecological conservation.

  6. Youth Power: Targeting youth empowerment through education, skill development, and employment opportunities.

  7. Financial Sector: Strengthening the financial framework, enhancing stability and inclusivity in economic growth.

These priorities have since driven targeted developmental efforts across various sectors.

Here are some other key developments:

Macroeconomic Stability and Growth

GDP and Fiscal Deficit: India’s Gross Domestic Product (GDP) growth, pegged at 7% in the 2023 budget, has been a testament to the nation's resilient economic structure. The fiscal deficit targets set at 6.4% for FY23 and 5.9% for FY24 have been crucial in maintaining fiscal discipline.

Capital Expenditure: The 33% hike in Capital expenditure to Rs 10 lakh crore, marked as 3.3% of GDP, significantly impacted various sectors from transportation to digital connectivity.

Direct Tax Reforms: A New Era

The 2023 budget introduced major tax reforms, making the new tax regime the default but allowing taxpayers the choice to adhere to the old regime.

Here’s a look at the income slabs and the tax rates introduced in budget 2023:

Income Range (in Rs) and Tax Rates

  • Rs 0 to Rs 3 lakh - NIL
  • Rs 3 to Rs 6 lakh - 5%
  • Rs 6 to Rs 9 lakh - 10%
  • Rs 9 to Rs 12 lakh - 15%
  • Rs 12 to Rs 15 lakh - 20%
  • Above Rs 15 lakh - 30%

Apart from the above, the budget 2023 also increased income tax rebate limit to Rs 7 lakh. It also introduced a standard deduction of Rs 50,000 from the taxable income.

The tax exemption on leave encashment on the retirement of non-government salaried employees was raised to Rs 25 lakh from Rs 3 lakh earlier.

The highest surcharge rate was also reduced from 37% to 25%.

With direct taxes out of the way, here’s a look at the indirect tax amendments from budget 2023:

Indirect Taxes Reforms

Here’s a look at some of the key changes:

• As part of the Green Growth priority, the Government proposed to exempt excise duty on GST-paid compressed biogas.

• The basic customs duty on parts of open cells for TV panels was reduced to 2.5%.

• The customs duty for electric kitchen chimneys was raised from 7.5% to 15%.

• The customs duty on chimney heat coils was reduced from 20% to 15%.

• Taxes on cigarettes was hiked by 16%.

• A new exemption was introduced for the basic customs duty on chemicals and petrochemicals.

• Import duty for Silver was increased.

Savings Schemes

Senior Citizen Savings Scheme: The maximum deposit limit under this scheme was increased to Rs 30 lakh.

Monthly Income Scheme: Limits under this scheme were doubled to Rs 9 lakh and Rs 15 lakh for joint accounts.

Mahila Samman Saving Certificate: This scheme was launched with a 7.5% interest rate, valid until 2025, focusing on women's economic empowerment.

Healthcare Sector Boost

• The budget 2023 increased the allocation for Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) to Rs 7200 crore, while Rs 646 crore has been allocated for the Ayushman Bharat Health Infrastructure Mission (PM-ABHIM).

• The government also announced the mission to eliminate sickle cell anaemia by 2047.

Agriculture Sector Developments

  • The government said that an Agriculture Accelerator Fund will be set up to encourage agri-startups by young entrepreneurs.

  • The agricultural credit target was increased to Rs 20 lakh crores with a focus on animal husbandry, dairy and fisheries.

  • It said that over the next 3 years, one crore farmers will get assistance to adopt natural farming and 10,000 bio input resource centres will be set up.

Budget and Senior Citizens

• The maximum deposit limit in the Senior Citizen Savings Scheme was revised upwards from Rs 15 lakh to Rs 30 lakh.

• The maximum deposit limit for the Post Office Monthly Income Scheme was increased from Rs 4.5 lakh to Rs 9 lakh for a single account. The same for a joint account was raised from Rs 9 lakh to Rs 15 lakh.

Digitalisation Initiatives

  • The budget allocated Rs 3,000 crores for promoting digitalisation, with a focus on increasing access to digital infrastructure and services.

  • The budget aimed to promote digital transactions and boost the country's digital infrastructure.

  • The government proposed to set up a new institution to provide digital infrastructure and services and to increase the use of digital payments by incentivising merchants.

Budget and the Economy

Capital Expenditure: The 33% year-on-year increase in Capital Expenditure outlay for the financial year 2023-24 to Rs 10 lakh crore significantly boosted infrastructure development.

Fiscal Deficit Management: Keeping the deficit at 5.9% of GDP and allowing states a fiscal deficit of 3.5% deficit of Gross State Domestic Product (GSDP) has been pivotal in maintaining economic stability. States were also provided a fifty-year interest free loan where the entire fifty-year loan to states has to be spent on capital expenditure within 2023-24.

MSMEs and Credit Flow: The infusion of Rs 9,000 crore for Micro, Small, & Medium Enterprises (MSMEs) and an additional credit guarantee of Rs 2 lakh crore has helped revitalize the MSME sector.

So, these were some of the major announcements from the Union Budget 2023.

The above changes make it clear that Budget 2023 was more than just a financial statement.

The budget's focus on inclusive development, infrastructural enhancement, and fiscal stability helped reshape our economic landscape and set the stage for sustainable and equitable growth.

The anticipation for further developments in these crucial sectors is palpable.

The Interim Budget 2024 will undoubtedly build on this foundation, introducing new reforms and initiatives to propel India towards becoming a global economic powerhouse.

Impact of these policy decisions on the markets, individual livelihoods, and the nation's overall progress will be closely analysed by market participants.

It would be interesting to know about further amendments in the above sectors in the upcoming budget.

Watch out this space for more interesting Indian Budget 2024 updates!

Sources: Kotak Securities, Union Budget 2023, Economic Times, Moneycontrol

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investors should conduct their own research and consult with financial professionals before making any investment decisions. Read the full disclaimer here.

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