UNION BUDGET 2023: GOVT GOES ON SPENDING SPREE FOR GROWTH

Union Finance Minister Nirmala Sitharaman hiked capital expenditure by a massive 33 per cent to Rs 10 lakh crore and provided direct tax concessions worth Rs 35,000 crore while presenting the last full Budget before next year’s general elections.

Centre’s record capital investment will be supplemented by its Rs 3.7 lakh crore as grants-in-aid to states for the creation of capital assets. This will raise India’s effective capital expenditure in 2023-24 to Rs 13.7 lakh crore or 4.5 per cent of GDP. Railways with Rs 2.4 lakh crore and roads with Rs 3.44 lakh crore will account for bulk of the outlay.

The Budget also announced 100 projects for last and first mile connectivity for ports, coal, steel, fertiliser and food grains sectors with investment of Rs 75,000 crore, including Rs 15,000 crore from the private sector. It also includes Rs 79,000 crore for PM Aawas Yojna and 50 new airports to boost regional connectivity.

The capital outlay for the defence sector has been hiked by Rs 10,000 crore to Rs 1.62 lakh crore.

Sitharaman said a “Saptarishi” of priorities will guide the Govt’s plans. These include inclusive development, Reaching the Last Mile, Infrastructure and Investment, unleashing the potential, green growth, youth power and financial sector. These measures would help achieve GDP growth rate of about 6.5 per cent in 2023-24.

In a gesture to the common man, a one-time Mahila Samman Savings Certificate, valid till March 2025, will offer deposits up to Rs 2 lakh at 7.5 per cent interest. The maximum deposit limit for Senior Citizen Savings Scheme and Monthly Income Account Scheme will be doubled to Rs 30 lakh and Rs 9 lakh, respectively.

The total Govt’s expenditure of over Rs 42 lakh crore will be financed by receipts of Rs 27.2 lakh crore and borrowings of Rs 15.4 lakh crore. The gap or the fiscal deficit will be 5.9 per cent of GDP. In comparison, the current fiscal’s expenditure of about Rs 38 lakh crore has been funded by total receipts of 24.3 lakh crore and borrowings of Rs 14.21 lakh crore.

The Govt’s expenditure plans will also be helped by savings – Rs 49,000 crore less on fertiliser subsidy as compared to the revised estimates of the current fiscal and Rs. 76,000 crore less on food subsidy.

PERSONAL INCOME TAX: A NUDGE TOWARDS AN EXEMPTION-FREE TAX REGIME

With smart tweaking in tax slabs and rates under the new tax regime and extending the benefit of standard deduction, the govt has made a big pitch for taxpayers to move from the old tax regime (OTR) to the new tax regime (NTR) by making the new regime (mostly) less taxing compared to OTR, without the need for any deduction.

It comes on the back of the announcement to increase the limit of rebate from Rs 5 lakh earlier to Rs 7 lakh beginning April 1, 2023. This means that if an individual earns up to Rs 7 lakh, he/she is not required to pay any tax. However, if the salary is more than Rs 7 lakh he/she will have to pay taxes as per the applicable tax slabs under the new tax regime. So, a person with an income of Rs. 7,00,001 will have to pay a Tax of Rs.25,000 (see Tax Slabs below)

Not only will taxpayers already under the new tax regime benefit from this tweaking, the announcement has also made taxpayers (under OTR) do their math to understand whether they should move from OTR to NTR.

Now the numbers:

First, there are no changes in the Old Tax Regime, including in deductions/exemptions.

In the New Tax Regime, the only deduction available is Rs. 50,000 for salaried individuals.

A five-slab structure will apply now under the New regime, also raising the no-tax slab by ₹ 50,000.

Income between ₹ 0-3 lakh will have no tax; it was zero to ₹ 2.5 lakh earlier.

From then on:

Income part from ₹ 3 lakh and 6 lakh will be taxed at 5 per cent;

Rs 6 lakh to ₹ 9 lakh, at 10 per cent;

Rs 9 lakh to 12 lakh, 15 per cent;

Rs 12 lakh to 15 lakh will attract a 20-per-cent tax; and

The part of income going above ₹ 15 lakh will be taxed at 30 per cent.

Opinion: A taxpayer whose deductions and exemption claims are less than Rs 3.75 lakh annually would be advised to opt for the new income tax regime and pay less tax than in the old regime.

Meanwhile, the govt also made it attractive for the super rich (earning over Rs 5 crore) to shift to the new tax regime by offering them a hefty cut on surcharge from 37 per cent to 25 per cent, making their effective rate from 42.7 to 39 per cent.

ALL-INCLUSIVE BUDGET WILL LEND NEW ENERGY, PACE TO INDIA'S GROWTH: PM MODI

Prime Minister Narendra Modi on Wednesday described the union budget as all-inclusive and historic, one that will lend a “new pace and energy to India’s growth.”

The PM hailed Finance Minister Nirmala Sitharaman for the budget that he said promotes “sustainable and green growth and touches the lives of everyone from artisans and craftsmen, poor, women and youth to the expanding middle class.”

Describing the “hard working middle class as a major contributor to India’s growth,” the PM said, “Middle class like youth is a major power. Our govt has ensured ease of living for them, given them tax rebates and simplified tax procedures for them. This budget will further empower the middle class,” said the PM in a year when nine states will go to elections followed by the 2024 Lok Sabha polls.

The PM added that the budget continues to place a premium on infrastructure with Rs 10 lakh crore infusion in the sector. “Since 2014, we have seen a 400 pc rise in infrastructure budget,” said the PM adding that MSMEs would benefit from increase in presumptive tax limit and the guarantee of Rs 22 lakh crore of additional loans.

INDIA, US AGREE TO DEEPEN TECH, DEFENCE TIES

In what is being perceived as the new frontier for cooperation with an eye on China, India and the US have decided to deepen cooperation on defence, artificial intelligence, quantum technologies, high performance computing, co-production of jet engines, semiconductor supply chain, human spaceflight, commercial space launches and telecom, including 6G.

These are the major takeaways after the meeting between National Security Advisor Ajit Doval and US NSA Jake Sullivan in Washington DC over the last two days.

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OUTLAY ON SUBSIDIES, MGNREGA LOWER

The Centre’s subsidy outgo on the three Fs – food, fertiliser and fuel (petroleum) – is expected to be Rs 1.47 lakh crore lower in the coming fiscal compared to 2022-23.

Along with a Rs 29,400 crore reduction in the Budget for the Mahatma Gandhi National Rural Employment Act (MGNREGA), it would generate savings of over Rs 1.76 lakh crore, amounting to 0.6 per cent of GDP. That’s more than the fall in the fiscal deficit – from 6.4 per cent to 5.9 per cent of GDP – targeted by the finance minister Nirmala Sitharaman for 2023-24.

The above savings are a result of the economy ostensibly emerging completely out of the pandemic-induced disruptions.

Amid tensions with China at the Line of Actual Control (LAC), Finance Minister Nirmala Sitharaman on Wednesday announced a 44 per cent hike in the Indian military’s sustenance budget—Rs 90,000 crore—that will be utilised towards stocking up on fuel, ammunition, and maintenance of assets through procurement of critical spares and other capabilities.

The overall defence budget earmarked for 2023-24 is Rs 5.94-lakh crore—including pensions of Rs 1.38-lakh crore—up by 12.9 per cent from Rs 5.25-lakh crore allocated in the previous fiscal. This is 13.18 per cent of the total budget outlay of Rs 45,03,097 crore.

The Centre has allocated Rs 1.13-lakh crore for education sector in this Budget, raising the projected expenditure on school and higher education by around 8.3 per cent compared to last fiscal.

In the budget allocation for school education, there has been an overall increase of Rs 9,752.07 crore (16.51 per cent), and for higher education, an amount of Rs 44,094.62 crore has been made, an increase of 8 per cent.

The outlay for PM-Poshan has been increased by 13.3 per cent, taking the allocation from Rs 10,233 crore in 2022-23 to Rs 11,600 crore.

The Budget has allocated Rs 2.40 lakh crore for the Railways for 2023-24. The outlay is Rs 1 lakh crore more than the Rs 1.40 lakh crore allocated to the Railways last fiscal. “This is about nine times the outlay made in 2013-14,” Sitharaman said.

NOTHING FOR POOR, MIDDLE CLASS; BENEFITS ONLY ONE CLASS, SAYS OPPOSITION

The Congress and several opposition parties on Wednesday panned the Budget, arguing that it has given no relief to the poor, not offered much for the electorally key middle-class barring the “minor” tax relief and has no concrete proposals for employment generation and to tackle price rise.

While the Congress called it a “callous Budget that has betrayed the hopes of the vast majority of the people,” the Left termed it contractionary and anti-people. West Bengal Chief Minister Mamata Banerjee said the Budget, which will benefit only one class of people, was “not futuristic”, “totally opportunistic”, anti-people and anti-poor. Delhi Chief Minister Arvind Kejriwal too spoke on similar lines.

The CPM slammed the Govt for reducing the allocation for MGNREGA and the cut in food, fertilizer and petroleum subsidies.

While the govt is banking big on the massive capital expenditure (capex) hike, former Finance Minister P Chidambaram pointed out that the govt had spent Rs 22,000 crore less of what it had allocated for capital expenditure this fiscal. “Allocating money is not equal to spending the money. Nor is allocating money equal to creating jobs. It is only when you actually spend the money, fill the vacancies your objective will be achieved,” he said.

Chidambaram said Finance Minister Nirmala Sitharaman did not mention the words “unemployment, poverty, inequality or equity” anywhere in her speech

Congress leader Rahul Gandhi tweeted, “Mitr Kaal Budget has no vision to create jobs, no plan to tackle price rise and no intent to stem inequality. One percent richest own 40 percent wealth, 50 percent poorest pay 64 percent of GST, 42 percent youth are unemployed- yet, the PM doesn’t care…”

ADANI CALLS OFF FULLY SUBSCRIBED RS 20,000 CRORE FPO

On a day the markets welcomed the Budget with a sharp rally early on, Adani Group companies were again in virtual free fall Wednesday. With its flagship Adani Enterprises Limited plunging 28.4%, the group announced late night that it had decided to call off the Rs 20,000-crore follow-on public offer (FPO) and return the money to investors.

This came a day after its FPO had scraped through with non-institutional investors, including HNIs and family offices of industrialists, chipping in. And hours after Swiss lender Credit Suisse Group AG had stopped “accepting bonds of Adani Group companies as collateral for margin loans to its private banking clients.”

At the end of the day, Adani Group chairman Gautam Adani’s personal net worth was down $14 billion to $74.7 billion pushing him to No. 15 on the Forbes billionaire list – down from No. 3 barely days ago. All Adani Group stocks were down with Adani Ports falling 19.7%.

In its statement, AEL said: “Given the unprecedented situation and the current market volatility, the company aims to protect the interest of its investing community by returning the FPO proceeds and withdrawing the completed transaction.”

It quoted its chairman Gautam Adani: “Today the market has been unprecedented and our stock price has fluctuated over the course of the day… Given these extraordinary circumstances, the company’s board felt that going ahead with the issue will not be morally correct. The interest of the investors is paramount and hence to insulate them from any potential financial losses, the board has decided not to go ahead with the FPO.”

Adani group companies have lost market capitalisation of over Rs 7 lakh crore (38 per cent) after US-based Hindenburg Research report accused the group of “brazen stock manipulation and accounting fraud.” Bank stocks were also hit following the plunge in Adani stocks. Markets are worried about further fall in Adani stocks and reportedly, there was pressure from investors who put money in the FPO for the withdrawal of the issue.

Adani claimed its balance sheet is healthy with strong cash flows and secure assets and the group has an impeccable track record of servicing our debt. “This decision will not have any impact on our existing operations and future plans. We will continue to focus on long term value creation and growth will be managed by internal accruals. Once the market stabilizes, we will review our capital market strategy. We are very confident that we will continue to get your support,” Adani said.

INSURANCE LOSES TAX-SAVING LUSTRE, ITS STOCKS RAPIDLY FADE

As the fine print became clear on the Union Budget, the shares of life insurance companies fell sharply. Reason: Word had trickled into the markets by then that the tweaks in slabs and rates in the new tax regime (NTR) may result in tax-payers shifting from the old regime — and lead to a dip in demand for life insurance products as tax-saving instruments.

While LIC shares fell 8.4 per cent, those of SBI life declined 9.3 per cent. ICICI Prudential Life and HDFC Life witnessed a sharp decline of 11 per cent and Bajaj Finserv dipped by 5.65 per cent.

Market participants say that with the tweaks in NTR slabs and rates, the Govt is offering nearly the same benefits as those available in the old tax regime with all the applicable deductions that include investments under section 80C (life insurance premium, PPF and home loan principal, among others), interest outgo on home loans and premium payment on health insurance.

Most tax-payers are like to move to move to the NTR, which has no compliance burden and also lesser tax burden..

Adding concerns to the growth outlook, it was also proposed to tax the income earned from life insurance products (other than ULIPs) issued after April 1, 2023, where the total annual premium exceeds Rs 5 lakh. This has taken away the tax-free advantage of high-value traditional insurance policies.

CHANGE IN CUSTOMS DUTIES: TVS, MOBILES TO BE CHEAPER; GOLD, CIGARETTES, IMPORTED CARS TO BE DEARER

Mobile phones and TV sets manufactured in India would become cheaper with Finance Minister Nirmala Sitharaman announcing cuts in Basic Customs Duty (BCD) on import of their components but smokers would have to pay more as the govt has increased taxes.

Fully imported cars, including electric vehicles, and those assembled in India with imported parts will also become costlier with the finance minister increasing customs duty.

There are some other goods too that will become cheaper as the govt has slashed the customs duty. These are: Shrimp feed, Fish lipid oil used in manufacturing aquatic feed, Seeds for lab-grown diamonds, Machinery for manufacturing lithium ion cell to be used in electric vehicles.

CUTTING RED TAPE, KYC NORMS TO BE SIMPLIFIED

In addition to the rejig in personal income tax slabs, the Union Budget imparted another feel good factor by promising to reduce red tape. These would include an end to harassment for KYC updation, making PAN a “common identifier for all digital systems of specified govt agencies through a legal mandate”.

The KYC process will be simplified by adopting a ‘risk-based’ instead of the ‘one-size-fits-all’ approach, the Finance Minister announced.

Sitharaman also announced that a “one- stop solution for reconciliation and updating of identity and address of individuals maintained by various govt agencies regulators and regulated entities will be established using DigiLocker service and Aadhaar as foundational identity’’.

PRIVACY POLICY CASE: SC ASKS WHATSAPP TO PUBLICISE UNDERTAKING TO GOVT

The Supreme Court on Wednesday asked WhatApp to give wide publicity to its undertaking to the Centre that it will not limit functionality of the app for users in India who do not agree to its revised privacy policy until the govt firms up a data protection law.

In an interim direction, a five-judge Constitution bench asked the messaging platform to do this through full-page advertisements in five national dailies on two occasions. The ads will state what the app said in the undertaking given to the Centre by a letter dated May 22, 2021.

GILL SLAMS TON AS INDIA MAUL NZ TO CLAIM SERIES

Shubman Gill smashed a whirlwind unbeaten maiden century in the shortest format as India thrashed New Zealand by 168 runs, their biggest ever win in terms of runs, in the third and final T20 International to pocket the hard-fought series 2-1 in Ahmedabad on Wednesday.

India's second highest margin of victory was 143-run win over Ireland in Dublin in 2018.

Gill continued his fine form and showcased his array of shots, hitting the New Zealand bowlers to all parts of the Narendra Modi Stadium to score 126 not out off just 63 balls balls with the help of 12 fours and seven sixes.

Riding on Gill's brilliance, India posted 234 for 4 after electing to bat.

New Zealand never got going in the huge chase as Indian bowlers performed in unison to bowl out the visitors for a mere 66 in 12.1 overs, the third lowest score for the Kiwis in this format.

Skipper Hardik Pandya led the bowling department with figures of 4/16, while Umran Malik (2/9), Shivam Mavi (2/12) and Arshdeep Singh (2/16) scalped two wickets each.

India next host Australia for a 4-Test and 3-ODI series, starting from 9th Feb.

INDICATORS

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Bitcoin - USD 23,988

Dollar Index 100.83 Brent Crude 83.39 BDI 668

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THOUGHT FOR THE DAY

Nothing in the world is more dangerous than sincere ignorance and conscientious stupidity. - Martin Luther King, Jr

OFF TRACK

A lady is having a bad day at the table in Monte Carlo. Down to her last Pound 100, completely exasperated, she cries, "What rotten luck! What in the world should I do now?"

A gentleman next to her, trying to calm her down a bit, calmly suggests, "I don't know... Why don't you play your age?"

He walks away. Moments later, he is intrigued to hear a great commotion at the roulette table. Maybe, she won!

Rushing back to the table and pushing his way through the crowd, he is stunned to see the lady lying limp on the floor, with the table operator kneeling over her.

He asks, "What happened? Is she all right?"

"I don't know, she put everything on number 29 and when 36 came up, she screamed and then fainted."