(Narendranath K Menon)
In budget 2023–24,Finance Minister, Ms.Nirmala Seetharaman, has continued with her policy of allocating significant budgetary resources for capital expenditure. The multiplier effect of capital expenditure is what is being banked upon. The 33% increase in capital expenditure envisaged in the budget, would take it to Rs.10 trillion from an amount of Rs.7.5 trillion in the fiscal year 2022-23. In the days ahead, capital investment from the private sector will be crowded in. Together, it would generate job opportunities and the resulting purchasing power in the hands of employees would boost consumption demand. A virtuous cycle that is triggered would help revive the growth of the economy.
The widespread notion that the budget would be populist has been belied. Fiscal recklessness in a year that presaged numerous uncertainties was a risky gamble that the government could ill afford. The adherence to the fiscal deficit target of 6.4% for 2022-23 and the setting of the fiscal deficit target at 5.9% in the new fiscal with the promise of clocking 4.5% by 2025-26 is a considerable reason for funding agencies to be happy. Moderate rates of fiscal deficit lead to lower costs of borrowing for the government.
In the sphere of indirect taxes, the Minister has made for a reduction of the compliance burden and improvement in tax administration by reducing the number of basic customs duty rates from 21 to 13. Green mobility has been furthered by reducing customs duty on imported capital goods used to make lithium-ion cells for batteries used in EVs. Also, the customs duty on chemical inputs that go into the production of ethanol has been reduced. On the back of these green pursuits that help achieve the goal of the energy transition, the Atmanirbharagenda is strengthened by imposing increased customs duty on mid-range to premium motor vehicles and e-vehicles.
Making for a robust digitized new India is a common thread that one sees throughout the entire budget. To realize the vision of making AI for India and India for AI, three centres of excellence are to be set up in leading educational institutions. The industry is expected to collaborate in conducting research and developing cutting-edge applications and scalable problem solutions in the areas of health, agriculture, and sustainable cities in the centers of excellence. We can look forward to the work at the institutes galvanizing the AI ecosystem and helping keep India ahead of the curve.The announcement that 39,000 compliances have been done away with and 3,400 legal provisions have been decriminalized would serve to make the pursuit of business in India an easier task. The increase in turnover limits, by 50% from Rs.2 crores to Rs.3 crores, to pay a presumptive tax by micro, small and medium enterprises is laudable. It would mean that small businessmen will not be subject to needless inspections by government officials. Professionals to have reason to cheer, as the presumptive tax limit for them has been increased from Rs.50 lakhs to Rs.75 lakhs.A heartening and pro-development measure is the increased allocation for 50-year interest-free loans to States by 30%, from Rs.one trillion. The loans would be conditional. Borrowing states need to initiate actions outlined by the Centre. They include the replacement of old government vehicles, construction of houses for police personnel, initiation of urban reforms, and setting up of digital libraries. The construction of ‘Unity Malls’ is an element in the budget. States are expected to construct them in designated places and market their ODOPs (one district, one product), GI products, and handicrafts. The construction of such Unity Malls also qualifies to avail of the fifty-year interest-free loans by the States.
On the divestment target, the minister has taken a realistic view. Successive budgets had set ambitious targets and they were repeatedly undershot. While the asset sale target was pegged at Rs.65,000 crores for FY 23, only 48% was achieved, thanks largely to the LIC public offer. Announcements made by government officials after the budget proposals were outlined indicate that disinvestment should be seen through the lens of reforms and employment creation rather than as capital generation. The disinvestment target for FY 24 has been set at Rs.50,000 crores.Section 56 (2) (viib) of the Income Tax Act was inserted in the legislation in 2012.
The clause sought to prevent the laundering of black money and round-tripping and is popularly referred to as the Angel tax. The announcement that from now it would apply to non-residents also is retrograde. The consequence of the angel tax being applied to non-residents will significantly impact the funding for startups. In the backdrop of the startups already facing a ‘funding winter’, the minister’s announcement has come at an inappropriate time. Notwithstanding this, the numerous proposals announced through Budget 24 have the rich potential to enable India to attain its aspirational status of NEW INDIA – a developed country.
