Staying the course on fiscal prudence

Despite being the last full Budget before the general elections next year, the Finance Minister, Nirmala Sitharaman didn't succumb to the pressure to give a populist budget, doling out extensive freebies.

The FM presented a progressive budget with goals set on long-term economic stability, capex, job creation and inclusive growth. The focus was on a technology-driven, knowledge-based economy with strong public finance and a robust financial sector.

On the economic front, the Budget estimates India's GDP growth at 7 per cent in FY23 and 6.5 per cent in FY24, despite a slowdown globally owing to the Covid-19 pandemic. India has been one of the top-growing economies among its global peers and has also been able to contain inflation better than others.

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The key highlight of the Budget was the focus on fiscal prudence as the FM continued with the government’s long-term path to fiscal consolidation targeting bringing the deficit below 4.5 per cent by FY26. The Budget has set the fiscal deficit target at 5.9 per cent of GDP for FY24.

The government continued its push towards capacity creation which would help in long-term economic stability. It proposed to sharply increase the allocation for capital investment by 33 per cent year-on-year (YoY) to Rs 10 lakh crore for FY24 targeting job creation and infrastructure development.

Among the key segments to benefit from the higher capex are likely to be housing, railways, ports, airports, roads, power, renewable energy, etc. The Budget has provided the highest-ever capital outlay of Rs 2.40 lakh crore for railways in FY24. In addition, the outlay for Pradhan Mantri Awas Yojana or 'housing for all', has been increased by 66 per cent for FY24 to over Rs 79,000 crore.

The government refrained from any changes relating to the securities market, thus providing some relief to market participants who were expecting some tweaking to the Securities Transaction Tax (STT) and capital gains tax.

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In line with 'ease of doing business', more than 39,000 compliance requirements have been removed, and more than 3400 legal provisions have been decriminalised.

For the middle class as well as salaried income tax payers, the government has offered some relief under the new tax regime. The Budget proposes to reduce the tax slab from seven to five while increasing the rebate limit to Rs 7 lakh from the present Rs 5 lakh. It also included the standard deduction available for salaried taxpayers under the new regime.

While the focus on capex should be positive for sectors like cement, capital goods, infrastructure and construction, the scrapping of old government vehicles is positive for auto companies.

(The writer is MD & CEO of Motilal Oswal Financial Services Ltd)