Budget 2023: FM Sitharaman’s key announcements from fiscal deficit to tax changes
On February 1, 2023, the Finance Minister of India, Nirmala Sitharaman announced the Union Budget for the financial year 2023-2024. This was Nirmala Sitharaman’s fifth budget and is the last budget of the current government before next year’s general elections.
Going in to budget day, there were several expectations and hopes of businesses, individuals and investors.
Here are some of the key highlights and takeaways from the Finance Minister’s speech.
- One of the key announcements was the changes in the new tax regime, which will now be the default regime. Under the new tax regime, there will be no tax if taxable income is up to Rs 7 lakh. A standard deduction of Rs 50,000 has also been introduced under the new tax regime.
- The Credit Guarantee Scheme for micro, small and medium enterprises (MSMEs) will be extended and additional Rs. 9000 crores will be infused in it. This is especially helpful for the MSME sector which was negatively affected during the covid pandemic. The Credit Guarantee Scheme also offers relief to banks as they would be more comfortable in lending loans to MSMEs.
- The estimated fiscal deficit for FY23-24 is 5.9% of the GDP. This figure was 6.4% in FY22-23. The finance minister aims to budget in order to bring down the fiscal deficit to 4.5% by FY25-26
- The tax on cigarettes was increased to 16% under the National Calamity Contingency tax. This was done to reduce the consumption of cigarettes by making them more expensive.
- Another major announcement was made in relation to green energy. An allocation of Rs 35,000 crores was announced for energy transition investment. The budget highlighted the aim to touch 5 million tonnes of green hydrogen production by the year 2030. The government will also help with increasing the battery storage capacity to 4000 MWH. Furthermore, a green credit programme will be announced under the Environment Protection Act.
- The budget introduced a compressed biogas (CBG) mandate of 5%. This means that natural gas marketing companies in India will have to include CBG as 5% of their total volume. This initiative is undertaken to increase the production and usage of CBG especially in the transport segment.
- In order to push the growth in technology and communication, the finance minister announced the setting up of 100 labs in engineering colleges in order to research and develop 5G solutions. Setting up of data embassies in the IFSC Gift City has also been encouraged to other countries.
- The finance minister also announced a scheme to replace old and polluting vehicles of state governments and municipalities. This will not only help boost the sales of automobile companies, but also help in transitioning to EVs.
- A big figure in the budget was the Agri Credit Target which was increased to Rs 20 lakh crore.
- The proposed capital expenditure target for FY24 is up 33% to Rs 10 lakh crore. The outlay for railways also saw a steep hike.
- There was a revision in the disinvestment target of the government to Rs 50,000 crore for FY23. Whereas the disinvestment target for FY24 is Rs 51,000 crore.
- The finance minister also announced an increase in the outlay of the PM Aawas Yojana by 66% to Rs 79,000 crore.
- The central government will bear the entire expenditure for the free food scheme. This amount is Rs 2 lakh crores.
- The finance minister also announced the promotion of tourism with the help of public-private partnerships (PPPs). Additional amount under the Emergency Credit Line Guarantee Scheme is set aside especially for the tourism and hospitality industry.
With the current growth of the Indian economy at 7%, the finance minister said the country is on the right track. With the help of the budget for FY23-24, the aim is to create a blueprint for the bright future of India@100.
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