NEW DIGITAL INDIA was the theme that was expected out of the budget, with relaxation and building hopes across all sections. The objectives definitely underlined boosting income and purchasing power, but left common public perplexed as the budget announcements flowed.
The budget surely fell short of expectations and the market was the first to show its resentment. It is fair to say that aspirations across sections were let down a bit. The Nifty and Sensex both followed a ‘sell on rise’ approach and went tumbling. Overall, the Budget would have been decent in normal conditions but a slowing economy and uncertain global situation required an unorthodox and effective policy. Nevertheless, the adverse reaction is short-lived and markets would get back on track soon and a gradual recovery is expected.
There were many important announcements to strengthen various sectors. Let us see some of the keyhighlights from the sectors considered:
1. Financial Sector:
a) Insurance coverage on fixed deposits increased to INR.5 lac from INR.1 lac which is a welcome move to ruffle fear among investors.
b) To uplift the banking sector, Public Sector Banks especially, a fresh capital of INR. 3500 crwill be infused. Few other public sector banks will be seen raising capital from the capital markets.
c) Cooperative banks will now have access to capital, improve governance and the Banking Regulation Act has been amended.
d) The BOND Market is very ecstatic. A lot of attention has been given to strengthen this segment. NRIs will now have a category of G-sec to invest in.
e) Many more debt ETFs will be floated, thereby giving more exposure and opportunities for individual investors to be a part of the G-sec market.
LIC, IDBI divestment will bring transparency and depth to market which is good especially for stock investors.
a) Personal Taxation:
It was a common guess that personal income tax shall be lowered but a surprise of a parallel system for personal income tax awaited and receiving mixed reactions. The most talked about segment by the public after announcement. The motto behind the trade-off of no exemptions and lower rates was to make the income tax system simple and self assessable without needing any professional help. You would have found all your social media accounts flooded with calculations and tables suggesting which would be a better approach, new regime or old regime... However, since it is left to the tax payers’ discretion as to which one to choose, here is our take on whether to follow the old regime or file taxes under the new regime. In short “If you are able to claim more than INR. 2,50,000 under deductions, present tax regime is beneficial” and here is why...
b) Corporate taxation:
Further reduction in corporate taxes to 22% for existing companies and with effect from March 2023 the manufacturing companies will be taxed at 15%. This means the companies can grow by expanding their businesses and be more competitive.
Micro, small and medium enterprises with turnover of up to INR. 5 cr need not get their books audited now.
c) Foreign Investors:
To boost infra funding, there is a 100% tax exemption on interest, dividend and capital gains from Sovereign Wealth Fund. However, this comes with a 3 year lock-in period.
A compilation of about 6500 projects on housing, roads, health care, pipelines, drinking water and other infrastructure transformation within the next 5 years will be seen and a mammoth INR. 100 Lac crores will be spent.
Skill development will see INR. 3000 cr infused and INR. 9300 cr will be spent on education sector. A new policy on education system is expected soon.
Technology has taken front seat in the recent times with the government policies and this budget is no different. A whopping INR 8000 cr has been allocated for the ‘National Mission on Quantum Technologies and Applications’. Apart from this, internet connectivity will be focused under ‘Bharat Net Program’. New technology for agriculture sector is appreciable.
6. Start-ups and Entrepreneurship:
To reinforce the rather dull “Make In India” initiative, custom duty on various imports will be hiked. Made in India Furniture, electronics, footwear will see better light as the regulatory process has also been eased.
“Investment Clearing Cell” is a welcome to budding entrepreneurs and will have services like funding advice and obtaining clearances.
7. Climate Change:
Climate change is talked about globally and the government is focused to not be a nation stamped for bad foot print on the environment. The Ministry of environment, forests and climate change will see INR. 4400 cr in allocation. The centre will now encourage state governments to maintain good air quality.
There was a lot riding on the budget and it has seen a mixed bag of reactions. India earlier labelled as the fastest growing economy is now restarting its economic growth and only right implementation will answer the backlash the Finance Ministry is facing.