Saptarshi Union Budget 2023-24: Expert Opinion
Author: B. Yerram Raju
Even as we await the fine print my quick take on the Union Budget 23-24 released on Wednesday (February 1) is that it has a number of hopefuls. It is growth-oriented on the face of it. Except Karnataka, States do not have much to expect.
The middle class has a lot to cheer like the income tax slab for the salaried moved up by Rs 50,000, exemption limits on interest-free savings of senior citizens and the threshold of their tax-free savings limit from Rs 5 lakh to Rs 7 lakh.
Union Finance Minister Nirmala Sitharaman has announced seven important features of the budget akin to the Saptarshis. By this comparison, she would like to make the citizens feel the sanctity of the Budget and left a challenge for the economy to attain it.
The FM made bold attempt at increasing allocations for infrastructure in line with the aspiration to reach the USD 5 trillion GDP by 2025. All the capital allocations accompanied a big push for a green economy as well. From this angle, she gave enough hope for the economy to reach the goals relating to the Committee of Paris agreements. She also laid a firm path to achieving the targets.
Fiscal deficit has been artificially contained at 5.9 per cent in a scenario of global uncertainties, the worrying inflation and the disruption in supply chains and commodity markets. We are not decoupled from the global economy.
Further, there are huge interest payments due on the earlier public debt and bond issue to make up the fiscal deficit in a rising discount rate market will have serious implications and give rise to doubts about the target set in the budget on this count.
The Budget does not appear to have absorbed the recommendations of the Fifteenth Finance Commission, particularly related to the share of States in Union taxes, release of grants to the states, revenue deficit grants, resources to the states for development projects etc.
Sector-specific grants of Rs 1.3 lakh crore over the five year period should be given to states for eight sectors: (i) health, (ii) school education, (iii) higher education, (iv) implementation of agricultural reforms, (v) maintenance of PMGSY roads, (vi) judiciary, (vii) statistics, and (viii) aspirational districts and blocks.
A portion of these grants will be performance-linked. Budget for health sector should be 8 per cent as per their recommendations. However, the total allocation under health sector falls short of this recommendation. Since health, education and agriculture are concurrent subjects under Indian Constitution, union government has responsibility to share the burden.
Based on performance, Telangana being one of the high performing states should have got specific allocations under the Budget. They are being denied their share for the ninth successive year.
FM made quite a few announcements related to the MSMEs:
Credit Guarantee Trust for MSMEs is getting revamped and the FM allocated Rs 9000 crore for the purpose. The guarantee limit of Rs 2 crore is set to increase. But with no implementation mechanism to ensure that the revamp addresses the access to credit to manufacturing MSMEs mere allocation would be parking the amount with SIDBI for the purpose.
The FM expects that collateral-free credit will allow access of credit of Rs 2 lakh crore to MSMEs while the cost of credit will be reduced by 1 per cent. This would mean that the enterprises that are covered by the CGTMSE would be charged interest rate less by 1 per cent than others. Hopefully, the revamp would allow better comfort for the member lending institutions in terms of claim settlement as well.
A National Financial Information Registry will be set up to serve as the central repository of financial and ancillary information and enable an efficient flow of credit.
The limit for presumptive taxation increased for micro enterprises with a turnover of up to Rs 3 crore and for certain professionals with a turnover of up to Rs 75 lakh.
There is little information on the utilisation of this facility up to the existing limits of Rs 2 crore turnover for micro enterprises and Rs 50 lakh for the professionals. While this should certainly help in bringing them into the organised sector, it will be a wild conjecture on numbers.
The announcement that government and government undertakings will return 95 per cent of the forfeited amount related to bid or performance security in cases of failure of MSMEs to execute contract during the Covid period in order to provide relief to MSMEs, will be widely welcomed.
Even relating to the delayed payments by such undertakings, the FM should have strengthened the implementation of MSE Facilitation Centres as an arbitral and conciliatory mechanism by making a similar announcement.
Agriculture has got a raw deal. Increasing credit target is beyond her budget. It is a target to the Banks. Not a single year, banks have defaulted on such targets for agriculture short term credit.
This is a jugglery of figures by the lending institutions. If the FM had fixed a similar target for term credit for agriculture and allied activities, it would have made a healthy departure.
Financial sector is undergoing digital transformation. One virtuous thing is that she did not allocate capital to the public sector banks. The sector will be under great pressure during the next financial year due to the cascading effect of the global turmoil on the forex reserves, inflation targeting, cyber threats and increasing frauds. Regulatory burden enhances with its digital currency introduction and the ability of the banks and NBFCs to cope with the new challenges.
While one may feel that the FM gave lot of cheer than jeer, sectoral and federal expectations had little to admire.
Disclaimer: The author is an economist and risk management specialist. Views are personal
Be first to give your comments.