Union finance minister Nirmala Sitharaman spoke of Union Budget 2023-24’s focus on capital expenditure, tax measures announced in it that will benefit the middle class, and the emphasis on encouraging and incentivising states to invest in infrastructure in her reply to the budget discussion in the Lok Sabha on Friday. In an about 93-minute-long speech she rejected accusations of the budget being “anti-minority”, not doing enough for the states and the middle-class, and accused the opposition parties of nepotism even as she stressed the difficult economic environment of 2022-23.
“I am sure, most of us, who were speaking on the Indian economy and the Budget, would observe that it is a very, very tight measure; it is very delicately balanced; and that is what has been achieved in the 2023-24 Budget. without compromising on India’s growth potential and sustaining the growth momentum, we also have made sure that fiscal prudence is maintained as per the glide path we had given two years ago,” she said.
Later, she also responded to the budget discussion in the Rajya Sabha and said sustained growth and developments are needed to remove disparity in income. “By better development, we will certainly be able to achieve better prosperity, better income generation for people, more jobs for people… leading to 2047 when we will see a developed India…”
Sitharaman presented her budget on February 1, and announced an ambitious 13.5 lakh crore (including grants to states) investment in capital expenditure, tax relief for tax payers at the lowest and highest ends of the tax payer spectrum, even as she pruned next year’s fiscal deficit of GDP. Over the course of the budget discussion, opposition parties said the Budget has new “jumlas” (gimmicks), new names but it does not address issues such as unemployment nor inflation. Trinamool Congress member Saugata Roy said the Union Budget was anti-farmer, anti-poor and anti-rural. A US research firm (and short seller’s) report on the Adani Group, alleging several violations, have cast a shadow over proceedings.
In her reply, Sitharaman said Budget 2023-24 has “astutely” balanced India’s development imperatives with fiscal prudence with states at the forefront of boosting growth. She rejected the Congress’ allegation of being anti-minority in fund allocation, reminding the party of the anti-Sikh riots (1984, New Delhi) and the Nellie massacre (in Assam in 1983, targeting Muslim farmers) during its rule.
Explaining the context of the Budget 2023-24 she said while a path of recovery was “distinctly observed” at the beginning of 2022-23 (the year’s budget was presented before the Russian invasion of Ukraine), the war and the unexpected resurgence of Covid in China triggered inflationary pressures globally. She added that the government and the Reserve Bank of India took several “preventive” fiscal and monetary measures to check inflation , bringing it under the central bank’s upper tolerance band of 6% from a peak of 7.8% in April 2022.
According to RBI, the Consumer Price Index (CPI)-based inflation fell slightly below RBI’s upper tolerance limit in November ( 5.9%) and December (5.7%) , and is expected to fall further to 5.3% in 2023-24, on the assumption of a normal monsoon.
Despite this, Sitharaman said, the Indian economy is “the fastest growing major economy in the world”.
RBI’s Monetary Policy Committee on February 8 projected India’s gross domestic product (GDP) growth at 6.4% for 2023-24. Earlier, the Economic Survey projected a range between 6% to 6.8% with a baseline growth of 6.5%. In a post-Budget interview with HT (published on February 6) economic affairs secretary Ajay Seth said he would expect growth to have an “upside potential” from the baseline scenario.
Since the Covid pandemic the government’s strategy has revolved around the capital expenditure (capex) route because “it has great multiplier effects enable to have in situ jobs created” … “and, therefore, triggers better income; and, therefore, triggers, better consumption. This is the well-established route… as compared to giving money in the hands of the people,” Sitharaman said.
The states have been given funds and incentives to implement projects on the ground expeditiously and spur growth. Budget 2023-24 “astutely balances the requirement for India’s development imperatives within the limit of fiscal prudence,” she said.
Replying to a query on whether the Centre is giving enough to states, the finance minister said total resources being transferred to states under Budget Estimates (BE) 2023-24 is estimated at ₹17.98 lakh crore. This is higher by ₹1.55 lakh crore over the Revised Estimate (RE) of 2022-23 and ₹2.91 lakh crore more than the actual of 2021-22. “States will be the partners in this massive capital expenditure exercise,” she added.
The minister said the budget has also focused on the middle-class by encouraging them to move to the new tax regime that offers a rebate on annual income of up to ₹7 lakh. The new tax regime is “very attractive” as the tax exemption limit has been hiked to ₹3 lakh [from ₹2.5 lakh] and the standard deduction of ₹50,000 has also been extended to those who opt for this scheme. “Since the enhanced rebate limit is unconditional, it leaves higher disposable income in the hands of people,” she said.
Sitharaman rejected the Opposition’s charge that the ₹35,000 crore allocation for clean energy transition was made keeping the Adani Group in mind. This could be the Congress culture to give benefits to “‘jijas” (brothers-in-law) and “bhatijas” (nephews) but not of the Modi government, she said adding that no allocation is made keeping anyone specific in mind . The Narendra Modi government keeps everyone in mind, she added.
The minister attacked the opposition for allegedly influencing state-run banks to lend to people during their rule. “If phone calls were made, if relations were given benefit, if jijajis and bhatijas were given benefit, it might be their culture,” she added.
While the minister did not take any names, the BJP has consistently targeted Rahul Gandhi’s brother-in-law Robert Vadra.
She said the Modi government does not distinguish on the basis of religion and all get benefits of welfare measures such as housing for all scheme and Jal Jeevan Mission. Both are schemes that have significant outlay in the budget.
In the course of the debate on the budget, the opposition also raised the lower allocation to the Mahatma Gandhi National Rural Employment Guarantee Scheme in the budget, unemployment, and the state of small and medium enterprises (MSMEs), lower food and fertiliser subsidies.
On the rural job guarantee scheme, she said, “MGNREGA is a demand-driven programme. Therefore, whenever there is an increase in demand, we come up with the numbers. But this year, we also want to underline the fact that MGNREGA outlays factor in economic recovery and massive increase in the PM Awas Yojana (PMAY), particularly the rural… Here the beneficiaries are similar beneficiaries… So, actually there is no reduction.”
Several opposition leaders had raised questions that the Budget Estimate (BE) for 2022-23 that was ₹73,000 crore, has now been reduced to ₹60,000 crore in 2023-24 BE.
And on MSMEs, she added that the “Vivad Se Vishwas Scheme” would refund the forfeited amounts of bid fee or performance security, which is given during the Covid-19 period by all the government and public sector enterprises which have contracts with the MSMEs. “The Vivad Se Vishwas Scheme is for the MSMEs and also to encourage timely payment. Deduction of expenses for tax purposes allowed only when the payment is actually made to the MSMEs which will greatly benefit the MSMEs because most often, large companies retain them and really take the offset benefits for them without really paying the MSMEs.”
“We want to encourage the payment of MSMEs because they are the ones who generate a lot of local jobs. Then, we have the Revamped Credit Guarantee Scheme for micro and small enterprises with additional credit of Rs.2 lakh crore, and reduction of interest rate by approximately one per cent. Also, the presumptive taxation limit has been enhanced both for the MSMEs and for professionals,” she added.
The first half of the budget session of Parliament is scheduled to end on Monday.