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Wednesday, October 4, 2023

From capex to corporate tax breaks; 10 great announcements made by FM

The FM began the speech by reinforcing India’s growth story, highlighting how India grew by 7% in the last fiscal year, and how the Indian economy has increased in size from tenth to fifth place in the last nine years. He soon shifted his focus to the wellness agenda by announcing that the center would spend $2 lakh cr in free food grains for all priority households.

The big announcements were a 33% increase in Capex, which beat estimates. Another typical significant announcement for the election year was to increase the tax exemption up to 7 lac per year from 5 lac per year in the next tax regime and to further rationalize taxes.

The FM divided its focus into seven key areas:

  1. inclusive developments,
  2. reaching the last mile,
  3. infrastructure and investment,
  4. Unleashing the potential,
  5. green growth,
  6. Youth power and finance.

Budgetary impact on the stock market

  • The budget has received a great reception from the market and the public.
  • The tax break has been greeted as a big welcome sentiment move, buoying the broader markets, but the greater benefit to taxpayers is debatable.
  • The infrastructure push would further India’s goal of becoming the manufacturing hub for the world and improve the ease of doing business.
  • The capital goods, cement, rail, infrastructure and rail sectors top the charts with this move.
  • The travel sector is booming due to travel SOPs, and other industries like seeds and agrochemicals are also booming.
  • The issue of fiscal prudence was also promoted, which calms the nerves of the market.
  • Power banks continue to lag, and power has lagged.

First Big Announcement – Capex

The big announcements were: an increase in total capex outlay by 33% to 10 lac crore, bringing effective capex to 13.7 lac crore, forming 4.5% of GDP. This is well above our expectations of 3.5% and should boost infrastructure, capital food, logistics and rail. Rail spending was the highest ever at 2.4 lac crore. Critical projects for urban development and transportation improvements were announced. Nifty Infra jumped on this news. It also included artificial intelligence and data governance in its infrastructure development announcements.

The 50-year interest-free loan to states for capital spending purposes has now been increased to $1.3 lakh crore, 30% more than allocated for 2022-23.

Equity indices welcomed the infrastructure spending announcements. But bond yields rose two basis points to 7.38% since the FM announced the increase in capital spending.

With a huge increase in capital spending, the outlay of Prime Minister Awaas Yajna and an increase in railway capital spending, the Modi government, in its latest budget, has focused on job creation and infrastructure development. about populism.

Second big announcement – Personal income tax

In a typical pre-election budget announcement, in the new tax regime, he increased the tax exemption to lac 7 per year from lac 5 per year. It has reformed the tax rates with 0 taxes up to 3lacs and reformatting the general personal tax regime. Reduced the tax surcharge rate from 37% to 25%. She estimated an outlay of Rs 35,000 crores due to this.

The broader benefit for the middle class income taxpayer is debatable since in the new regime the benefits of the 80C are less. The largest taxpayers will see the benefits of this move.

The ease of doing business

More than 39,000 compliances have been reduced to improve the ease of doing business and more than 3,400 legal provisions have been decriminalized. The Union Government has cleverly used often open-ended settlement schemes to raise additional revenue and resolve long-standing tax and contract disputes.

Green energy

Keeping the focus on green energy, the FM announced $Rs 35,000 crore in priority capital for energy transition, among other incentives for the sustainable sector.

MSME sector

For the MSME Sector, the government enabled the credit guarantee for MSMEs by allocating Rs 9000 crore. This will allow for an additional guarantee of credit without guarantee of $2 lakh crore rupees, which will reduce the cost of credit by 1 per cent.

Financial sector

He discussed a comprehensive review of existing regulations for the financial sector and focused on including private sector contributions to regulatory reviews. The capitalization of the banking sector was not announced, nor were changes in the capital tax structure announced. The NSE PSU Bank Index is under pressure, down 0.74 percent, even as the Nifty Bank Index is up 1.2 percent.

A National Data Governance Policy will be drawn up to unleash Innovation and research by Startups and Academia. This will allow access to anonymous data.

Fiscal management

He calculated that the fiscal deficit target for fiscal year 24 is 5.9% and reinforced his focus on reducing the fiscal deficit below 4.5% of GDP by 2025-26. The fiscal deficit target for fiscal year 2023 remained at 6.5%. The FY24 fiscal divestment target remained at Rs 61 000 crore.

Support for the new industry

Customs duty support was announced for the manufacturing components of mobile phones, televisions, electric fireplaces and the chemical industry, especially the ethanol blend. Customs duty SOPs for synthetic metals were also announced. The NCCD for cigarettes was increased to 16%.

Corporate tax breaks

The indirect tax proposals were aimed at promoting exports, boosting domestic manufacturing, enhancing domestic value added, and encouraging green energy and mobility. He said a simplified tax structure reduces the compliance burden and improves tax administration. He also extended the duration of the tax-exempt benefit for new businesses.

Sonam Srivastava is the small case manager and founder of Wright research.

Budget 2023: Allocation for specific ministries

First post: February 02, 2023, 11:26 am ist

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