Union Budget 2023: All eyes will be on Finance Minister Nirmala Sitharaman who presents the last budget of the Modi government ahead of 2024 elections. The Union Budget comes at a time when Indian economy is under heavy pressure from increasing global slowdown. The tight rope walk will be more difficult as she remains fiscally prudent while balancing the government’s political aspirations as well as public expectations at the same time. Inflationary pressures due to the ongoing Russia-Ukraine war is another major deterrent that the FM will need to address.
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The FM has enough experience handling challenging times like two years of Covid 19 and the subsequent migrant labour problem wherein free rations had to be distributed to 85 crore Indians. Making sure that the entire population is duly vaccinated was another huge burden on the exchequer.
She has dealt with these problems with a fair measure of balance but how she deals with fresh issues post pandemic is a matter of conjecture.
Challenges before FM
The falling rupee, domestic and international inflationary pressures, sluggish agricultural exports and a dip in exports are some of the major issues that face her. Poor performance by the banking sector and the issue of NPAs and visible slowdown in consumption and demand make her task that much more difficult.
While experts believe that the FM may not make major changes in the taxation system other, some fine tuning in the existing direct and indirect taxation regimes may not be off the mark. She is expected to focus on housing, drinking water supply, poverty, health care and manufacturing sector.
Amids fears of slowdown in consumption and investments, global recession and job cuts, Sitharaman will try to focus on long-term growth, low fiscal deficit and shield the economy from external shocks.
Boost for MSMEs, start-ups
As a result she may announce steps to support rural economic growth, boost allocation in job-oriented sectors like infrastructure and manufacturing, and cut spending on subsidies. Experts expect favourable measures for small MSMEs and startups to boost local manufacturing and increase tariffs to reduce imports.
But while the FM safeguards the economy, she also knows this is her government’s last full-fledged budget before the 2024 elections. While emerging as a dominant force in India’s political spectrum, the BJP-led NDA government has been battling high inflation, slower growth, rising unemployment and falling income. How the FM balances her party’s political aspirations and the economic challenges remains to be seen.
Pro-poor policies and social reforms
So expect some pro-poor policies and social reforms in the upcoming budget. While the government has so far refrained from populist measures like rationalisation of income tax slabs, it could give a fresh makeover to the optional income tax regime. It would give the government a chance to gain some lost confidence and also help in sustaining the direct tax collection momentum in FY24.
Experts believe that the government could introduce lower tax rates and more flexible tax slabs in this budget. It may also announce sops for farmers and the rural economy. Cut in existing food, fertiliser and fuel subsidies is another measure expected.
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