Union Budget 2023: Five Stars for the Indian economy

This piece is part of the essay series, Amrit Kaal 1.0: Budget 2023

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There is no doubt that the Indian economy has been an example of stellar economic performance, and the Union Budget 2023 is reflective of the holistic growth trajectory that the country intends to take. While on the one hand, this is the last full Budget before the 2024 Union Government election, making it highly crucial for the current dispensation to deliver on the promises made; on the other hand, the Budget also needs to advance the Indian stance of being a strong voice for the Global South and strengthening world stability for holding the presidencies for G20 and Shanghai Cooperation Organisation (SCO) this year. There are some compelling reasons to note how the Budget 2023 could kick-start India's Amrit Kaal towards an inclusive and prosperous economic powerhouse in the near future. First, the Indian economy has essentially been consumption-driven in the last three decades, especially post-1990s, when the economy had started integrating with the globalised world order. However, despite several stimulus packages after the pandemic, consumption demand has been relatively low, with the GDP shrinking by 6.6 percent in FY 2020-21. The commendable handling of the pandemic, expansion of domestic capacities and the resumption of economic activities, especially in the contact-intensive sectors such as trade and hospitality, have brought the private consumption figures to an incredible 58.4 percent of GDP in the second quarter of FY 2023 – the highest of all second quarters since 2013-14.

The Indian economy has essentially been consumption-driven in the last three decades, especially post-1990s, when the economy had started integrating with the globalised world order.

One of the major highlights of the Budget 2023 is the relaxation of both direct and indirect taxes, which would result in an estimated INR 350 billion net loss in tax revenue, but will further boost disposable income and consumption demand for the Indian masses, especially in the middle-to-lower financial classes. Additionally, schemes such as the PM Jan Dhan Yojana, PM Kisan Samman Nidhi, and the proposed hike in agriculture credit by 11 percent in this Budget will have ripple effects in boosting demand in the rural markets. Second, India surpassed China to become the most populous country in the world in January 2023; the country opened up a robust labour market for the world. This is quite relevant from the perspective of a young population where India enjoys the demographic dividend of having an under-30 population at about 52 percent. The focus on human capital advancement through fast-track skilling initiatives in this Budget will be seminal in finding demand-supply equilibrium in the domestic labour markets, creating more livelihood opportunities, and making the Indian youth suitable for the global job markets. The Pradhan Mantri Kaushal Vikas Yojana (PMKVY) 4.0 mentioned in the Budget 2023 will aim to skill numerous Indian youth in new-age Industry 4.0 domains such as robotics, Artificial Intelligence (AI), 3D printing and mechatronics, among others. This will also help mitigate the job crisis that India is currently facing, with high rates of unemployment, which stood at 8.3 percent (a 16-month high) in December 2022. The youth income is also expected to increase consumption, savings and investments for India’s avowed goals of a US $5- or 10- trillion-dollar economy.

The focus on human capital advancement through fast-track skilling initiatives in this Budget will be seminal in finding demand-supply equilibrium in the domestic labour markets, creating more livelihood opportunities, and making the Indian youth suitable for the global job markets.

Third, as the world crosses the halfway mark for the UN Sustainable Development Goals (SDGs) Agenda 2030, almost all countries are not on track to meeting the SDG objectives, mainly because of the deviation of development finance towards health emergencies, supply chain disruptions, and extreme climate events. Against this background, the Indian vision for ‘LiFE’ or Lifestyle for Environment is an example of innovative thinking towards an environmentally-conscious lifestyle. The Budget 2023 was firm on ushering in the targets of net-zero carbon emission by 2070 through the provision of INR 350 billion for priority capital investments on energy transition by the Ministry of Petroleum & Natural Gas. Fourth, the macroeconomic shocks in the global economy emanating from the pandemic-induced market disruptions, the looming threats of recession, and the Ukraine-Russia conflict have left even powerful economies struggling worldwide. In fact, the massive inflationary pressures in the global energy and food markets have put smaller South Asian countries such as Bangladesh and Sri Lanka in a crisis. As Governments try to diversify the unforeseen global macroeconomic risks in the future, India rides the wave of the world's China Plus One (C+1) strategy – for being an alternative to China by entering different parts of the Global Value Chains (GVCs), ranging from domestic manufacturing to price-competitive exports. Finance Minister Nirmala Sitharaman mentions ‘Infrastructure and Investment‘ as one of the seven priorities for the Indian economy. This Budget has again prioritised infrastructure development for the third consecutive year by raising capital expenditure by 33 percent to INR 10 trillion (3.3 percent of GDP). In addition, the country is expected to reduce approximately 39,000 compliances, decriminalise 3400 legal provisions and introduce the Jan Vishwas Bill to amend 42 Central Acts to enhance trust-based governance and encourage domestic and foreign investments in businesses, by bringing down transaction costs.

The macroeconomic shocks in the global economy emanating from the pandemic-induced market disruptions, the looming threats of recession, and the Ukraine-Russia conflict have left even powerful economies struggling worldwide.

Finally, despite the global adversities, the International Monetary Fund (IMF) has estimated the Indian growth rate at 6.8 percent for FY 2023 – the fastest-growing major economy in the world. Moreover, the Budget 2023's target to bring down fiscal deficits to below 6 percent of GDP, for the first time since FY 2020, will strengthen the macroeconomic stability of the country through a series of revenue mobilisation and expenditure rationalisation measures. The crisis in the South Asian neighbourhood is quite alarming—the humanitarian disaster in Sri Lanka following the economic crisis last year, the power sector issues in Bangladesh, the FOREX crunch in Nepal, the shutdown of businesses in post-coup Myanmar and the currency weakening and acute economic instability in Pakistan. Nevertheless, according to India's Economic Survey 2022-23, the FOREX reserves stood at US $562.72 billion as of December 2022 (which accounts for 9.3 months of imports) to comfortably control the volatility of the Indian rupee. Given the external debt situation is also not worrisome, India stands as a bright star in the region and on the global stage, despite inflationary pressures.

• Indian Economy
• India
• Amrit Kaal
• budget
• Economy
• Finance
• G20
• GDP
• IMF
• Nirmala Sitharaman
• SDGs

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