Union Budget 2023: Expectations high as Nirmala Sitharaman to present her fifth straight budget

New Delhi: Finance Minister Nirmala Sitharaman is all set to present her fifth straight budget on Wednesday.

The budget to be presented at 11am on Wednesday will be crucial considering its the last full budget before the general elections next year. The finance minister has a tough task cut out for her this year- staying fiscally prudent while meeting public expectations of lower taxes and a wider social security net.

In the run-up to the Budget presentation, expectations are rife that she may tweak income-tax slabs to provide relief to the middle class and increase spending on the poor through programmes such as the rural job scheme while ramping up financial incentives for local manufacturing. But all this she has to do while staying on the course of the fiscal consolidation path.

To her aid are inflation falling below the target and buoyancy in tax collections. Healthcare, education and the rural economy may get a first call on such revenues as well as sectors that create jobs, particularly in small businesses.

The Union Budget for 2023-24 (April 2023 to March 2024) would be the first normal budget after the COVID-19 shock and amid global geopolitical developments. The priority for the Budget is expected to be to maintain a reasonably high but stable growth in the medium term. Alongside, to establish fiscal credibility with a suitable incremental reduction in the fiscal deficit to GDP ratio.

It would have the daunting task of progressing towards consolidation after the Covid-related fiscal push, and on the other hand, keeping an eye on needs on the economic growth in an atmosphere of slowing global growth and tightening domestic financial conditions.

On a strategic level, the broad reform process should continue with outlays earmarked for rural development, boosting manufacturing, employment generation, and capacity building through infrastructure.

Economic Survey predicts economy slowing down
The pre-Budget Economic Survey on Tuesday projected the Indian economy slowing to 6-6.8 per cent in the fiscal year starting April – still remaining the fastest-growing major economy in the world – as extraordinary challenges facing the globe will likely hurt exports.

The projection of India’s gross domestic product (GDP) growth is higher than the 6.1 per cent estimate of the International Monetary Fund (IMF) and compares with the survey’s estimated 7 per cent expansion in the current fiscal year (April 2022 to March 2023) and 8.7 per cent in the previous year.

The major risk to India’s growth trajectory arises from the continuing global supply-side uncertainties, including pressures on global crude prices. If these continue unabated, there would be additional pressure on inflation and policymakers would be forced to increase interest rates, which may have a dampening effect on investment.

Another consideration emanates from the global economic slowdown, which has dampened India’s export demand. If the advanced countries suffer from excessive de-growth, India’s export sector and the related domestic sub-sectors would face some pressure.

(With PTI inputs.)