Dashing hopes of a populist pre-election budget, this time FM focused on Core economy and its further revival. With GDP growth pegged at near 9%, one of the highest amongst large economies, FM tried to further strengthen it.
- India sees a 8-8.5% GDP growth in FY23. Projected 2021-22 real GDP growth at 9.2%.
“For an economy which is coming out of pandemic and showing good positive sign of revival, govt. tried further stabilizing it.”- FM.
- Capital Expenditure: (Money Spent on building &developing Fixed asset, facilities, equipment’s etc.) was targeted to increase by 35% taking it to Rs 7.5 Lac Crore, from current Rs. 5.54 Lac Crore. It is pertinent to mention that every Re spent in Capex gives it a Multiplier effect of Rs 2.95. This will help in supporting industries across the spectrum, Large, the Medium and MSMEs.
- Spending Comes at a cost. Fiscal Deficit FY23 is estimated to be INR 16.61 trillion. Or 6.4% of FY GDP, Lower than 6.9% of GDP in FY 22 and way lower than 9.2% (FY 21- Pandemic Hit). Though Fy16-20 average is 3.5%-4%.
- GATI SHAKTI: A Push to create a world class transportation network, speeding up the logistic channel and lowering the cost. Capex for Roads is up 55% YoY and railways up14%YoY.
- Affordable Housing: Rise in allocation to PM Awas Yojana – Rs. 480 Bn in FY23 from Rs. 275 Bn in FY22.
- The Finance Minister reiterated that the Government would continue on its path of fiscal consolidation to attain a fiscal deficit to GDP level below 4.5% by FY 2025-26 through a fairly steady decline over this period.
- Gross tax revenues for FY23 are estimated at INR 27.56 trillion, a 9.56% growth from FY22 RE at INR 25.16 trillion.
- Corporate tax revenues for FY23 is estimated at INR 7.2 trillion, a 13.4% growth from FY22 RE at INR 6.35 trillion while income tax revenues for FY23 is estimated at INR 7.0 tn, a 13.8% growth from FY22 RE at INR 6.15 trillion.
- Interesting: RBI to issue digital rupee in FY23 using block chain Technology. More importantly, Govt. warms up Cryptos with a 30% tax, a news that gives recognition to cryptos in India, but keeping the tax rate high will push it’s trades to overseas platforms.
A higher fiscal deficit and an unexpected increase in Government borrowing via market loans for FY23 may lead to the yields moving higher to the curve. The yields on 10-Year benchmark G-Sec moved up by 15-20 bps market hours on 1st Feb; rising to 6.87% intraday and ended at 6.83%. Today (2nd Feb 2022) it again remained elevated at 6.80-6.90 levels.
Budget provided a much needed thrust to infrastructure by increasing Capex across segments, re-iterating Government’s emphasis on structural reforms. The Government continues to focus on long term growth drivers like infrastructure, rather than short term consumption support, and prioritizing growth over inflation. It is Positive for the sectors which are closely linked to economy like Banks, Capital Goods, Infrastructure, etc.