Budget 2023 Analysis: Major announcements and how will they impact your investments?

Budget 2023: India’s central government has continued to follow an expansionary fiscal policy, lending economic support through favourable income tax structures, a serious jump in government capital spending, a push towards job growth and financial support for the agricultural and adjoining sectors.

This would be the last budget presented by the current government ahead of the national elections which are due in 2024!

Budget 2023 highlights: Macro Economics

Target budget deficit of 5.9% of GDP for FY24. Current deficit at 6.4% for FY23.

Analysis: As the government has adopted an expansionary fiscal policy to support economic growth, the budgetary deficit is likely to rise steeply. 

However, the fiscal deficit target for the upcoming fiscal has been set lower than the ongoing fiscal year. Notably, the expected deficit of 5.9% for FY24, is lower than analyst expectations of 6%, according to Refinitiv. 

Here is a snapshot on India’s fiscal deficit over the past years:

 Furthermore, as India looks to spend heavily on infrastructure, jobs, green energy and more, infrastructure capital spending for FY24 is expected to jump 33% to Rs 10 trillion, the highest ever! 

Budget 2023: More cash to you! Higher tax rebate under new regime 

The Finance Minister in her budget gave a rebate of income earned up to Rs 7 lakh, up from Rs 5 lakh earlier under the new tax regime. The basic exemption limit in the regime has been raised to Rs 3 lakh, up from Rs 2.5 lakh earlier. 

For Example: Under the new regime, a person earning Rs 15 lakh will have a taxable income of Rs 12 lakh.  

Budget 2023: Top sectors which stand to benefit! 

Infrastructure 

The Finance Minister revealed that the capital spending for infrastructure development for 2023–2024 will increase by 33% to Rs 10 lakh crore, or 3.3% of the GDP.  

Major builders - Lodha, Oberoi Realty, Dilip Buildcon, Brigade to name a few all jumped above 1%. 

Healthcare

The government in its budget allocated about Rs 8,000 crore towards various healthcare infrastructure projects and missions. 

Healthcare stocks like Cipla, Lupin, Zydus Life and Biocan among others rose between 0.5% and 2%.

Automobiles

The decision to provide higher tax rebates pushed auto stocks higher amid anticipation that higher spending power would lead to higher demand for vehicles.  

Furthermore, the government also announced a scheme to support state governments and also municipalities in replacing their old polluting vehicles. The government is also pushing towards faster adoption of more green energy usage.  

Toyota Kirloskar, Tata Motors and Eicher Motors’ stocks jumped in anticipation of higher sales. 

Travel and Tourism

As many as 50 destinations will be developed as a ‘complete package of tourism’ according to the Finance Minister, who pushed towards making India a preferred destination for foreign and domestic tourists.  

The top hotel stocks:  Indian Hotels, Lemon Tree Hotels and EIH Limited.

The top travel stocks: Thomas Cook, Ease My Trip, IRCTC.  

Overall Budget 2023: Something for everyone 

Overall, the Budget has given priority to more fiscal support and spending with the hope that the resultant economic growth will offset the negative impact stemming from a higher deficit. The slew of measures announced for infrastructure and rural development should help to bring the economy back on track. 

The income tax rebates provided under the new income tax regime is a welcome change as it improves the spending power, helping improve the demand issues which plagued the economy since the coronavirus pandemic.