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Indian federal budget 2023-24: Why expectations are running high

The budget of the world’s fastest-growing major economy comes at a critical time as things like global inflation and rate hikes pose headwinds

Excitement and expectations have been running high across India and among millions of overseas Indians as Finance Minister Nirmala Sitharaman prepares to present the federal budget 2023-24 tomorrow.

The final-full year Finance Bill of the Modi government before the 2024 Lok Sabha elections will be tabled at the budget session of Parliament with President Droupadi Murmu’s maiden address to the joint sitting of both houses.

The budget of the world’s fastest-growing major economy comes at a critical time as global inflation, rate hikes, deepening geopolitical fragmentation, global economic uncertainties, the pandemic's after-effects, and the Ukraine-Russian war pose headwinds for the $3.4 trillion economy.

While last year's budget unveiled the Amrit Kaal roadmap for the next 25 years to India at 100, the budget 2023-24 is expected to present a clear action plan to drive the nation to the short and medium-term economic milestones, analysts said.

While some of the common expectations revolve around changes in tax slabs, relaxation on capital gains, exemption on personal loans, and improved incentives for home-buyers, investors will also be keenly looking for offers for the booming startup sector as well as tax benefits on the long-term capital gain.

Economists expect a further big boost to defence, agriculture, and manufacturing sectors, albeit the finance minister facing a difficult test this time as she needs to maintain a perfect balance between expenditure priorities and the need for fiscal prudence. Analysts also expect a key boost to welfare spending ahead of the national polls.

The fintech sector, a key player in India's aim to reach $5 trillion by 2025, expects the government to recognise and reward its efforts in making financial products more accessible to millions. Experts also expect the budget to prioritise macroeconomic challenges over growth, and focus on providing a credible fiscal consolidation roadmap. They expect the government to bring down the fiscal deficit to a more sustainable level at 5.8 per cent of the gross domestic product for the financial year, starting April 1, from 6.4 per cent in the current year. The manufacturing sector may see some more incentives, especially in the electronics and small-scale industries.

Economists expect proposals to foster investments aimed at accelerating and balancing economic recovery across markets. The budget is expected to enhance focus on programmes that aim to increase employment opportunities while giving a boost to the rural economy and increasing their purchasing capacity.

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