Budget 2023-24: Fiscal Impulse Mmaximized To Improve Potential Growth

The budget has ensured, the fiscal impulse is maximized to improve potential growth, while signalling adherence to medium-term fiscal sustainability.

This requires continued financial sector reforms, better resource allocation. Expenditure focus has been on rural, welfare, infrastructure, PLIs, and energy transition. Capex spend has picked up significantly to 3.3% of GDP and is almost double of Pre-Pandemic prints. This especially implies larger fiscal multiplier on employment and growth and will support crowding in of still-lacking private capex.

On the revenue side, lower tax buoyancy vs last year could be partly countered by higher RBI dividend than budget has assumed and still-healthy divestment proceeds.

The tax benefits have been tweaked to encourage individuals to move towards new tax regime, and to provide relief to middle class, while maximum marginal rate has also been reduced to 39% from 42.7% to give relief to the highest income strata. While the government is foregoing effective revenue of Rs350bn, this could have a consumption multiplier effect albeit at the margin, in the economy that's seeing fading consumption growth."

(Krishna Kumar Karwa is the Managing Director of Emkay Global Financial Services)