Union Budget 2023-24: Hits and misses

Decrease in allocations for welfare schemes

The biggest welfare legislation in India since 1991 was the introduction of the Mahatma Gandhi National Rural Employment Act ( MGNREGA) in 2005. This scheme enabled us to cruise the tumultuous tough times maintaining high growth momentum. We were able to uplift a large section of our population as a result of this remarkable piece of legislation. However the outlay in this year’s Budget for MGNREGA points a sad and dismal picture.

While for the year 2021-22, the actual expenditure incurred for the scheme was Rs 98,468 crores, in the year 2022-23, the revised estimates allocated an amount of Rs 89,400 crores. This amount has been slashed to a nominal figure of Rs 60,000 crores in 2023-24. There has been a significant decrease of allocations for flagship schemes such as Pradhan Mantri Awas Yojana and Pradhan Mantri KISAN Samman Yojana.

PMAY, aimed at providing pucca houses to the poor, has been allocated only a meager Rs 79,590 crores. Recent reports of the functioning of this scheme also points to various irregularities in allocation of houses to eligible beneficiaries across states such as Kerala and West Bengal. The allocation to PM KISAN scheme stands at Rs 60,000 crores, a decrease of Rs 6,825 crores from what was actually incurred in 2021-22 actuals. In terms of food subsidy being provided to Food Corporation of India under National Food Security Act there has been a significant reduction of Rs 71,722/- crores compared to the actual incurred in 2021-22. It is a reality that the Budget failed to address the needs of farmers and the common man.

Neglect on Minorities

There is an overall cut of nearly 38 percent in the allocation to the Minority Ministry. The central government has recently stopped Maulana Abdul Kalam Azad scholarships to the minority communities. For the educational empowerment of minorities, the fund allocation was Rs 2,249.90 for 2020-21. In 2023-24, this has come down to Rs 1,689 crores. For the revised estimates for 2022-23, this stood at Rs 1,584 crores. Overall the Ministry of Minority Affairs has been provided with Rs 2,336.50 crores , an increase of meager Rs 375.01 crores from the revised estimates of 2022-23 and a cut of Rs 441.97 crores from the actual audited figures of 2021-22. Even though there is an increase in post metric scholarship of minority communities, pre metric scholarships have been heavily decreased. The total allocation of education empowerment of minorities which was Rs 2,515 crores last year has been reduced to Rs 1689/- crores this year.

Thrust on infrastructure

Like the Union Budget 2022-23, this Budget also stressed upon the capital push into infrastructure sector. Government hopes that giving push to capital expenditure would ultimately enable the private sector to invest more. The capital expenditure allocation for 2023-24 has been increased to ten lakh crore rupees. Last year the allocation for the same was 7.5 lakh crores. As of September 2022, the Central government was only able to spend 4.1 lakh crores which is nearly 54 percent of the allocated amount. The Economic Survey assumes that the entire amount will be spent during the year 2022-23. We don't know that yet. In such a scenario, even though the intention is good, ten lakh crores sounds like an unrealistic number.

The capital thrust on Railways for Rs 2,400,00 crores is welcome. A large share of this will move towards modernisation of colonial era railway network, changing the signalling systems, electrification of tracks, research into new railway engines etc. The government has not provided for new Vande Bharat trains in this year's Budget since it was already announced in the Budget for 2022-23 that 400 new Vande Bharat trains shall be provided in the next three years. As on date, six new Vande Bharat trains operate between Newdelhi-Varanasi, New Delhi- Shri Mata Vaishno Devi Katra, Mumbai central- Gandhi nagar capital, New Delhi- AmbAnduara, Chennai Mysuru and Nagpur Bilaspur routes. The government plans to increase this to 75 Vande Bharat trains by August 2023. Hence the capital provided for Railway modernization is highly welcome since this would provide the much required traction for operating these Vande Bharat trains.

Saptarshi during Amrit Kaal

The Finance Minister has provided us with seven thrust areas during this year’s budget, which are inclusive development, reaching the last mile, infrastructure and investment, unleashing the potential, green growth , youth power and financial sector. Although the large thrust provided for the renewable and youth empowerment is laudable, the allocation for connecting vulnerable tribes of India through safe housing, clean drinking water and sanitation, improved access to education, health and nutrition, road and telecom connectivity, and sustainable livelihood opportunities has been maintained at a minimal Rs 15,000 crores.

A fool proof monitoring system is required to ensure that the benefit of these projects reaches the targeted population. The idea to set up National Digital Library for children and adolescents for facilitating availability of quality books across geographies, languages, genres and levels, and device agnostic accessibility is a welcome move which is aimed at the spread of knowledge and enhancing community level reading and learning skills.

There is nothing in the budget to cheer for women and senior citizens. An unemployment allowance for women could have been introduced to bring educated women to the workforce. Safety and security of women could have been ensured by providing them with free public transport facilities across Railways and more ladies coaches in trains. Mahila Samman Saving’s Certificate mentioned in the Budget is far from being an attractive schemes for women to invest in.

There is a large apathy and neglect shown towards Senior Citizens. Sadly, the budget speech didn’t find mention of any new schemes for differently abled or specially abled. Enhancing the target of agricultural credit is not merely enough, the terms and conditions have to be simplified. Still large number of banks rely upon the CIBIL system to pass credit to farmers. This still keeps a large number of farmers out of the agri credit system.

For realising the vision of “Make AI in India and Make AI work for India,” government plans to set up Artificial Intelligence research centers in top educational institutions. This move aimed at making India an artificial hub is encouraging. However deep research into this domain can only be achieved if sufficient funds and grants are granted. Government must also work out ways to integrate this Artificial Intelligence research into areas of agriculture, medicine etc. Only then, 'Saptarshi during the Amrit Kaal' will become the guiding light for realising the vision of a developed India by 2047.

Tax benefits

There are a large number of provisions to make the Budget attractive for middle class persons. The increase in the taxable limit to Rs 7 lakhs could help families save some amount of money. However, government has only provided thrust for persons opting for new tax regime. Finance minister has clearly stated that the new tax regime will remain default from now on, although those who have agreed for the old regime may continue under the same. The government’s intention is to push the middle class into the new income tax regime. Perhaps it is with these intentions and impending elections in mind that large number of benefits have been provided to the middle class.

Moving into new tax regime will eventually erode all the benefits accrued under the savings made under 80C, interest under home loan etc.The regime of two new tax slabs persists a higher confusion amongst the tax payers. According to the old tax regime, there are a large number of exemptions provided under various savings schemes whereby his gross taxable income gets reduced. There can be basic social security schemes such as health insurance, public provident funds, tax savings deposits, interest for home loans availed etc. When these were eventually deducted from the total income, the taxable income comes down.

For those individuals willing to have long term savings, old tax regimes still is the most attractive option. Even for those who has income of almost 9 lakh can make use of various benefits under old tax regimes to bring down tax level to very minimum whereas this is not the case with new tax regime. Under new tax regime, basic exemption limit is hiked from Rs 2.5 lakh to Rs 3 lakh while rebate under section 87A has been hiked from 5 lakh to 7 lakhs. This means a person earning up to 7 lakh will have to pay no income tax in India. This may sound attractive to all those young individuals who have just started their professional journey and do not want to save much. The rationing behind this scheme is that those money earmarked for savings by these class of individuals will ultimately move towards the economy triggering a spending curve. There is also a reduction in highest surcharge from 37 percent to 25 percent under new regime which will eventually benefit high net worth individuals. Thus the new income tax proposals may find takers amongst the first time tax payers and individuals with high net worth, but those who are consistent and bothered about savings may still opt for the old tax regime.

In a nutshell, the budget was largely a disappointment for the common man, farmers, women, minorities, and middle class who were expecting further concessions under old tax regime. The Railways modernisation project is much welcomed and is the need of the hour. We are yet to stand and watch whether the capital expenditure proposals could lead to a multiplier effect on our economy. It is to be seen whether such a multiplier effect would lead us to be a developed economy by 2047. If that happens, then this will be remembered as a historical budget. Only time will tell.