Budget 2023: From capex push to fiscal discipline – top ideas for FM Sitharaman from TOI Economists’ Survey – Times of India

Union Budget 2023-24: Finance Minister Nirmala Sitharaman will present the last full budget of the Narendra Modi government on February 1, 2023. The Union Budget will be presented at a time when the global economy is staring at the twin risks of recession and high inflation. The Indian growth story is however expected to be resilient despite the global headwinds.
In this backdrop, economists and experts are of the view that FM Sitharaman should continue to push for capital expenditure to aid growth, while at the same time providing a credible path for fiscal consolidation. A majority of the 14 economists and experts surveyed by Times of India Online say that India Budget 2023 should strike a balance between fiscal discipline and targeted capex push.
Capital expenditure & infrastructure spending:
Most experts are of the view that the Budget should focus on increasing capital expenditure to support economic growth. According to Ranen Banerjee, Partner and Leader Economic Advisory Services at PwC, there should be continued capex push by the government both at central level and higher transfers for capex at state level.

Yet another aspect that economists want FM Sitharaman to focus on is boosting rural demand. “Budget 2023 should look at higher allocation to MGNREGA to provide the cushion at the bottom of the pyramid and also use it as a tool for demand augmentation at the grassroots,” suggests Banerjee of PwC.
Dr. Rupa Rege Nitsure, Group Chief Economist at L&T Financial Services agrees that measures to revive the rural consumption demand through higher allocation to rural employment generating projects should be taken.
Indranil Pan, Chief Economist at Yes Bank believes that Union Budget 2023 is likely to continue its focus on infrastructure and attempt at creating a more conducive environment for capital spending. “The government will attempt prioritizing capital expenditure over revenue expenditure,” he says.
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DK Srivastava, Chief Policy Advisor, EY says the government should look at continued expansion of infrastructure spending. Dharmakirti Joshi, Chief Economist at CRISIL also says India Budget 2023 should focus on infrastructure augmentation.
Production Linked Incentive (PLI) Scheme:
Nitsure of L&T Financial services suggests focus on China plus one and Europe plus one, where there should be continued focus to position India as an alternate and more lucrative investment destination for companies. She also advocates continued emphasis on PLI schemes.
The Narendra Modi government has rolled out the Production Linked Incentive (PLI) scheme with an outlay of around Rs 2 lakh crore for 14 sectors. According to a recent PTI report, proposals are in works to extend the Rs 35,000 crore PLI scheme to various sectors.
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Ranen Banerjee wants significant allocation for skill development in higher-end manufacturing and new age skills with a Skill Linked Incentive (SLI) scheme on the lines of PLI scheme.
Radhika Rao, Senior Economist at DBS Bank says Budget 2023 should look to support the manufacturing sector and also make higher disbursements towards the agriculture sector.
Fiscal consolidation & tapering off subsidies:
Sachchidanand Shukla, Chief Economist at Mahindra Group says it is important to “stay alive” to financial stability concerns and err on the side of caution and stick to deficit targets. “The government should definitely eschew populist spending,” he tells TOI.
FM Nirmala Sitharaman set a fiscal deficit target of 6.4% this fiscal year. An economist at a leading industry body says that fiscal credibility by achieving the target fiscal deficit and projecting further consolidation is the need of the hour. The economist also advocates focus on health and education. Joshi of CRISIL says fiscal consolidation and tapering off subsidies should assume significance in this Union Budget.

Indranil Pan of Yes Bank is of the view that the Union Budget 2023 needs to continue being careful with respect to any further fiscal push. “…given the general government debt level is high and interest burden could be a cause for concern for the future years,” he tells TOI.
“The above point will be important as Budget 2023 will be the last by the ruling government before the general elections in 2024. The government should therefore attempt to pull away from the Covid related measures such as the PM Garib Kalyan Yojana,” he adds.

A report in the Times of India suggests that the government’s food subsidy bill for the current fiscal is expected to be above Rs 3 lakh crore, which is over 50% more than the budgeted estimate. The report states that extension of free foodgrain scheme PM Garib Kalyan Ann Yojna is the primary reason for that.
Madan Sabnavis, Chief Economist at Bank of Baroda believes that the Union Budget should work to lower the fiscal deficit ratio to less than 6% for FY24. DK Srivastava, Chief Policy Advisor at EY also says there should be progressive reduction of fiscal deficit relative to GDP.
Taxes:
On the tax front, Vikas Vasal National, Managing Partner, Tax at Grant Thornton Bharat recommends extending the 15% corporate tax rate for new investments in manufacturing to all sectors including services. “Our aim should be to bring down the overall corporate tax rate to 15% for all businesses in the near future,” he says.
Vasal also says that necessary measures should be taken to reduce unnecessary litigation – both on direct taxes and GST. “This takes away a lot of valuable time of the revenue authorities and the businesses, which can be otherwise utilized in nation building and faster growth,” he explains.
According to Vasal, Budget 2023 should focus on administrative reforms to further support ease of doing business and reduce the compliance burden. “Focus should be on rationalization of the Tax Deducted at Source regime and Capital Gains regime etc,” he adds.
Sabnavis of Bank of Baroda advocates that the government should not increase direct taxes as inflation has hit everyone hard.
DK Srivastava of EY says Budget 2023 can look at improving tax revenue growth, particularly indirect taxes. “In the context of the ongoing global economic slowdown and sluggish recovery in private investment demand, growth in India would require continued fiscal policy support particularly by augmenting infrastructure demand,” he concludes.