India Union Budget 2023-24

Anirban Mukherjee

Managing Director & Partner

New Delhi

Today’s Budget announcement reiterates India’s commitment to achieving Net Zero by 2070, expanding focus into traditionally underserved spaces such as batteries and energy storage. This also presents an opportune moment for the Indian O&G sector, who having announced Net Zero targets over the past year, can now leverage the ongoing energy transition conversation to gain market leadership in new energy solutions like biofuels, green hydrogen, energy storage and carbon capture. Today’s budget provision of INR 35,000 with specific provisions such as the VGF for battery storage is a step in that direction, to attract global and domestic finance in these sectors, which has been lacking so far.

Namit Puri

Managing Director & Partner

New Delhi

India continues to be a bright spot not just in economic performance but also consumer confidence. However, the impact of inflation has really impacted consumption. While the commodity inflation has softened lately, costs of key input raw materials like cereals, milk, pulses, etc. are still up by 25-40% over last year. This has led to price increases of 8-10%+ over last year resulting in consumption volume slow down for FMCG sector. Urban consumption grew at a mere 1-2%, whereas rural demand has been flat or seen a decline depending on the category

The budget focus addresses the following:

• Winning versus inflation: Prudent policies, supply side interventions & changes in the taxation structure that mitigate the impact of inflation, put more money in the hand of consumers and unlock consumption and arrest downtrading especially with the aspiring households (. i.e., with a HH income of < 5 lacs).
• Reviving rural demand: Boosting disposable income, allocation to farm and higher fund allocation on rural infrastructure, connectivity, and mobility to create long-term jobs will aid growth in rural demand.
• Making India self-reliant: India remains a net importer of various essentials as well as discretionary items especially consumer electronics and components. PLI has been a great success in catalyzing the change. This sustained focus would go a long way in encouraging start-ups and local manufacturing, thereby making Indian companies competitive globally.

Vishal Mehta

Managing Director & Partner

Mumbai - Nariman Point

The budget as expected has placed adequate emphasis on India’s green journey. It is time we start thinking of advanced measures like energy storage to ensure steady state renewables growth. In that regards the VGF for BESS, directional nod towards a framework for pumped hyrdo projects are a step in the right direction.

Suresh Subudhi

Managing Director & Partner

Dubai

“Budget 2023-24 has checked multiple boxes and specifically provides a significant boost to the infrastructure sector. In line with our expectations, capital investment outlay was increased substantially, by 33%, for the third consecutive year. The outlay not only aims to enhance first and last mile connectivity but is also focused on sustainable transport. Further, the budget has made Green Growth its priority, allocating INR 19,700 cr to the Green Hydrogen Mission and launching GOBARdhan, 500 waste-to-wealth plants.

The outlay for the PM Awas Yojna has been enhanced by 66%. This initiative, coupled with the income tax benefits that have been announced, particularly for the middle class and salaried people, is likely to boost affordable and mid-segment housing.

Lastly, the budget took a well-rounded view of developing sustainable cities of the future. An allocation of INR 10,000 cr to the urban infrastructure development fund, the launch of multiple reforms for capacity building (Mission Karamyogi) and improving municipal creditworthiness and urban planning (efficient use of land resources, TOD, affordability, etc.) are all steps in the right direction. Additionally, to unlock the tourism potential, the budget announced the development of 50 tourist destinations on challenge mode. All these initiatives will be integral in the face of our rapidly urbanizing economy.

Vikram Janakiraman

Managing Director & Partner

Mumbai - Nariman Point

I see this as a budget that will spur the economy through both investment and consumption driven growth. Infrastructure spending will in my view be the more important engine with the 33% higher allocation for capex spending, loans to states with clear linkage to their capex spends, higher allocation to the railways, investments in greater regional connectivity, development of coastal transportation etc. This will obviously have implications in the near term spend on such projects and well as the longer-term network benefits that infrastructure development brings. Additionally, the simplification of income tax slabs and reduction of direct taxes at literally each slab will put a lot more spending power in the hands of the consumer; this will help overcome some of the inflation-related challenges we saw recently and will hopefully also spur some additional real growth if we are able to keep inflation under check.

Many Industrial sectors have seen support in the budget. For e.g., Building materials will benefit from the higher PMAY and infrastructure spend, automotive and electrification will benefit from the higher FAME allocation and push for faster clean energy transition, chemicals and non-ferrous metals have benefits from some duty changes etc. However, it is worth calling out the concerted push for agricultural sector reform and growth that I see in this budget. The creation of the Agriculture Aggregator Fund to bring modern technology, decentralized storage capacity to reduce post-harvest losses enhancing farm incomes, push for digital/AI innovations for precision agriculture, impetus to biodiversity and sustainable farming etc. all seem like the right moves that will help reform agriculture over the medium to long term.

Rajiv Gupta

Managing Director & Partner

New Delhi

The Hon’ble Finance Minister’s repeat of using a tablet instead of the colonial briefcase or ‘bahi-khata’ to usher in Budget 2023 was a good omen to begin with for the Tech sector. Many were waiting with bated breaths given it was the last full-year Budget before a major election and the government sure did not disappoint. There are several positives for the sector to take away from this year’s edition:

• Sustained focus on Skill India initiatives with focus on AI and 5G
• Push for driving digital pervasiveness across sectors including agriculture
• Clubbed with industry consultations and participation in inter-disciplinary research to galvanize an effective digital ecosystem
• Extension of tax holiday for homegrown startups as well as driving towards greater ease of doing business through digital infra investments e.g., Common Business Identifier, Entity DigiLocker
• Measures to build GIFT city as the failsafe for digital continuity risk for global companies

Anirban Mukherjee

Managing Director & Partner

New Delhi

We expect the Budget to have a balanced approach across mitigation action, and adaptation to climate change. With India making impressive strides in renewables, the Budget could promote specific fiscal measures towards emerging technologies like storage, hydrogen and bio energy, and also cross sectoral action like circularity and energy efficiency. On the side of adaptation, Budget outlays targeted at clean air mission, state climate action plans and water mission would be important to draw the right investment to safeguard against climate change.

Priyanka Aggarwal

Managing Director & Partner

New Delhi

India pharma market is $48-50 bn today – poised to become $90-120 bn by 2030. This vision can be achieved through 5 pillars - Discover In India; Make in India; Promoting Wellness; Enhancing Health Equity and Creating a Knowledge Economy.

Towards this vision; the budget can create enabling policies and incentives. Specifically, supportive policies to encourage R&D – i.e., funding support, fueling the talent ecosystem would help the industry invest more in R&D. More allocations towards PLI and encouraging more domestic production of APIs and KSMs will help towards Make in India. Reducing duties on nutraceuticals will help boost wellness sector. Finally, increased overall allocation towards health is much required – in creating a new normal in post COVID healthcare sector and first post COVID budget.

Rishabh Bindlish

Managing Director & Partner

Mumbai - Nariman Point

To further the Atma Nirbhar Bharat vision and also make our supply chains more resilient, Govt should look at expanding the remit of PLI scheme to include more APIs and KSMs while taking measures to improve the ease of doing business, especially for small and medium enterprises. Spending on public health and focus on creating the necessary healthcare infrastructure should continue to be a priority. Given the incidence of non-communicable diseases, there is an opportunity to reduce the overall burden of healthcare by focusing on preventive healthcare. Govt should therefore look at rationalizing the duties on Nutraceuticals and bring it at par with pharma. Last but not least, there is an opportunity to give impetus to R&D and Innovation through RLI (Research Linked Incentive) scheme that can help pivot India from Make in India to Discover in India.

Suresh Subudhi

Managing Director & Senior Partner

Dubai

With the backdrop of slowing global economy, public capex has been one of the key pillars pushing India forward. Infrastructure spending in particular has hit record levels with government tendering >INR 1.3 trillion till Dec 2022 (a 45% increase YoY). Taking advantage of global de-coupling, government has stated plans of making India a manufacturing hub, expecting a growth of 15x, with sector output reaching USD 500 billion per annum by 2030. Achieving this would require a substantial investment not only in industrial parks and innovation centers but also related infrastructure sectors like transport, energy, etc. Therefore, we expect infrastructure to occupy the center stage in Union Budget yet again. Increased allocation towards setting up infrastructure eco-system to support the various industrial corridors is expected.

Rajiv Gupta

Managing Director & Senior Partner

New Delhi

TMT as a sector, especially Technology, has seen it all in the last 6-8 quarters. From a sharp covid-led demand side impact to breakthrough recovery to forex tailwinds and finally coming back full circle to again being demand-constrained and cost-focused. Needless to say, in light of these events, Budget 2023 will be critical. While restructuring and leaner-meaner operations are the current focus areas across sectors, the Budget needs to create the right platforms, to put the industry back on the growth-focused mindset, as well as be razor-sharp in taking advantage of the littlest and not-so-little opportunities that are emerging.

We believe that Budget 2023 needs to address most of the below focus areas if not all:

1. India as World’s Second Factory: See the glass as half full and create the right mechanisms, incentives, and expedited frameworks to garner as much share of electronics manufacturing share as possible from China. Recent indicators, whether it is Telangana sweeping up investments at Davos, India’s semiconductor manufacturing vision, or Apple’s intention of manufacturing 1 of 4 iPhones in India, all point to positive momentum but need to systematically substitute share versus chipping away at it shyly and slowly.
2. Expertise and Skill Hubs: While skill development has been a focus area since long, the time is ripe to adopt measures to build varied and specialized skill hubs to cater to all types of needs. This would entail building NASSCOM equivalents across a variety of sectors so as to push ‘Digital Literacy’ to the grass root levels and tap the potential of our large digital-savvy population.
3. Startup Winter to Breezy Summer: Funds are drying up, tough questions are being raised about valuations and the path to profitability, and investors are more cautious and thinking of smaller-sized long-term bets. The coming of age of the Indian startup ecosystem is here. And Budget 2023 needs to provide commensurate maturity in the form of easing and streamlining the tax framework for startup firms, their employees as well as investors.
4. ESG Focus: Budget 2023 can look to catalyze public and private green finance investments in businesses that are making concerted efforts to develop, digitalize and embed ESG best practices. India’s commitments at COP have been nothing short of ambitious and this is the right time to lay down a concrete path to drive timely action.