New tax regime will benefit the middle class, says Sitharaman

NEW DELHI: Union finance minister Nirmala Sitharaman spoke of Union Budget 2023-24’s focus on capital expenditure, tax measures announced in it that will benefit the middle class, and the emphasis on encouraging and incentivising states to invest in infrastructure in her reply to the budget discussion in the Lok Sabha on Friday. In an about 93-minute-long speech she rejected accusations of the budget being “anti-minority”, not doing enough for the states and the middle-class, and accused the opposition parties of nepotism even as she stressed the difficult economic environment of 2022-23.

“I am sure, most of us, who were speaking on the Indian economy and the Budget, would observe that it is a very, very tight measure; it is very delicately balanced; and that is what has been achieved in the 2023-24 Budget without compromising on India’s growth potential and sustaining the growth momentum, we also have made sure that fiscal prudence is maintained as per the glide path we had given two years ago,” she said.

Later, she also responded to the budget discussion in the Rajya Sabha and said sustained growth and developments are needed to remove disparity in income. “By better development, we will certainly be able to achieve better prosperity, better income generation for people, more jobs for people… leading to 2047 when we will see a developed India…”

Sitharaman presented her budget on February 1, and announced an ambitious 13.5 lakh crore (including grants to states) investment in capital expenditure, tax relief for tax payers at the lowest and highest ends of the tax payer spectrum, even as she pruned next year’s fiscal deficit of GDP. Over the course of the budget discussion, opposition parties said the Budget has new “jumlas” (gimmicks), new names but it does not address issues such as unemployment nor inflation. Trinamool Congress member Saugata Roy said the Union Budget was antifarmer, anti-poor and anti-rural. A

US research firm (and short seller’s) report on the Adani Group, alleging several violations, have cast a shadow over proceedings.

In her reply, Sitharaman said Budget 2023-24 has “astutely” balanced India’s development imperatives with fiscal prudence with states at the forefront of boosting growth. She rejected the Congress’ allegation of being anti-minority in fund allocation, reminding the party of the anti-Sikh riots (1984, New Delhi) and the Nellie massacre (in Assam in 1983, targeting Muslim farmers) during its rule.

Explaining the context of the Budget 2023-24 she said while a path of recovery was “distinctly observed” at the beginning of 2022-23 (the year’s budget was presented before the Russian invasion of Ukraine), the war and the unexpected resurgence of Covid in China triggered inflationary pressures globally. She added that the government and the Reserve Bank of India took several “preventive” fiscal and monetary measures to check inflation , bringing it under the central bank’s upper tolerance band of 6% from a peak of 7.8% in April 2022.

According to RBI, the Consumer Price Index (CPI)-based inflation fell slightly below RBI’s upper tolerance limit in November ( 5.9%) and December (5.7%), and is expected to fall further to 5.3% in 2023-24, on the assumption of a normal monsoon.

Despite this, Sitharaman said, the Indian economy is “the fastest growing major economy in the world”.

RBI’s Monetary Policy Committee on February 8 projected India’s gross domestic product (GDP) growth at 6.4% for 2023-24. Earlier, the Economic Survey projected a range between 6% to 6.8% with a baseline growth of 6.5%. In a post-Budget interview with HT (published on February 6) economic affairs secretary Ajay Seth said he would expect growth to have an “upside potential” from the baseline scenario.

Since the Covid pandemic the government’s strategy has revolved around the capital expenditure (capex) route because “it has great multiplier effects enable to have in situ jobs created” … “and, therefore, triggers better income; and, therefore, triggers, better consumption. This is the well-established route… as compared to giving money in the hands of the people,” Sitharaman said.