India launches urban infrastructure fund, gives push to lab grown diamonds
New Delhi / Dubai: India is raising its capital investments in the 2023-24 financial year to a substantial Rs10 trillion ($122.2 billion) — that’s 3 times the level in 2019-20 — as the government goes in for a growth budget.
The Rs10 trillion capital investment represents 3.3 per cent of GDP.
“In spite of the massive slowdown globally caused by COVID-19 and the war, the Indian economy is on the right track,” said Nirmala Sitharaman, the Finance Minister.
“I would term it as an ‘inclusive’ budget that has tried to take into consideration all segments of society and priority sectors,” said Yusuffali M.A., Chairman of Lulu Group. “For me, the key takeaways are the major initiatives announced in strengthening connectivity, food security and skill development sectors.
The Lulu founder, incidentally, is a promoter shareholder in Kochi’s Nedumbassery Airport and also the one in Kannur. “I am sure Budget 2023-24 will further strengthen Indo-Gulf business relationship and bring in more investments into the country to benefit our economic development and employment sector.”
Investors cheer
Stock market investors sure are cheering, with India's Nifty around 17,700, Sensex rises 400 points as of 12:53 pm UAE time. The impression is that India can stick to the post-pandemic growth story, and the revision of income tax slabs could be just the spur consumers want. Stocks of key industry verticals such as tourism are pushing higher. "Anything that is retail focussed should be getting a boost in the days ahead," said a market watcher. "The big bet investors will make is that this is a consumer-friendly budget. Ahead of an election year, this is a feel-good one."
The budget also outlines creating an ‘urban infrastructure fund’ of Rs100 billion a year as India aims to make it smoother for global businesses seeking to set up manufacturing/logistics hubs in the country. Post-pandemic, countries are competing to take in such possibilities as businesses realise that consolidating all of their overseas interests in single markets could create supply chain logjams.
In latest budget, India raises exemption for income tax rebate to Rs700,000 from Rs500,000.
India reduces maximum upper tax to 39 per cent from 42 per cent, which is ‘one of the highest in the world’.
There are major shifts in the income tax burden of individuals. Reduction of up to 25 per cent are being offered depending on the individual’s annual income. For instance, someone generating Rs1.5 million gets to pay 10 per cent of it, down 25 per cent from the previous regime.
India’s revised income tax slab is a win-win for middle-class
1. Up to Rs300,000 - 0% 2. Rs300,000 to Rs600,000 - 5% 3. Rs600,000 to Rs900,000 - 10% 4. Rs900,000 to Rs1.2 million - 15% 5. Rs1.2 million to Rs1.5 million- 20% 6. Above Rs1.5 million - 30%
Leading lights in UAE’s Indian business circles also point to the fact that NRIs have not been given any mention in Budget 2023-24.
“In the last year of the current Lok Sabha, the Budget finds NRIs don’t mean anything to their motherland,” said Ram Buxani, Chairman of Cosmos-ITL Group. “There is not even a hollow mention of NRIs in the text. The recent Pravasi Bharati award was given to just one person out of 4 million Indian expatriates living in the region.
“Except for that, there will be lot of appreciation for the inclusive budget otherwise. This year’s budget is voter’s budget. And NRIs don’t have vote in their country.”
While the FM Nirmala made a point of committing more into India’s villages/tribal zones, there are 7 overarching targets for growth and boost development:
India is also planning a quick move into the still emerging ‘lab grown diamond’ space, through special incentives. More jewellery retailers are using such diamonds as opposed to natural ones, and there is also a growing acceptance among consumers, especially among a younger buyer profile.
The budget also comes as Modi takes the global stage with India's presidency of the Group of 20 nations as he pushes an ambition to turn the nation into the world's third-largest economy before the end of the decade.
"G20 presidency gives us a unique opportunity to strengthen India's role in global order," Sitharaman said. "Our vision for the 'Amrit Kaal' includes technology driven and knowledge based economy with strong public finances and a robust financial sector," she said, referring to the next 25 years leading to India's 100 years of independence, which the government touts as the period of nectar.
The Budget is going for green with renewed push. Polluting vehicles are being given short shrift, with a new programme announced to turn older government-owned vehicles into scarp.
"Government will primarily focus boosting infrastructure with 50 new airports and a massive boost Rs2.4 trillion allocation for Railways," said Neelesh Bhatnagar, the Dubai-based founder of NB Ventures.
‘Unity’ mall
A new sort of mall? The Finance Minister is calling on Indian states to create ‘unity malls’ where handicrafts and other merchandise particular to that state can go be displayed – and catch the eye of potential shoppers.
Indian states will be offered interest-free loans, and these need to be used in tandem with their own capex schemes.
The Budget lays much emphasis on building the infrastructure of the country, with emphasis on last-mile connectivity," said Anuj Puri, Chairman of Anarock, the real estate consultancy. "Improved urban infrastructure will provide further impetus to Tier 2 and 3 cities.
"The unwavering focus on infrastructure will indirectly drive real estate growth over the next one year. The tourism sector also has something to cheer for as the budget aims to boost domestic and international tourism."
Domestic mobile phone production is getting more support, through reduction in custom duty. This has been one area where India has made headway of late, a fact emphasised by Apple widening its production of iPhones.
TV production too is getting the same treatment, as India spots an opportunity to deepen its manufacturing base across sectors and categories, especially in high-end gadgets.
“The economic growth indicated of 6.8 per cent is realistic - and it will still be higher that most countries,” said Tariq Chauhan, CEO of EFS Group.
How should we make sense of India’s Budget 2023-24?
Ahead of the Budget day, experts were of the expectation there may not be any major change in the taxation system other than fine-tuning existing direct and indirect taxation regimes – and that’s precisely what unraveled this time around. The latest Budget was coined as predominantly a ‘middle-class bonanza’, while also deemed inclusive to schemes catering to women and the elderly. As a result, five income tax measures were announced on Wednesday in a huge relief to average Indian income earners. A clear highlight was the announcement of an increase in the income tax rebate limit from Rs500,000 to Rs700,000 stating that the new tax regime will now be the default tax regime. But what does this mean? A tax rebate is a refund that you are eligible for in case the taxes you pay exceed your liability. For instance, if your tax liability amounts to Rs30,000, but the government is paid taxes amounting to Rs40,000 on your behalf, you qualify for a rebate or refund for the excess. When putting the current hike in tax rebate limit to Rs700,000 into perspective, people earning up to Rs700,000 annually will not pay any income tax in the new tax regime as the personal income tax rebate limit has been increased to Rs700,000 from Rs500,000. Additionally, the government also proposed a change the tax structure in this regime by reducing the number of tax slabs to five (from six) and increasing the tax exemption limit to Rs300,000 (from Rs250,000 earlier). The government offered to make the new tax regime as the default option. However, people will further have the option of old tax regime, which allows PPF, NPS and some other concessions. What this means is that people above Rs700,000 annual income will have to prudently choose between the new and old regimes.
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