Articles and Commentaries |
March 1, 2023

Union Budget 2023 – 24: A View from the Private Sector

Written By: Vikas Khitha

The FY 24 Union Budget, formulated amidst global headwinds and a bleak economic outlook in much of the developed world also had the conflicting domestic demands of growth and fiscal consolidation as challenges. With India ranking amongst the top 5 global economies, the Union Budget was awaited with bated breath not only by India, but by several friendly nations. The Hon’ble Finance Minister did not disappoint, with the vast majority of Indians at home and abroad, cheering a path breaking set of announcements!

While the economic growth in FY 23 is estimated to be at 7%, FY 24 growth is expected to range between 6 and 6.8%, in stark contrast to other large economies. This while continuing the downward trend of fiscal deficit from 6.4% of GDP in FY 23 to a targeted 5.9% in FY 24, and a target of 4.5% fiscal deficit by FY 25 – a challenging ask by any yardstick.

The FY24 Budget aims to propel economic growth via a record capital outlay of Rs 10 lakh crore, and rekindle animal spirits in the private sector, with the thrust areas being infrastructure development and green energy while keeping an eye on food security for the world’s largest population, and indirectly providing an impetus to manufacturing activity associated with these sectors.

Construction and Manufacturing being the largest employment generators, this budget lays the foundation for a developed and modern economy, catalyse job creation and aid demand generation, especially in rural and semi-urban clusters. The increased demand for skilled labour, would bring into sharp focus the various skilling initiatives kick-started in previous years and supported by the corporate sector.

India’s manufacturing sector of which MSMEs are the back-bone, has often been characterised by low returns on investment due to the high cost of logistics, high energy costs, low productivity, high working capital requirements coupled by meagre credit facilities, multiple labour laws, under- utilisation of capacity, and the absence of entire industrial eco-systems such as semi-conductor manufacturing, the last aspect resulting in supply chain vulnerability in testing times.

The Government’s relentless push to lower the cost of logistics and connect Tier 2 towns via construction of expressways, freight corridors, the Gati Shakti programme and the National Logistics Policy carries its unmistakable stamp on the FY 24 budget too, via a capex outlay of Rs 75,000 crore towards 100 critical projects including airports and Rs 2.4 lakh crores for Railways.

The PLI scheme launched two years ago including in areas such as mobile manufacturing, along with the very large scale of digital financial transactions via UPI, resulted in a large demand being created for smartphones, which are now manufactured in the country. An eco-system of semi-conductor manufacturing thus received due impetus, with large investments already committed.

Ease of Doing Business also received due focus, with a reduction in the number of compliances and de-criminalisation of several offences, and the PAN card being notified as the single identifier for businesses in FY24 budget. This should be of relief to firms with input tax credits in one state being able to offset tax dues in another state, as private sector working capital is presently blocked on this count. Green initiatives in the Power sector received a capex outlay of Rs 19,700 crore towards the Green Hydrogen Mission, with an additional Rs 35,000 crore being earmarked for transition to green energy and a further Rs 20,700 crore to connect renewable energy from Ladakh via a 13 GW transmission line. In addition to a significant reduction in carbon footprint with a target of net zero by 2070, large scale generation of renewable energy would help in lowering the cost of industrial power as well, to aid competitiveness in manufacturing.

The private sector has been making significant investments in defence manufacturing facilities and in R&D over the last few years. The sector received a further thrust over the last two years with the notification of four positive lists for indigenisation to substitute imports. While defence exports did make their presence felt in recent times with a stellar performance, the Hon’ble Prime Minister’s target to the sector of USD 5 billion in defence exports by 2025 at the recently concluded Aero India event, has far reaching implications for growth and transformation of the defence sector.

The budget features a capex outlay of Rs 1,62,600 crore for defence manufacturing in FY24—a 7% increase over the previous fiscal. Although a higher increase in the Defence capex would have been desirable, for now much shorter evaluation and ordering cycles and superlative execution are clearly the need of the hour, in light of both domestic imperatives and the exports target. The private sector defence industry which is now beginning to take the lead in order generation and execution, does require certain measures by way of enabling policies; hopefully they will be heard once again.

The Space sector has also been churning out a spectacular performance and has received a budgetary allocation of Rs 12, 543.91 crore, for FY 24, up 19% from the previous fiscal, including a capital outlay of Rs 6356.8 crore for space research for the forthcoming year, bringing cheer to the Space start-up and research eco-system.

The Space economy will be a game changer in times to come for the nation, by way of enhanced connectivity via 5G with the remote regions, ushering in a wave of education, financial inclusion, tele-medicine, tourism opportunities as more locations are discovered by both domestic and foreign tourists, growth and development – all key enablers to Ek Bharat Shrestha Bharat!

An examination of how key parameters in the attached table published by CII (with data sourced from CSO, RBI, Ministry of Commerce & Industry and CGA) have moved since 2018, will reveal the rationale behind many of the recent initiatives undertaken by the present Government. While per capita income has been steadily rising, inflation held in check, a rising trend in current account balance as a percentage of GDP underscores the urgent need to further enhance manufacturing activity and exports from India, as opposed to outright imports.

In order to increase exports especially in high tech areas, cost competitiveness and quality would be of paramount importance. Since a large part of the cost of the product is built into the design itself, once again, Indian industry’s famed frugal engineering skills—amply demonstrated by the Auto, Defence and Space sectors, would once again come into play! Adoption of industry 4.0 practices in manufacturing has already met with success at several plants in the country and the numbers are only expected to grow.

With execution being key, the Budget indirectly also places the onus onto laggard States to get their act together in dramatically improving on ease of doing business parameters and in creating a business-friendly environment in order to attract serious investors. With several steps now in place for a transition from a developing country to an emerging super-power, it’s all hands-on deck!


Sno Category Unit 2018-19 2019-20 2020-21 2021-22 2022-23
1 Population Million 1327 1341 1355 1369 1383 (AE)
2 GDP & related indicators            
2.1 GDP (2011-12 prices) Rs Lakh Cr 140.0 145.2 135.6 147.4 157.6 (AE)
2.2 Growth Rate % 6.5 3.7 -6.6 8.7 7.0 (AE)
2.3 GVA at Basic Prices (2011-12 prices) Rs Lakh Cr 127.4 132.2 125.9 136.1 145.2 (AE)
2.4 Growth Rate % 5.9 3.8 -4.8 8.1 6.7 (AE)
2.5 Gross Savings Rate % of GNDI 30.6 29.4 27.8 N.A. N.A.
2.6 Gross Capital Formation Rate % of GDP 33.8 30.7 27.3 31.2 31.7 (AE)
2.7 Per Capita Net National Income (at Current Prices) Rs. 1,25,883 1,32,115 1,26,855 1,50,007 1,70,620
3 Production            
3.1 Food Grains Million Tonnes 285.2 297.5 310.7 315.7 149.9 (AE)
3.2 Index of Industrial Production (Growth) % 3.8 -0.8 -8.4 11.4 5.5 (Apr-Nov)
3.3 Electricity Generation (Growth) % 5.2 0.9 -0.5 8.0 9.8 (Apr-Dec)
4 Prices            
4.1 WPI Inflation (average) % 4.3 1.7 1.3 12.8 11.6 (Apr-Dec)
4.2 CPI (Combined) inflation (average) % 3.4 4.8 6.2 5.5 6.8 (Apr-Dec)
5 External Sector            
5.1 Merchandise Export Growth % 8.7 -5.1 -6.9 43.8 9.1 (Apr-Dec)
5.2 Merchandise Import Growth % 10.4 -7.7 -16.9 55.1 25.0 (Apr -Dec)
5.3 Current Account Balance % of GDP -2.1 -0.9 0.9 -1.2 -3.3 (H1 FY23)
5.4 Foreign Exchange Reserves (end of year) USD Bn 411.9 475.6 577.0 617.6 573.7 (as on 20 Jan 23)
5.5 Average Exchange Rate Rs / USD 69.9 70.5 74.2 74.5 79.9 (Apr-Jan)
6 Money & Credit            
6.1 Broad Money (M3) Growth (Annual) % 10.5 8.9 12.2 8.7 9.7 (as on 13 Jan 23)
6.2 Scheduled Commercial Bank Credit Growth % 13.2 6.1 5.6 9.6 16.5 (as on 13 Jan 23)
7 Fiscal Indicators (Centre)            
7.1 Gross Fiscal Deficit % of GDP 3.4 4.6 9.2 6.7 6.4 (RE)
7.2 Revenue Deficit % of GDP 2.4 3.3 7.3 4.4 4.1 (RE)
7.3 Primary Deficit % of GDP 0.4 1.6 5.7 3.3 3.0 (RE)


Source : as published by CII with data sourced from CSO, RBI, Ministry of Commerce & Industry and CGA

Legends : AE : Advance Estimates : RE : Revised Estimates; H1 refers to first half of fiscal year (Apr – Sep); NA indicates Not Available.

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