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Union Budget 2023-24: Key Highlights

Finance Minister Smt. Nirmala Sitharaman presented the Union Budget 2023-24 in Parliament today (February 1, 2023). The budget has brought some much-needed tax relief for citizens and included a set of important schemes that target different sectors of our economy. Let us take a look at some of the key highlights from the Budget presentation and the sectors that could benefit in the long term!

Relief for Taxpayers?

With inflation on the rise and loans getting expensive, we were all hoping for a relaxation in income tax rates. The Finance Minister made a much-anticipated mega announcement: there will be no tax on income of up to ₹7 lakh a year in the NEW REGIME! 

But bear in mind that there are no changes for taxpayers under the old tax regime! (The old income tax regime will continue with existing tax exemptions and deductions).

Here are some of the changes declared under the new tax regime system:

  • The country’s highest tax bracket has been brought down from 42.74% to 39%.
  • The surcharge on those earning between ₹50 lakh to ₹1 crore has been reduced from 37% to 25% in the new tax regime.
  • A five-slab structure will apply now under the new regime:
(Those earning up to ₹7 lakh per year are entitled to a tax rebate/refund)
  • Say, for example, you earn ₹7.5 lakhs a year. Then you’ll have to pay 5% tax on your income between ₹3 lakh to ₹6 lakh, and 10% between ₹6 lakh and ₹7.5 lakh.
  • Salaried people with an income of ₹15.5 lakh or more can subtract ₹52,500 as Standard Deduction while calculating their taxable income in the new tax regime. Till now, a standard deduction of ₹50,000 was available only under the old tax regime.
  • The new tax regime will be the default choice, but citizens can still opt for the old tax regime. You can make an informed decision after going through the opinions of tax experts.
  • To read about the current income tax structure for stock market investors & traders, click here!

Huge Jump in Capital Expenditure

The Central government will spend ₹10 lakh crore (up 33% YoY) on long-term capital expenditure (capex) in FY2023-24 to enhance growth potential & job creation and boost private investments. This amount is higher than the ₹7.5 lakh crore budgeted in the previous year and the highest on record!

This push in capex is crucial for India’s growth dreams to become the third-largest economy in the world and create sufficient jobs.

Boost for Railways Sector

The Finance Ministry allocated ₹2.40 lakh crore to Indian Railways. This is the largest capital outlay for railways to date and is nine times the amount provided in FY2013-14. This railway budget is likely to prioritise the completion of unfinished projects and development of infrastructure. The govt. will focus on the launch of more Vande Bharat high-speed trains. It will also allocate funds to introduce hydrogen-powered trains and the Ahmedabad-Mumbai bullet train project.

Do look out for stocks related to our railway sector: Indian Railway Catering and Tourism Corporation (IRCTC), Indian Railway Finance Corporation (IRFC), RailTel, Container Corporation of India, RITES, and Rail Vikas Nigam Ltd (RVNL).

Boost for Green Energy Sector

  • India has targeted to reach net-zero carbon emissions by 2070. In a strategic move, the Finance Minister announced ₹35,000 crore for priority capital investment towards energy transition, net zero objectives, and energy security by the Ministry of Petroleum & Natural Gas.
  • The govt. will support the development of battery energy storage of 4,000 megawatt-hours (MWh).
  • In August 2021, our govt launched the National Hydrogen Energy Mission (NHEM) and announced its decision to transform India into a global hub for green hydrogen production and export. This mission will now receive an outlay of ₹19,700 crore to help achieve a target of 5 million metric tonnes (MMT) of green hydrogen production capacity by 2023! 
  • The top 5 companies leading the green hydrogen revolution in India are Reliance Industries Ltd (RIL), NTPC, Indian Oil Corp, and Larsen & Toubro. These firms are also examining methods to bring down the cost of production and find alternate use cases. To learn more about NHEM, click here.

Boost for Agricultural Sector

  • Around ₹20 lakh crore will be allocated towards agricultural credit targeted at animal husbandry, dairy, and fisheries.
  • One crore farmers will get assistance to adopt natural farming over the next three years.
  • An Agriculture Accelerator Fund will be set up to encourage agri-startups by young entrepreneurs.
  • Nearly 63,000 credit societies across the country will be computerised. The Finance Ministry will allocate ₹2,516 crore towards this initiative.
  • Smt. Nirmala Sitharman also announced a new scheme to provide incentives for the adoption of alternative and natural fertilisers. 

The top companies operating in the agricultural sector include UPL, Coromandel International, Rallis India, Avanti Feeds, PI Industries, and Bayer CropScience.

Boost for Defence Sector

The govt. will increase the defence budget for FY2023-24 by 12.95% YoY to ₹5.94 lakh crore. This will allow the military to develop or buy advanced weapons systems, including new fighter jets, submarines and tanks!

Stocks related to the defence sector include Hindustan Aeronautics Ltd, Bharat Dynamics, Zen Technologies, Bharat Electronics, and Paras Defence & Space.

The Way Ahead

The Indian government continues to focus on getting the economy back on track and speeding up growth. The Budget will provide a boost to the ‘Make-in-India’ initiative by focusing on infrastructure, power, railways, defence, and agriculture. The Centre’s extended focus on digitisation through new-age technologies and electric vehicles is highly commendable. The govt. seeks to launch policies that promote fair growth, reduce inequalities, and build a more inclusive society.

Now, let’s look forward to seeing how these strategic policies are implemented! 

What are your views on Union Budget 2023-24? Let us know in the comments section of the marketfeed app!

Disclaimer: The stocks mentioned in the article are solely for educational purposes. Please do your own research before investing.

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Editorial

Government To Raise Rs 6 Lakh Crore Through Asset Monetisation: Know More

The Indian Government has announced plans to ‘monetise’ its assets and earn up to Rs 6 lakh crores by the end of 2025 through the National Monetisation Pipeline. Now the question is, what is monetisation? When you monetise something, you either convert it into cash/currency or generate revenue from it. The Indian Government has made plans to generate revenue by monetising assets like Railway Infrastructure, Roads, Public Infrastructure, Coal Mines, Stadiums, Airports, to name a few. Let us do some deeper digging into what exactly the National Monetisation Pipeline is.

What is the National Monetisation Pipeline (NMP)?

Finance Minister Nirmala Sitharaman has announced that the government intends to monetise its assets and generate up to Rs 6 lakh crore between 2022 and 2025. Firstly, private players shall bid for projects and pay the government an upfront amount. Later, the government shall withhold the ownership rights of a project and instead give out the revenue rights to private players. The revenue rights shall be valid only till 2025. A Core Group of Secretaries on Asset Monetization (CGAM) shall be set up under the chairmanship of the Cabinet Secretary.

The NMP will run a co-terminus with the National Infrastructure Pipeline of Rs 100 lakh crore announced in December 2019. The government shall make structured partnerships under defined contractual frameworks with strict performance benchmarks. Companies bidding for these assets will have to keep up with these performance benchmarks. 

Source: NITI Aayog

The government plans to monetise only ‘de-risked or ‘brownfield’ projects. A brownfield project is an already developed project that might be dormant or have some efficiencies that could be corrected. A greenfield project is the construction of a new project on a vacant piece of land. For example – The redevelopment of an old building is a brownfield project, construction of a new building on an empty piece of land is a greenfield project.   

Currently, only assets of central government line ministries and Central Public Sector Enterprises (CPSEs) in infrastructure sectors have been included. This includes more than 12 line ministries and more than 20 asset classes. The sectors included are roads, ports, airports, railways, warehousing, gas & product pipeline, power generation and transmission, mining, telecom, stadium, hospitality and housing. The top 5 sectors (by estimated value) capture ~83% of the aggregate pipeline value. These top 5 sectors include Roads (27%) followed by Railways (25%), Power (15%), oil & gas pipelines (8%) and Telecom (6%). These sectors are expected to catch the most interest from private players. 

Which Stocks Are Likely To Benefit?

  • Roads and Highways: Roads and highways constitute a majority of the monetisation pipeline. Companies like IRB, L&T, GMR Infra, Dilip Buildcon can be on the list
  • Railways: Railways in India are wholly owned by the government. Stocks such aslike IRCTC, IRFC, Ircon, Titagarh Wagon, RITES, and RailTel could likely benefit from the move.
  • Power Sector: Companies like Power Grid, Adani Transmission, KEC Intl, and GE Power, GE T&D could benefit from it.  
  • Adani Group: The Adani Group has its hand in the game. It is the largest private airport operator in the country. Its subsidiary Adani Airport Holdings Limited holds the highest number of airports in India (eight airports across India). Apart from these Adani Gas, Adani Green, Adani Power, Adani Enterprises could prosper from the deal.  

The Way Ahead

The NMP is a part of the Modi government’s divestment and privatisation policy. It is no secret that government-owned companies function less efficiently than private companies. The NMP will enable increased efficiency and optimum utilisation of government assets. The revenue generated by leasing government assets will help fund more government projects. This move shall receive lesser resistance than usual. Unlike privatisation/divestment, the government is retaining the ownership of government assets.

Source: NITI Aayog

Coming to the shortcomings of the NMP. The government still holds troubled assets like Air India and BPCL. It has tried yet failed to privatise them in the past. There might be a lack of identifiable revenue streams in particular assets. As for railways, the government received poor interest in its recent bidding for a Public-Private partnership for trains. The government has taken a halt to the privatisation/divestment process of the railways. 

Tariffs in the power sector are regulated, and there is poor capacity utilisation in the gas and petroleum sector. These factors could hinder the process of asset monetisation plan of the government. The rest depends on how the government incentivises the whole process for private players and executes the entire scheme. 

You can read the entire plan for the National Monetization Pipeline in detail at:  https://www.niti.gov.in/national-monetisation-pipeline