Union Budget 2023: Sectoral Disappointments to Mull Over

Brands and Business Magazine decides to look back at the budget a few weeks after the grand announcement, and what it entails for varied communities

By Karuna Chandwani

Amidst the commotion caused by the Adani-Hindenburg row, protests in the parliament, and a warning from the Supreme Court to Indian regulators, have we already moved on from the biggest financial event of the year too soon? 

Two weeks ago, the Indian government proposed to spend Rs 39,44,909 crore this year, an increase of 4.6% over the revised estimate of 2021-22. As promised by Prime Minister Narendra Modi, the Union budget also assured a pocket full of hope and savings for the middle-class. From smart tweaking of tax slabs under the new tax regime to increasing capital expenditure, the Big Budget focuses on fiscal consolidation rather than populist freebies. 

On the industrial front, le but is to boost in-house production to keep the economy going. Costs are likely to come down for television sets and smartphones manufactured in India. Only domestically-produced electric vehicles will see a lowering of prices. Fully-imported cars will wring out more money out of your bank accounts. 

However, there was no indication of respite from the mounting fuel prices from the Union Finance Minister Nirmala Sitharaman. She also remained strikingly silent on the fears of a global slowdown which could adversely impact exports and even flourishing sectors like IT. And we cannot help but wonder if these newer juicier events are now the focus of the news cycle (we are all for transparency, and the truth coming to light—don’t get us wrong), might warrant going over some points of the budget

So we put down our thoughts on possible setbacks that the budget might spring on some sections of the society.

1. Insurance companies: Indian stock markets witnessed extreme volatility after the budget speech. Despite all the positive reviews, for the first time in three years, Indian benchmark Nifty 50 ended up in red on the day of the budget. The pulldown came especially from the insurance sector. The reason being imposition of tax on income from life insurance products (except Unit Linked Insurance Plans) where the total premium exceeds Rs 5 lakh (applicable on products sold on or after 1 April 2023). One could have a single or multiple insurance policies, where, in case the aggregate premium surpasses 5 lakh per year, the amount received will be taxable. This removal of exemption will definitely affect the industry as it will change the way people look at insurance policies as tax-free investment havens. It is also likely to reduce insurance penetration in India.

2. Tourism agencies: Domestic tour operators will now be required to collect tax at source (TCS) which was increased fourfold (to 20%) on sales of overseas tour packages. Besides, budgetary allocation for overseas promotions of Incredible India campaign was also reduced by a massive 50%. Such provisions could distress an industry which had just started to regenerate from the ramifications of a pandemic and Russia-Ukraine war. This, in turn, could hamper tourism’s contributions to the Indian economy. According to a Business Times report, Federation of Associations in Indian Tourism and Hospitality (FAITH) expressed disappointment in the budget, stating that none of their demands were met.

3. Farming community: Sharp decrease in food security as well as rural employment outlays this year is bound to affect the country’s rural and urban poor. After the Modi government discontinued the Pradhan Mantri Garib Kalyan Yojana (PMGKY), the union budget proposes a drastic cut in the fertiliser subsidies from Rs 2,25,000 crore to Rs 1,75,000 crore. The budgetary estimate for the food and public distribution system this year is Rs 2,05,513 crore, which is 30% less than the estimate of Rs 2,96,303 crore for 2022-23. On top of that, funds for the rural employment scheme MGNREGA has been slashed by almost 31%.
   
   While these decisions by the government could prove fiscally shrewd, and while pandemic-related disruptions are in the past (or so we hope), most indicators of the rural economy suggest that distress persists due to high inflation and unemployment rate.  

4. Startups: According to a proposal in the Financial Bill, 2023, if startups offer shares to foreign investors to raise capital, they will have to pay an “angel tax”. Even though this tax was introduced back in 2012, this year it is extended on funding by angel investors, a crucial source during the early stages of a startup. Such provisions for a sector that is already facing consequences of a funding winter could worsen the Indian startup ecosystem. As per a report by PwC India, funding for India’s startups has already slumped by a massive 40% in 2022, as compared to 2021.