Skills, Millet, Green — Hidden gems in FM’s Budget

Dear Readers,

Old or new, which tax regime is better for you? Everyone seems to be asking this question after Finance Minister Nirmala Sitharaman unveiled the Budget 2023 this week. Though the new tax system has been around for two years, the chatter around it has grown after the finance minister made it the default option and took away a few exemptions from the old one. While the new regime benefits those who are just starting out in their careers, those in higher pay brackets with a home loan and insurance deductions are better off with the old scheme.

Leaving aside the dilemma over the tax regime, the common feedback I have got from most experts is that the Budget is prudent and growth-oriented, which will take the country forward. The comment I liked the most was by Nilesh Shah of Kotak Mahindra Asset Management, who called it a ‘Bahubali Budget’.

The finance minister has come up with many provisions and initiatives in the Budget but I would like to highlight three major points which are a little unusual and will help the country in the long term. They are skills, green and millet.

Skills

I strongly think that the current education system needs a reboot. The skill mismatch is huge. The demand from the office desks doesn't pair with the classroom. The finance minister has announced 30 Skill India International Centres across the country. The government will launch Pradhan Mantri Kaushal Vikas Yojana 4.0 (PMKSY 4.0) to skill lakhs of youth within the next three years. This will cover new-age courses like coding, AI, robotics, mechatronics, IOT, 3D printing, drones, and soft skills.

Millet

Discussions over organic and healthy foods today are like never before. Social media platforms are overflowing with content on these topics. The finance minister has also put a sharp focus on millet. Currently, India is the largest producer of millets and also the second-largest exporter. The government wants to make the country a global hub for millets and will provide support to The Indian Institute of Millet Research, Hyderabad. In fact, in a recent talk show ‘Mann Ki Baat’, Prime Minister Narendra Modi also pitched millets and highlighted how states are treating foreign delegates of the G20 Summit with millet products.

Green

In my earlier notes, I have written about green finance and the green world in detail. The Budget has widened its scope and promised to launch many projects under the National Green Hydrogen Mission, with an outlay of Rs 19,700 crore. This will facilitate the transition of the economy to a low-carbon intensity one. The government aims to reach an annual production of 5 MMT by 2030.

Apart from this, I would also like to highlight a few other points that matter to you the most, since you belong to the finance community.

Few Positive Factors

The Budget has noted that GST revenue collections have increased to Rs 1.49 lakh crore in FY23 despite pandemic shocks. The impact of corporate tax cuts in 2018 has helped in raising the collections. Along with robust credit growth, banks now have cleaner balance sheets with gross NPAs dropping to 5 per cent of total advances in 2022, from 8.2 per cent in 2020. The finance minister’s initiative to set up a National Data Governance Policy is absolutely the need of the hour. The government has also decided to give a push to Make AI (Artificial Intelligence) in India with three specialised AI-based solutions for health and agriculture.

The government has increased capital outlay on urban infrastructure and is looking to add 50 new airports, helipads, and aerodromes to bolster connectivity. Broadly, it has also increased customs duties on imports to promote ‘Make in India’ in sectors such as toys and bicycles. More importantly, to accomplish all these ambitious plans it has increased its capital expenditure by 33 per cent to Rs 10 lakh crore while at the same time aiming to reduce the fiscal deficit to 5.9 per cent this FY and 4.5 per cent in FY26.

What is missing in the Budget?

The finance minister has ticked the majority of the boxes and there is hardly any debate over any issue in the last 48 hours since she delivered the Budget. I was expecting attention to the following things.

1. The government should have encouraged people to invest by rationalising the tax structure, specifically for insurance. Despite two decades of allowing private companies into the sector, the insurance penetration is still lower. I think, post Budget, the sale of insurance products may come down. Listed insurance companies’ stocks have already seen a big fall in the last two days.

2. The Budget has pushed for green, but I strongly feel there should be a policy for electronic scraps like the one for automobiles. Just the carbon credit part will not help. Currently, every second 800 laptops are scrapped in India. If this is not processed well, we are not only creating tonnes of the garbage but also wasting the parts that can be recycled.

3. Stock market investors were jittery whether the government will tinker with the capital gains tax rates. However, with the FM skipping it this time, they have been relieved. However, the various rates, treatments and timelines across asset classes make it difficult for investors to keep a tab and comply with the rules. While no action on Capital Gains is a good move, further simplification would have been better.

4. The finance minister has made a move to simplify regulations and reduce the cost of compliance as she said in her Budget speech, “To simplify, ease and reduce the cost of compliance, financial sector regulators will be requested to carry out a comprehensive review of existing regulations. For this, they will consider suggestions from public and regulated entities. Time limits to decide the applications under various regulations will also be laid down.”

However, more clarity is required on what areas financial regulators should focus on.

5. The finance minister said to improve ease of doing business more than 39,000 compliances have been reduced, 3,400 legal provisions have been decriminalised, etc. But more attention is needed here since the Economic Survey also spoke about a six-point strategy, which includes dismantling LIC – Licence, Inspection & Compliance. It would have been great had the finance minister budgeted for it.

6. The other area, where the attention is missing is the Organisation for Economic Co-Operation and Development’s (OECD) and Global Minimum Tax rules in India. Many countries have initiated the process here.

7. Lastly, while the push for infrastructure with massive capital expenditure and also skill programs may help employment, more is needed in this segment, especially when the fear over job loss is hovering and the unemployment ratio is widening.

In conversation with me, many finance leaders and economists have predicted a difficult time for the world economies over the next two-three quarters. Chances are high that India will also have skin in it. China is bouncing back with a greater speed, inflation is still not moving to a comfortable level and interest rates have broken the middle class and discouraged the corporates. In such situations, we need more and more.

We filed more than a dozen articles not just about what's there in the Budget but how will it impact and what do experts think about it. Click here to read our Budget stories. Trust, you will find them meaningful and intelligent.

Apart from the Budget, Adani Group’s U-turn on FPO shook India Inc and the capital market this week. Also, the Fed has increased the interest rates and all the eyes are now on the RBI monetary policy committee meeting next week.

Happy Reading

Amol Dethe

Editor

ETBFSI