Message of Continuity

The FY23 budget should be seen as a continuation of the FY22 budget which was universally hailed as a pro-growth and proreforms budget. While the budget signals policy continuity with thrust on capex, announcements towards enhancing the ease of doing business and boosting exports and manufacturing, there is an added emphasis on new areas such as sustaining
digital ecosystems and urbanisation. Integrating the budgetary allocation towards national highways and railways with the ‘PM Gati Shakti Master Plan’ for allied infra-related sectors provides visibility to overall capex even beyond FY23. Further, the higher allocation to renewables highlights government’s commitment to achieve energy transition and climate change related goals.

While previous budgets have focused on building the road and railway infrastructure, there is an added stress in this budget on improving logistics to enhance productivity. Apart from the thrust on multimodal connectivity, the proposal to develop
multimodal parks and terminals and a Unified Logistics Interface Framework to enable efficient movement of goods is likely to boost the competitiveness of India's manufacturing sector.

The budget is targeted towards driving innovation and improving the resilience of the Indian economy. For instance, the budget provides additional thrust to solar power with a supplementary allocation towards the existing Production Linked Incentive (PLI) scheme for manufacturing high-efficiency modules. It also supports opportunities in sunrise sectors such as Geospatial Systems and Drones, Semiconductors, and Green Energy. Market borrowing through green bonds for mobilising resources for green infrastructure is also a welcome step. The decision to include dense charging infrastructure and grid-scale
battery systems in the harmonised list of infrastructure will help drive growth in data centres and energy storage systems. A PLI for design-led manufacturing to build a strong ecosystem for 5G networks has also been proposed. These measures will
help build India’s competency in industrial edge technology.

On the other hand, higher allocation towards social infrastructure continues under the flagship “Har Ghar, Nal Se  Jal” program and the “Pradhan Mantri Awas Yojana.” 

In addition, the financial assistance to states related to the funding of the infra investments has been expanded significantly. The budget was also pragmatic in extending measures such as the Emergency Credit Line Guarantee Scheme (ECLGS) for contact-intensive sectors like hospitality which were severely affected by the pandemic.

Over the last few years, the government has taken numerous measures towards improving the ease of doing business in India. This is also reflected in the sharp improvement in India’s rankings under the World Bank’s Ease of Doing Business Study over the last five years. There is an added emphasis in the FY23 budget with a roadmap towards digitisation, integration of the central and state-level IT systems and further rationalisation of compliances. The finance minister also reiterated the need to continuously fine tune the Insolvency and Bankruptcy Code to enhance the resolution process.

One area of concern though is the lower disinvestment target. However, given the slippages in the past, we believe the lower target this year is indicative of a calibrated approach designed to deliver on the promised number. In any case, we believe the projections should not undermine the process for strategic disinvestments which have been underway for last two years
for many Central Public Sector Enterprises(CPSEs).

India is expected to be the fastest-growing major economy in FY23. The emphasis on improving logistics efficiency and ease
of doing business apart from the thrust on capex is likely to support the rebound in growth post the pandemic. 

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