Budget 2023-24: Record growth push, historic rail outlay, new tax regime becomes default

The Union Budget 2023-24, presented by Finance Minister Nirmala Sitharaman on February 1, 2023, was a pivotal document setting the economic roadmap for India amidst global uncertainties and the lingering effects of the pandemic. This budget was framed against a backdrop of resilient domestic growth, inflation management challenges, and the government's continued thrust on infrastructure development to achieve its long-term economic aspirations. The global economic outlook remained cautious, with geopolitical tensions and supply chain disruptions impacting various economies. India, however, demonstrated robust recovery, positioning itself as a bright spot in the global economy, necessitating a budget that could sustain this momentum and build future resilience.

The central theme of the Budget 2023-24 was a strong growth agenda, underpinned by a significant increase in capital expenditure, a historic allocation for Indian Railways, and notable reforms in personal income tax. The government projected a capital expenditure of ₹10 lakh crore for FY24, representing a substantial 33% increase from the previous year and amounting to 3.3% of India's GDP. This massive push aims to stimulate economic activity, create jobs, and enhance the country's productive capacity. A historic outlay of ₹2.40 lakh crore was earmarked for Indian Railways, the highest ever, signaling a commitment to modernize and expand the rail network, which is crucial for logistics and economic integration. Furthermore, significant personal income tax reforms were introduced under the new tax regime, making it the default option. The rebate limit was increased to ₹7 lakh, meaning individuals with income up to ₹7 lakh would not pay any tax under the new regime. New tax slabs were also introduced, aiming to simplify the tax structure and provide relief to middle-class taxpayers. The budget also focused on inclusive, technology-driven, and sustainable growth, with specific initiatives for agriculture, health, education, skill development, and green growth, while maintaining a commitment to fiscal discipline, targeting a fiscal deficit of 5.9% for FY24.

Key stakeholders in this budget include the **Ministry of Finance**, responsible for its formulation and implementation; the **Indian Railways**, which will be a major beneficiary and executor of the historic capital outlay; **individual taxpayers**, who will be directly impacted by the income tax reforms; **industries**, particularly those in infrastructure, manufacturing, and logistics, which stand to gain from increased government spending; **state governments**, as they are partners in many central schemes and benefit from tax devolution; and **international investors**, who closely watch India's fiscal policies and growth trajectory. The budget's focus on capital expenditure aims to 'crowd in' private investment, making the private sector another crucial stakeholder.

This budget holds immense significance for India. Economically, the record capital expenditure is expected to have a multiplier effect, boosting aggregate demand, fostering job creation, and laying the foundation for long-term sustainable growth. Improved infrastructure, especially through railway modernization, will reduce logistics costs, enhance connectivity, and make Indian businesses more competitive globally. Socially, investments in health, education, and skill development, alongside schemes like PM-VIKAS for traditional artisans, aim for inclusive growth, addressing disparities and enhancing human capital. Politically, the budget reflects the government's economic philosophy and priorities, especially in the run-up to the 2024 general elections, aiming to garner public support through tax relief and development initiatives.

Historically, India's budget-making has evolved significantly since independence, transitioning from a largely planned economy approach to a more liberalized, market-oriented one after the 1991 reforms. The focus on capital expenditure has gained prominence in recent years, moving away from a revenue expenditure-heavy model, recognizing its potential for long-term growth. The concept of a 'growth budget' is not new, but the scale of the capital outlay in 2023-24 is notable. The move towards making the new tax regime default reflects a broader trend towards simplifying tax laws and reducing exemptions, a journey that began with the introduction of the new regime in Budget 2020.

Several constitutional provisions underpin the Union Budget. **Article 112** mandates the President to lay before both Houses of Parliament an "Annual Financial Statement," commonly known as the Union Budget. This statement details the estimated receipts and expenditures of the Government of India for that financial year. **Article 110** defines a "Money Bill," and the Finance Bill, which gives effect to the government's financial proposals, is certified as a Money Bill. The budget also adheres to principles laid out in the **Fiscal Responsibility and Budget Management (FRBM) Act, 2003**, which aims to ensure fiscal discipline, although its targets are often revised based on economic realities. Policies like the **PM Gati Shakti National Master Plan** for multi-modal connectivity are directly supported by the budget's infrastructure push.

The future implications of this budget are substantial. If successfully implemented, the capital expenditure push could accelerate India's journey towards becoming a $5 trillion economy and a global manufacturing hub. The railway modernization could significantly improve logistics efficiency. The new tax regime's default status might simplify compliance for many, though its impact on savings patterns and investment behavior needs to be closely monitored. The challenge will lie in effective execution, managing potential inflationary pressures from increased spending, and ensuring fiscal consolidation targets are met in the medium term. The budget sets a clear trajectory for India's economic development, emphasizing investment, innovation, and inclusiveness for the years to come.