Industries set to benefit and suffer from the Budget 2023-24

On February 1, Finance Minister Nirmala Sitharaman will deliver the Union Budget of India 2023-2024. Expectations and dreams are plenty, whether they come from Indians asking for tax breaks or foreign businesses hoping to take advantage of the nation's manufacturing capabilities. India will be glued to their viewing devices to hear the verdict. We are sure that, after elections and cricket matches, India feels most united on the day of the Union Budget presentation.

However, the presentation of the Union Budget for 2023–24 comes at a vulnerable period marked by geopolitical unrest, high inflation, and trends toward a global economic downturn. This is the last budget to be presented before the elections of 2024, and more than anyone, it is the Prime Minister of India who will be holding his breath for it. 

In 2023, it is anticipated that economic development will slow in India's top 10 export destinations and top 10 import sources. In this case, a constant economic growth trajectory would depend on measured actions to improve domestic sources of growth as well as investigate the new export potential.

The budget for 2023 makes an appearance right when India enters the period of “Amrit Kaal” and sets an objective of “Viksit Bharat” by 2047.

Indian Budgetary Deficit: A Primary Issue

In comparison to the 9.2% gap recorded during the first year of the pandemic, India has budgeted a deficit of 6.4% of GDP for the current fiscal year ending in March 2023. By 2025–2026, the government wants to reduce this gap to less than 4.5% of GDP.

India has the chance to profit on several fronts, as the proportion of working people in the total population is high and because of a positive investment climate. The Progress Harmony Development  Chamber of Commerce and Industry (PHDCCI) offers a three-pronged strategy in this regard.

First, it is crucial to raise per capita disposable income to boost consumption-led demand. In simple terms, boosting the tax rebate benefits will allow consumers to have better spending capabilities, which can be used to entice consumers to spend more on long-lasting consumer durables or real assets, like a store or a second home, which will have a ripple effect on investment and output.

Second, India should make use of its advantages to increase exports. With an estimated 11 crore jobs created, the MSME industry in India is the second-largest employer. The MSME industry contributed to 30% of the GDP, and 48% of the country’s exports. The current production-linked incentive (PLI) programmes are only available to corporations and top players specialising in particular industries.

The PLI programmes must be made available to MSMEs engaged in manufacturing as well if the government is to work toward Atmanirbharta in the sector. A dedicated PLI will be a good solution to lowering India's high import bill because it will reduce imports and increase employment.

Third, the investment share of the GDP needs to increase. It makes for roughly 30% of GDP at the moment, down from 34% of GDP in 2011. Additionally, private sector investment hasn't taken off in terms of total investment. It is even after the government continuously performed well in the Ease of Doing Business category and successfully lured investors with “Make in India”. However, more attention is required to create a favourable economic environment that might encourage private investment.

With aspirations around the Union Budget for FY24, there will be a key focus on enhancing domestic growth amid the global slowdown. Stocks in the automobile, banking, construction, consumer staples, defence, infrastructure, renewable energy, railway, sugar, and textile sectors are likely to find favour among investors.

The government is expected to increase capital spending in the upcoming budget, with the key infrastructure ministries seeing a substantial portion in the allocation.

Industries that could benefit from Budget 2023

Accurately predicting which industry will succeed is challenging. However, some patterns can provide us with hints. Here are the ones we think will benefit from the Budget 2023-24:

Electronic Vehicle Industry

The EV business anticipates noticeable policies and adjustments as India accelerates aggressively to meet the 2030 target.

Reduced taxes and the introduction of incentives will increase EV adoption in the industry over time, especially in light of the high GST rates for logistics and last-mile service providers. We anticipate seeing updated incentives and subsidies in the commercial EV market, particularly for LCVs (lightweight commercial vehicles).

Speaking of ways to reduce the cost of EV financing, the government may include EVs in priority sector lending (PSL), making them more accessible to the general public.

Last but not least, to ensure that only the best products get delivered to the final consumer, government incentives & financial enablers may take more factors than just the production levels pledged by manufacturers into account. These factors include the technological superiority of the vehicles and battery technologies in terms of safety, longevity, and fast charging. Thus, at this moment, the EV Industry can hope for…

Healthcare

The government of India's budget for the fiscal year 2023–24 will be closely scrutinised for its commitment to the healthcare industry.

The Government of India (GoI), through state and local governments, has been concentrating on strengthening healthcare infrastructure and services at the primary care level by investing in health and wellness centres and making commitments under the 15^th Finance Commission, in keeping with the confidence in National Health Policy 2017. 

This Budget may take into account starting a health care expansion programme. Incentives for the conversion of small clinics/nursing homes into 50-bed hospitals and smaller hospitals into larger hospitals may be created, similar to the PLI programmes for manufacturing industries. The assistance can take the shape of financial, fiscal, and operational incentives.

Additionally, the Pradhan Mantri Jan Arogya Yojana (PM-JAY) has given the population the ability to afford secondary and tertiary healthcare services. However, there remains room for improvement in terms of access to high-quality healthcare, particularly in rural areas of the nation. The Budget 2023 to the healthcare industry now is like…

Renewable Energy

The year 2023 appears to be quite promising for the renewable energy sector. It will implement new tactics in addition to staying on the path outlined last year to assist India's sustainability goals.

The key topics of the Union Budget 2023–24 are projected to be decarbonisation, energy transformation, and renewable energy (RE), reflecting India's COP26 and COP27 climate pledges. The Production Linked Incentive (PLI) scheme, electric mobility, green financing, and advanced chemistry cell (ACC) production for electric vehicles are only a few examples of significant advances that have occurred in recent years that represent the pledges.

However, this Budget will concentrate on capacity expansion and integration rather than the previous Budget's targeted concentration on RE production and the development of ancillary markets. This strategy of leapfrogging in the direction hints at the eagerly awaited passage of the Energy Conversation (Amendment) Bill, 2022, and RE grid integration. The RE industry, in their hopes from the Budget 2023 be like…

Technology

With the Union Budget 2023–24, India is expected to gain even greater appeal as a destination for investments. A big part of attaining this goal will probably be the growth of the information technology sector. Despite the IT industry layoffs in 2022, India's technology sector had a lot of achievements to add to its resume. The Indian IT sector has been eagerly servicing the "good change" while also preparing for the new ones, like the rising use of digital services, the surging demand for new-age technologies like artificial intelligence (AI) etc, and the debut of 5G services.

According to a recent Gartner forecast, spending on information technology in India is anticipated to rise by 2.6% in 2023, largely due to a significant growth of 13.7% in the software sector. This might lead to some beneficial allocation to the tech sector in the Budget 2023. The tech sector might hope for…

Industries that might suffer due to Budget 2023

Every coin has two sides, and so does the Budget. While the aforementioned industries are set to possibly gain from the decisions taken in the budget, the following are the industries that might face variably sized hiccups as the budget is implemented.

Tobacco Industry

A significant tax increase will help the government achieve two goals; help India achieve its goal to become a $5 trillion economy by 2025. Tax might drive a strong divide between smokers and cigarettes. Still, addiction is a strong motivator not to quit.

Of course, there’s the public health benefit that the government is aiming towards as well.

Experts also noted that the healthcare burden associated with tobacco consumption in India is approximately 1.04% of GDP, driving many into poverty. A significant increase in tax on these deadly items would close the gap. Noting these, there is a chance that there won’t be any major changes in the budget for this industry. However, a significant tax rise can be predicted further, which might restrict your ‘phoo-phoo’ habits.

Fuel Industry

Due to the high price of crude oil, the oil marketing companies (OMCs) suffered significant losses on the sale of LPG and gasoline during FY2022. Further, because of disruptions in the global supply chain and subsequent increasing prices, governments all over the world were obliged to reassess their relationships with energy sources as a result of the Russia-Ukraine war.

The Government of India (GoI) issued a one-time compensation of Rs 22,000 crore to PSU OMCs in October 2022 to cover losses incurred on the sale of LPG, but this only partially offsets the losses. In light of this, the industry anticipates a sufficient budgetary provision to make up for losses sustained from the sale of motor fuels and LPG. However, it might not see the provision it expects, as the Government might prefer to push renewable sources instead. Fuel prices, on the other hand, expect to go...

Fertilisers

To reduce the fiscal deficit that grew during the COVID-19 pandemic, India plans to reduce spending on food and fertiliser subsidies to ₹3.7 trillion ($44.6 billion) in the coming fiscal year beginning in April. This brings a 26% reduction from the current year. About one-eighth of India's fiscal year 2019 budget, or ₹39.45 trillion, is spent on food and fertiliser subsidies alone, but reducing these subsidies could be politically sensitive given the impending elections. The government now will be like…

It remains to be seen how the budget will treat the fertiliser industry.

The Bottom Line

The Prime Minister's vision for the following 25 years of Amrit Kaal will be outlined in the budget for 2023. Therefore, it will include the mantra of Sabka Saath, Sabka Vikas, Sabka Vishwas, and Sabka Prayas.

Thus, in conclusion, we can say that there remain a lot of expectations that India keeps from the Budget 2023, as this decides the future of the country and the next season of participants at Shark Tank India.