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Decoding Union Budget 2023-24 

Union Budget 2023-24: An overview

In the days leading up to the Union Budget 2023, expectations were high among individual taxpayers and industry leaders alike. Most people expected the government to introduce income support measures for the rural and agricultural sectors, and to boost consumption in the economy in the wake of recent inflationary pressures.

However, the budget resisted such populism and continued to remain focused on investment-oriented growth, much like in the previous years. 

Budgeted and revised fiscal deficit estimates

The budget estimate (BE) for the fiscal deficit in FY23 was pegged at 6.4% of the GDP. And the revised estimate (RE) for FY23 also remained unchanged, at the same 6.4%. However, as for the next year, the fiscal deficit for FY24 has been budgeted at 5.9% of GDP. This is an ambitious target because the Indian government has vowed to bring the fiscal deficit down to 4.5% by FY26

Exhibit 1 shown below throws some light on the fiscal deficit numbers over the past 20 years. Notice how the deficit peaked during the year following the pandemic, and how the government has been taking successful measures to minimize the deficit in the following years. 

Tax receipt estimates

In the past couple of years, the government has been quite conservative in estimating its tax receipts in the forthcoming financial years. This year, however, the estimates appear to be more realistic. The budgeted year-on-year growth in taxes has been pegged at the following estimates.


FY23RE (Revised Estimate)

FY24BE (Budget Estimate)

Gross taxes



Net taxes



Focus on investment-oriented and CAPEX-led growth

The growth in revenue expenditure growth remained minimal this year, at just 1.2% YoY. Instead, for the third year in a row, the Union Budget prioritized capital expenditure in various prominent economic sectors.

A closer look at the numbers offers more clarity on how Budget 2023 has continued to focus on spending quality rather than quantity. Here are some key data points that are important in this regard.

  • The revenue expenditure is budgeted to grow 7% YoY in FY24BE, making it the slowest estimated growth in eight years. 
  • By contrast, the government’s capital expenditure is budgeted to grow 37.4% YoY in FY24BE, which is a huge jump from the 23% YoY growth in FY23RE.
  • The government’s capital expenditure has increased by around 2.5 times in the previous three years alone.

Such strong focus on capital expenditure indicates that the government continues to prioritize infrastructural growth and development in the country. 

Why the FY23 revised fiscal deficit estimate (FY23RE) remains unchanged

The government’s total estimates for receipts and expenditures actually increased between FY22BE and FY23RE, leading to an increase in the fiscal deficit. However, the higher-than-average GDP growth has ensured that the fiscal deficit as a percentage of the GDP remained unchanged. 

Check out the numbers for more clarity on this front. 


FY22BE (₹)

FY23RE (₹)

Impact (₹)

Total receipt estimates

22.8 trillion

24.3 trillion

Increased by 1.5 trillion

Expenditure target

39.4 trillion

41.9 trillion

Increased by 2.5 trillion

Fiscal deficit (in terms of value)

16.6 trillion 

17.6 trillion 

Increased by 1 trillion

Nominal GDP growth

9% YoY

15.4% YoY 


Fiscal deficit (as a percentage of GDP)




How does the government expect to finance the fiscal deficit?

Typically, the government finances the fiscal deficit with different kinds of market borrowings. Check out the revisions in the gross market borrowings (GMBs) and net market borrowings (NMBs) for FY23 and the estimates for FY24 in the table below.


Gross market borrowings (GMBs)

Net market borrowings (NMBs)


₹15.0 trillion

₹11.2 trillion


₹14.2 trillion

₹11.1 trillion

FY24 estimates

₹15.4 trillion

₹11.8 trillion

Exhibit 2 shown below should give you more clarity on the finer details of the government’s market borrowings. 

Since the gross borrowings for FY24 appear to be significantly lower than the collective market expectations (pegged at ₹16 trillion), the debt market has breathed a sigh of relief.  That said, it is interesting to note that the government seems to be relying heavily on small savings schemes to finance the fiscal deficit. As Exhibit 3 below reveals, around 26% of the fiscal deficit is expected to be met through small savings. Whether this works out as planned and how much pressure it puts on the debt market remains to be seen. 

Budgeted increase in expenses: The lowest so far in 9 years 

Another point of interest in the Union Budget 2023 is that the government expects its total expenditure to grow by only 7.5% YoY in FY24. This is the lowest budgeted increase in outlays in nearly a decade. The exhibit below shows a comparison of the total budgeted spending between FY13 and FY24.

Beyond the numbers, a decrease in spending could imply that the push given by the government for economic growth in the past few years may subside in the coming years. 

Estimated spending across different ministries 

Given that the overall outlays are estimated to reduce in FY24, the spending in nearly all major ministries are also expected to be lower in the coming year. The reduction in expenditure on the rural and the defense sectors is particularly noticeable in Budget 2023. Check out the exhibit below to get a better idea of how much the government plans to spend in different departments in FY24 as compared with the previous years. 

Beyond the numbers: How does the Union Budget 2023 impact taxpayers and individuals? 

The Union Budget 2023 has also introduced some changes in the tax regimes pertaining to individual taxpayers. Listed below are the key proposals you need to be aware of in this regard. 

  • Tax exemption limit has been enhanced to Rs. 3 lakhs from Rs. 2.5 lakhs
  • The number of income slabs in the new tax regime has been reduced to five (from the earlier six)
  • The eligible income limit to claim tax rebates in the new tax regime has been increased to Rs. 7,00,000 from the earlier Rs. 5,00,000. 
  • The highest effective personal income tax, which was 42.7%, has now been reduced to only 39%. 

Furthermore, some of the key industry-oriented and sector-specific proposals introduced in the budget this year may also impact individuals. The details of this are outlined below. 

1. Agriculture

Developing a technology-oriented agriculture industry through intensive digitization has been the focus of the Union Budget 2023. The measures proposed in the budget are likely to lead to an increase in production from agriculture and allied sectors.   

Here is how the proposals related to the agriculture industry could impact you.

  • Increase in credit allocation could make it easier for individuals involved in allied agricultural activities to obtain credit facilities. 
  • Launch of the PM Programme for Restoration, Awareness, Nourishment, and Amelioration of Mother Earth may promote the judicial use of chemical fertilizers and encourage farmers to use natural farming practices. 
  • Digitizing public infrastructure for agriculture may make it easier for farmers to obtain necessary information related to agricultural credit and farming practices.  

2. Autos

The focus of the government in the Union Budget 2023 was on promoting the manufacture of Electric Vehicles in India through various means. Additionally, the industry is likely to witness a boost in demand for new vehicles as old government vehicles would be scrapped in the near future. 

Here is how the proposals related to the automobile industry could impact you.

  • Increased allocation to the FAME-II scheme could make it easier for more individuals to avail the FAME-II subsidy when purchasing electric vehicles.
  • Increase in customs duty on imported vehicles could make imported automobiles costlier. 
  • Extension of reduced customs duty on lithium-ion battery imports and removal of duty on lithium-ion battery manufacture may make EVs more affordable for individuals. 
  • Customs duty hike on compounded rubber may lead to an increase in the cost of such tyres as well as the price of vehicles that use them. 

3. Cement

The Union Budget 2023 contained no direct proposals impacting the cement industry. However, the budget has proposals relating to housing schemes, roads, and other infrastructure, which may lead to a boost in the demand for cement. The increase in the demand for urban real estate is also likely to have a positive impact on the cement industry. 

The impact of proposals concerning the cement industry has a neutral effect on individuals. 

4. Specialty Chemicals

The proposals contained in the Union Budget 2023 are related to changes in the customs duty of raw materials used in the manufacture of specialty chemicals. The import duty on certain raw materials has been reduced, whereas, for a few others, it has been increased. These changes in the duties are expected to have a huge positive impact on domestic manufacturers of specialty chemicals.

The impact of the budget proposals related to the specialty chemicals industry on individuals is effectively neutral. 

5. Consumer

The consumer industry witnessed just three proposals in the Union Budget 2023, which may have a marginal impact on the industry and individuals. 

Here is how the proposals related to the consumer industry could impact you. 

  • Increase in the National Calamity Contingent Duty (NCCD) on all categories of cigarettes may lead to a slight increase in the prices of the products.
  • Increase in the Basic Customs Duty (BCD) on Naphtha may lead to a price hike on products using the chemical as a raw material.    

6. Financials

The Union Budget 2023 contained several proposals impacting the banking and insurance sectors. The focus of the proposals in the budget concerning the banking sector was primarily on ensuring the availability of credit. However, the insurance sector has been dealt a huge blow, which can have negative repercussions for both the sector as well as insurance policyholders. 

Here is how the proposals related to the financial industry could impact you. 

  • Proceeds (except death benefit) from life insurance policies (except ULIPs) issued after April 01, 2023, with annual premiums above Rs. 5 lakhs have been made taxable. This can lead to a significant decrease in the net returns generated by such investments.  
  • Additional credit of Rs. 2 trillion via the Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) can make it easier for MSMEs to obtain credit facilities. 
  • Significant increase in the allocation for Pradhan Mantri Awas Yojana can make it easier for more individuals to realize their dream of owning a home. 
  • The maximum deposit limit for India Post’s Senior Citizen Savings Scheme (SCSS) has been hiked from Rs. 15 lakhs to Rs. 30 lakhs, giving retired senior citizens more freedom to invest large sums of money at attractive interest rates. 

8. Infrastructure

Capital expenditure (Capex) was one of the primary focal points of the Union Budget 2023. The roads and railways sectors witnessed an increase in budgetary allocations for FY24 by 25% and 50% year-over-year (YOY), signifying the government’s push towards boosting the country’s infrastructure. The budgetary allocation for capital expenditure on the defense sector, however, was only marginally increased by 8.4%. 

The impact of the budget proposals related to the infrastructure industry on individuals is effectively neutral. 

9. Logistics

The Union Budget 2023 contained a proposal to promote coastal shipping as an energy-efficient and lower-cost mode of transport, both for passengers and freight through the Public-Private Partnership (PPP) model. 

The impact of this proposal related to the logistics industry on individuals, however, is effectively neutral. 

10. Metals

Import duties for scrap metals, ferrous waste, and raw materials used in the manufacturing of CRGO steel continued to be at 0%. Apart from this, the budget proposal did not contain any new proposals relating to the metals industry. But the increase in budgetary allocation for capital expenditure and infrastructure should boost the demand for the metals industry. 

The impact of proposals concerning the metals industry has a neutral effect on individuals. 

11. Oil and Gas

The government of India has repeatedly attempted to promote green and renewable energy. The Union Budget 2023 also contained proposals to that effect. The budget proposal accounted for investments of Rs. 350 billion for green energy transition and net-zero emissions.

 The impact of proposals concerning the oil and gas industry has a neutral effect on individuals. 

12. Real Estate

The budget proposal focused on two aspects - Real Estate Investment Trusts (REITs) and reinvestment of capital gains from an asset sale. 

Here is how the proposals related to the real estate industry could impact you. 

  • Deduction against reinvestment of capital gains arising from an asset sale has been capped at Rs. 10 crores. This effectively means that individuals with capital gains exceeding Rs. 10 crores cannot claim the amount in excess of Rs. 10 crores as a deduction by reinvesting it in a residential property. Instead, they will have to pay tax on the excess amount at the prevailing rates. 
  • Distributions made by REITs to its unit holders will be taxable in the hands of the unitholder. This means that individuals holding REIT units will have to pay tax on the distributions that they receive from the investment vehicle. 

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