Finance Minister Nirmala Sitharaman is presenting the Narendra Modi government’s 11th Union Budget in Parliament. This is the fifth budget presentation by the FM.
The capital investment outlay has been increased by 33 per cent to Rs 10 lakh crore, which will account for 3.3 per cent of the GDP
Finance Minister Nirmala Sitharaman, presenting Union Budget 2023-24 in Parliament, said that Rs 2.40 lakh have been allocated for Indian Railways. She stated that this was the “highest-ever outlay”, nine times the outlay made in 2013-14.
The Budget 2023 focuses on seven priorities, which the Finance Minister called the “Saptrishis guiding us through Amrit Kaal”. These are: inclusive development, reaching the last mile, infrastructure and investment, unleashing the potential, green growth, youth power and financial sector”
With a focus on switching to green fuel, the government is targeting 5 MT of Green Hydrogen production by 2030.
The ministries of housing and urban affairs (MoHUA) and railways will see a capex surge in FY24, getting close to Rs 3.2 trillion together. The Centre will continue its focus on having a “virtuous cycle” in private investment and getting more of it into government projects.
“The newly-established infrastructure finance secretariat will assist all stakeholders for more private investment in infrastructure, including railways, roads, urban infrastructure, and power, which are predominantly dependent on public resources,” Sitharaman said.
The railways ministry has been given its highest-ever capital expenditure allocation, of Rs 2.4 trillion in FY24, to be used for 100 transport infrastructure projects to be undertaken on priority for better last-mile connectivity for key commodities like steel and fertilisers, with connectivity to ports.
These projects will entail a capital outlay of Rs 75,000 crore.
Coastal shipping will get priority for energy-efficient transportation of passengers and freight, Sitharaman said. The Budget allotted MoHUA Rs 79,000 crore to meet its goals envisaged under the PM Awas Yojana.
Sitharaman announced establishing a Rs-10,000 crore Urban Infrastructure Development Fund (UIDF) through priority sector lending shortfall, which will be used for transforming urban planning and making cities more sustainable — efficient use of land, adequate resources for urban infrastructure, and transit-oriented development will be the core tenets of this transformation.
The Central Government will set up an Rs.10000 crore per year Urban Infrastructure Development Fund to be used for creating infrastructure in Tier-2 and Tier-3 cities across the country, Union Finance Minister Nirmala Sitharaman announced in her Budget speech for 2023-2024 Wednesday.
The finance minister said the fund would be established through the use of priority sector lending shortfall. “This will be managed by the National Housing Bank and will be used by public agencies to create urban infrastructure in Tier-2 and Tier-3 cities. States will be encouraged to leverage resources from the grants of the 15th Finance Commission, as well as existing schemes, to adopt appropriate user charges while accessing the UIDF. We expect to make available Rs. 10000 crore per annum for this purpose,” she said.
Shares of cement and metal manufacturers gained after Finance Minister Nirmala Sitharaman announced a 33 percent increase in capital investment outlay to Rs 10 lakh crore in her Union Budget 2023-24.
This higher capital expenditure announcement will boost key EPC players involved in segments such as road EPC, water and urban development. This announcement also augurs well for the demand of building and construction materials.
Post Budget Reaction
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Mr. Ramesh Nair, CEO, India and Market Development, Asia, Colliers
“The Union Budget 2023-24 commits to green growth while focusing on augmentation and enhancing urban infrastructure, technology, and inclusive development. At the same time, the budget throws open the doors for increased consumption and capital investment, to drive growth. The capital outlay for infrastructure at INR10 lakh crore, or 3.3% of GDP is significant as it can lead to multiple effects across sectors and set a strong footing for resilient growth. This includes aspects such as the urban infrastructure development fund at INR10,000 crore per annum. A dedicated investment of INR 10,000 cr through the urban infra development fund will result in the creation of quality urban infrastructure thereby improving quality of life. This will also translate into higher demand for housing and commercial real estate.
For the real estate sector, the government has increased the allocation for Pradhan Mantri Awas Yojana by 66% to about INR79,000 crore. The increase in outlay will go a long way in bridging the gap between demand and stock in affordable housing. This will provide opportunities for associated stakeholders such as construction companies, contractors, etc. Further, expected changes in income tax slabs will result in higher disposable incomes, boding well for prospective homebuyers, mainly in the affordable and mid-segment.
The announcement to set up 100 labs for developing 5G service applications in India will give a boost to startups, especially in the technology sector. This, along with a continued focus on digitization can rekindle the IT sector, and spur some activity in the commercial office space.
We believe that the thrust on electric mobility is the need of the hour. The budget provided provisions related to battery production, and investment in energy transition, which will give a fillip to the EV industry in India. Between 2023-2027, the EV space in India is likely to see investments of INR94,000 crore (USD12.6 billion) across the automotive value chain. The government’s focus on creating more decentralized storage facilities for agricultural products can create more warehousing demand, especially on the cold storage front. This, along with the government’s disinvestment schemes can unlock immense value in the warehousing space”.
Piyush Gupta, Managing Director, Capital Markets & Investment Services at Colliers India
“The slew of tax measures in personal tax indicates to provide more disposable income for the middle class and will boost consumer spending. With increased allocation to PMAY, the government’s emphasis on providing housing to all, especially the urban poor, significantly boosts real estate spending. Real Estate housing demand continues to remain strong, and consistency in policy framework shall keep the momentum.”
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Mr. Amit Goyal, CEO, India Sotheby’s International Realty
The Union Budget has laid out a long-term path of growth and capital investment and that is extremely positive for the Indian economy. The increased allocation to housing projects under PM Awas Yojana by 66% to Rs 79,000 crore will certainly help the affordable housing segment. Rationalization of tax slabs and enhancement of tax rebate is going to benefit the middle class which will boost domestic consumption and should aid in keeping demand for homes strong. Overall, the budget has addressed all concerns that are needed to keep India as the fastest-growing economy of the world.
However, the proposed cap on deduction from capital gains on investment in residential houses under sections 54 and 54F to Rs 10 crore can be a big deterrent for the housing industry. We sincerely appeal to the government to reconsider this limit.
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Mr. Pradeep Aggarwal, Founder & Chairman, Signature Global (India), Ltd.
This year’s budget touched upon the most critical issue for the revival and growth of the affordable housing segment. PMAY’s budgetary allocation increased by 66%, which is good news for affordable housing. The new allocation of Rs 79000 crores in the budget 2022-23 will help countless Indians realise their home aspirations. Also, the increased allocation will lead to more housing projects being taken up, in both rural and urban areas. The scheme will provide a much-needed boost to the housing sector and continue to assist those from the EWS and LIG sections of society in owning a home.
Moreover, the Finance Minister announced that infrastructure and investment will be the government’s third priority, and capital expenditures will be increased by 33% to accelerate the country’s development. This increased spending is expected to help create more jobs, spur economic growth, and create a more prosperous nation. Also, in order to convert cities from manholes to machine holes, an urban infrastructure development fund of Rs 10000 crore will be set aside every year for urban development. This fund will help enhance India’s urban living environment besides modernising India’s cities and towns.
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Dr. Payal Kanodia, Trustee, M3M Foundation
“The budget for this year is very encouraging, with a focus on inclusive development, green growth, and youth power. The announcements in various fields, such as tax relief, education improvements, and focus research and development, are encouraging. The increase in allocation for school education from Rs 63,449 crore (Budget Estimate) in 2022-23 to Rs 68,804 crore in 2023-24 is a welcome step for the education sector. The availability of the National Digital Library to children will greatly benefit the children. A strong focus on youth skill development will assist industries to attract young talent. Another significant development is the establishment of 30 Skill India International Centres across various states to prepare youth for international opportunities. We heartily welcome the ‘Mahila Samman Saving Certificate’ for women with a fixed interest rate of 7.5 per cent, for over a period of two years. This will definitely lead to shaping India into a stronger and growing economy in the future.
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CAM Budget’23 Perspective | Perspective of Mr. Cyril Shroff, Managing Partner, Cyril Amarchand Mangaldas
“By laying a significant emphasis on Capex and Energy Transition, the FM has provided foundation for strong anti-cyclical momentum that should enable robust domestic economic growth and help counter the expected global headwinds. The focus on making India future ready by way of AI labs, Agri-tech, R&D in healthcare, further boosting Digital Public Infrastructure and holistically expanding physical infrastructure, auger very well for sustained long term economic growth.”
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CAM Budger’23 Analysis | Focus on Energy Transition and Green Energy | Perspective of Ramanuj Kumar, Partner, Cyril Amarchand Mangaldas,
“As expected, the Union Budget has increased allocations for infrastructure investment and energy transition with special emphasis on logistics and transportation. This will create greater opportunity for private sector investment and help achieve India’s NDC commitment under the Paris Agreement.”
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CAM Budget’23 Persptive l Railways related proposal | Persptive of Ajay Sawhney, Partner, Cyril Amarchand Mangaldas,
“The outlay will bolster construction activities including demand for steel, aluminium and electronics products among others, provide employment opportunities and enhance logistics network strengthening last mile connectivity to ports giving impetus to schemes like Indian Maritime Vision 2030.”
CAM Budget’23 Persptive l Ports related l Perspective of Ajay Sawhney, Partner, Cyril Amarchand Mangaldas, “Focus on enhancing coastal shipping though PPP mode and VGF would help towards achieving aggressive targets for capacity expansion which have been identified under the Sagarmala project. Deployment of funds towards coastal shipping would also lead to cost optimisation at end user side”.
CAM Budget’23 Perspective | Increase in Capex l Perspective of Ajay Sawhney, Partner, Cyril Amarchand Mangaldas, “The new capital outlay was much needed to accelerate economic growth as the infrastructure sector is an engine having multiplier effect across the entire ecosystem including employment”
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CAM Budget’23 Analysis | Capital Gains, Tax and Real Estate| Perspective of Kunal Savani, Partner, Cyril Amarchand Mangaldas.
“Capping of long term capital gains tax exemption on acquisition of real estates to INR 100 million is a major speed breaker for luxury real estate projects. Contrary to the intention of these provisions i.e. to mitigate shortage of housing, such provisions exempting capital gains on acquisition of residential house were frequently used by HNI’s/UHNIs for offsetting their gains on sale of prime residential houses or on sale of other eligible capital assets (mainly equity shares). Quite a few unicorn promoters and key management team members holding stock options have taken advantage of these provisions and invested in luxury residential properties. Accordingly, in order to curb these practices, the government has now proposed to curtail the benefits available under these provisions to the extent of INR 100 million.”
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Mr.Shankar Nagabhushanam, CEO, India Business Parks, CapitaLand Investment
“The capital expenditure outlay of 10 lakh crores and the added focus on urban infrastructure in the Union Budget 2023 will have a positive impact on the real estate sector. The welcoming of private investment in public and urban infrastructure will increase the pace of development. Further, this will emerge as a critical component in addressing the infrastructure needs of the future.” – Gauri Shankar Nagabhushanam, CEO, India Business Parks, CapitaLand Investment
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Mr Raj Kumar, Chairman and Managing Director, Rodic Consultants
“The budget announcement by the Hon’ble Finance Minister Smt Nirmala Sitharaman is extremely progressive and the government has continued its focus on steps to help the economy by prioritizing infrastructure as one of the Saptrishi (7 Priorities of the union budget 2023). The Budget has rightly focused on ramping up infrastructure creation to provide a boost dose to revive economic growth. The new outlay of 10 Lakh Crore of infrastructure will aid in the development of the country. There will be 100 new projects for Last Mile connectivity for ports, coal, steel, fertilizers sector. To spur investment in infra at states 50-year interest free loan also continues.
He further added that “Setting up a separate Infra Finance Secretary will also assist us and states in road and highways, this will surely bring in more momentum into execution. The allocation of 10 thousand crore per annum for urban infrastructure in Tier 2 and 3 cities will also prove to be a boon for country’s development. Reducing more than 39k compliances and 3k legal provisions decriminalized for further trust-based government will enhance the ease of doing business. The capital outlay of Rs 2.4 Lakh cr. provided for railways is also a big progressive step”.
Keep watching this space for more updates on budget 2023