Union Budget 2023: Key Highlights

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On 1st February, 2023, the Honourable Finance Minister Nirmala Sitharaman presented the  Union Budget. This budget has carried forward the Govt’s focus on:

1) Bottom end of pyramid with free food grains and enhanced allocations for development of tribal and backward sections and regions
2) Taxation relief to middle class
3) Enhancing Agri credit and farm level subsidies
4) Green energy, energy transition, etc
5) Heightened capex spend with Rs13.7 trillion capex.

Sticking to the fiscal deficit target in FY23 in an environment of high inflation, global geopolitical crisis and enhanced outlay on public subsidies is a positive. We believe that the budget is targeting inclusive growth with a focus on increasing consumption through benefits to middle class and deprived sections, and impetus to industry to spur investment for domestic manufacturing and infrastructure development.

We believe it is a highly pragmatic and growth oriented budget which will help India remain amongst fastest growing economies globally.


  • FY23 fiscal deficit retained at 6.4% of GDP and for FY24, it is estimated at 5.9% of GDP; on track to achieve 4.5% fiscal deficit target by FY25
  • Capital investment increased steeply by 33% to Rs10tn accounting for 3.3% of GDP; 3x of FY20; Effective capex of Rs13.7tn, up by 30% (4.5% of GDP)
  • Highest ever railway capital outlay at Rs2.40tn
  • PM Awas Yojana enhanced by 66% to Rs790bn
  • Interest free-loan support extended to State Governments for one more year
  • Allocation of Rs100bn annually under Urban Infrastructure Development Fund (UIDF) for urban infrastructure in Tier 2 and Tier 3 cities


  • Common ITR form, strengthen grievance redressal form
  • Section 44AD – MSME – Turnover upto Rs. 3 crore and Professionals of Rs.75 lakh avail presumptive taxation if cash receipts are not more than 5%
  • Co-operatives which commence manufacturing till Mar’24 (extended from Mar’23) will get benefit of lower tax rate of 15%
  • Sugar co-operatives – payments made to sugarcane farmers relating to AY16-17 and before to be allowed as expenditure – which will provide relief of Rs. 10,000 crore to sugar co-operatives
  • Limit for cash deposits by members of primary agri co-op societies and rural development banks increased to Rs. 2 lakh per member
  • Section 54/54F: Exemption limit on Capital Gains on investment in residential housing property from proceeds of sale increased to 10 crore
  • EPF withdrawal in non-PAN cases and MLDs – TDS Rate slashed from 30 to 20%
  • Section 276A – Set off of carry forward losses on strategic disinvestment of stakes allowed including IDBI Bank
  • Providing EEE status to Agniveer Fund

Personal Tax:

  • Rebate under section 87A increased from Rs 5 lakh to Rs. 7 lakh under new tax regime
  • Tax structure reducing number of slabs: New Regime
Rs. 0-3 lakh
Rs. 3-6 lakh
5 per cent
Rs. 6-9 lakh
10 per cent
Rs. 9-12 lakh
15 per cent
Rs. 12-15 lakh
20 per cent
Above ` 15 lakh
30 per cent
  • Standard deduction in new tax regime for salaried person of annual income of Rs. 15.5 lakh to benefit by Rs 52,500
  • Highest surcharge reduced from 37% to 25% in new tax regime. (max tax rate reduced from 42.74% to 39%)
  • Exemption on leave encashment on retirement of non-government salaried employees limit increased to Rs. 25 lakhs
  • Basic Customs Duty increased on compounded Rubber from 10% to 25%

Digital advancement:

  • 3 centres of excellence for Artificial Intelligence will be set-up in top educational institutions
  • One-stop solution for updating identity of individuals maintained by various government agencies and regulators will be established using DigiLocker service and Aadhaar as foundational identity
  • Allocated Rs70bn for 3rd phase of E-courts
  • To establish 100 labs for 5G applications
  • To enable innovative Fintech services, the scope of documents in DigiLocker will be expanded for sharing documents online for both individuals and MSMEs

Other highlights:

  • Free food grain to priority households for the next one year under PM Garib Kalyan Anna Yojana – Rs2tn to be borne by the Central govt
  • To enhance ease of doing business, 39000 compliances reduced and 400 legal provision decriminalized
  • Digital infrastructure for agriculture built as open source and inter-operable
    Rs22bn outlay for horticulture and Rs60bn for fisheries
  • Pradhan Mantri PVTG Development Mission launched for development of Scheduled Tribes with outlay of Rs150bn to implement in 3 years
  • Rs33bn allocated for Sustainable Micro Irrigation under Upper Bhadra project


  • Fertiliser subsidy allocation: Fertiliser subsidy for FY24 stands at Rs1751.03bn (down 22% YoY to Rs501.1bn from FY23’s revised estimates of Rs2252.2bn (Budgeted estimate for FY23 was Rs1052.2bn)
  • Budgeted allocation in FY2023-24- Urea subsidy at Rs678.7bn; Non-urea at Rs440bn; Total at Rs1751.03bn
  • Revised Budgeted allocation in FY2022-23- Urea subsidy at Rs1540.9bn; Non-urea at Rs711.2bn; Total at Rs2252.2bn
  • Agriculture Credit target will be increased to Rs20tn
  • 10,000 bio input research centres will be set up. Will encourage 1cr farmers to adopt natural farming. PM Pranam scheme to promote balanced use of fertilizers.
  • Government decided to set up Agriculture accelerating fund to encourage Agri start ups in rural India


Budget for the auto sector was focused on the EV segment; additionally, it could help the CV industry through higher capital expenditure

  • FAME 2 (incentives for EV) allocation of Rs51.72bn vs Rs29.08bn last year; positive for Electric Vehicle segment
  • Allocation for Production Linked Incentive (PLI) Scheme for Automobiles and Auto Components has been increased from Rs0.11bn to Rs6.04bn
  • Customs duty exemptions are extended to the import of capital goods and machinery required for lithium and ion cells for batteries used in EVs. Positive for Amara Raja and Exide – doing investment in lithium ion battery manufacturing
  • Battery energy storage of 4,000 MWh capacity will be supported Viability Gap Funding
  • Allocation to National Highways Authority of India has been increase to Rs1622.07bn (+15% from last year) – Positive for CVs
  • Increase in capital expenditure outlay to help increase commercial vehicle demand (especially M&HCV) – Positive for CVs


  • PM Awas Yojana enhanced by 66% to Rs790bn
  • Revamped CGTSME to take effect from 1st April 2023 through infusion of Rs90bn in corpus. This will enable additional collateral free guaranteed credit of Rs2tn, unchanged from last year. Cost of credit to reduce by 1%

Capital Goods

  • Capital expenditure has been increased by 33% to Rs10tn, ~3.3% of GDP. (3x of 2019-20)
  • A capital outlay of Rs2.4 tn provided for the Railways. 9x the outlay made in 2013-14
  • 100 critical transport infrastructure projects, for last and first mile connectivity for ports, coal, steel, fertilizer, and food grains sectors with investment of Rs750bn, including Rs150bn from private sources
  • Capital investments towards energy transition and net zero objectives of ~Rs350bn
  • Battery Energy Storage Systems with capacity of 4,000 MWH will be supported with Viability Gap Funding
  • Inter-state Transmission system for Power evaluation of 13GW renewable energy from Ladakh will be constructed with investment of Rs207bn including central support of Rs83bn
  • 500 new ‘waste to wealth’ including 200 compressed biogas (CBG) plants, will be constructed at investment of Rs100bn. 5% CBG mandate to be introduced for all marketing natural and bio gas


  • BCD on denatured ethyl alcohol is being reduced from 5% to Nil for use in the manufacture of industrial chemicals – Benefits Jubilant Ingrevia, Laxmi Organics, GNFC – users for Ethyl Acetate
  • BCD on acid grade fluorspar (containing by weight more than 97% of calcium fluoride) is being reduced from 5% to 2.5% – to benefit fluorochem companies like SRF, Navin Fluorine, GFL. *PBT benefit of ~1.2% for Navin* as per our understanding (~20% of material cost is fluorspar), lesser for SRF given multiple business segments
  • BCD on crude glycerin is being reduced from 7.5% to 2.5% for use in manufacture of epichlorohydrin – to benefit Meghmani Finechem and DCM Shriram
  • BCD on Vinyl Chloride monomer is being increased from 2% to 2.5% – negative for Chemplast


  • Cigarettes – increase in calamity cess by 16%
  • R&G grant for Lab Grown Diamonds (LGD) – To reduce import dependency by encouraging domestic production & generate employment
  • Increase in custom duty- Articles of precious metals such as gold/silver/platinum – 20 (+Nil AIDC + 2 SWS) to – 25 (+Nil AIDC + Nil SWS)
  • Imitation Jewellery – 20 or Rs 400/kg. whichever is higher (+Nil AIDC +2 or Rs 40 per Kg SWS) to 25 or Rs 600/kg. whichever is higher (+Nil AIDC +Nil SWS)
  • Seeds for use in manufacturing of rough lab-grown diamonds – Custom duty cut from 5% to Nil

*AIDC -Agriculture Infrastructure Development Cess; SWS – Social Welfare Surcharge.

Consumer Durables & Buidling Materials

  • BCD on lens of camera module of mobile phone is being reduced from 2.5% to Nil: Benefit contract manufacturer like Dixon Tech
  • BCD on parts for manufacture of open cells of TV panels is being reduced from 5% to 2.5%: Benefit contract manufacturer like Dixon Tech
  • BCD on electric kitchen chimney is being increased from 7.5% to 15% and BCD on heat coils for use in manufacture of electric kitchen chimney is being reduced from 20% to 15%: Benefit Whirlpool (through Elica)
  • Overall capital investment outlay increased steeply by 33% to Rs10tn which would be 3.3% of GDP: Benefit Cable players – Polycab, KEI Industries
  • PM Awas Yojana Budget enhanced by 66% to Rs790bn – Expected to increase the market size for building materials companies. Benefit Kajaria, CERA, Astral, Supreme etc

*BCD – Basic Custom Duty changes


  • Expenditure on education for FY24 stands at Rs1128.9bn, up from Rs998.8bn (revised estimate for FY23)
  • In FY22, sector spend was at Rs803.5bn
  • Given NCF for K-2 was already announced in October and with elections around the corner, it paves the way for subsequent announcements for higher grades in near future

Healthcare & Pharma

  • Government to set up 157 new nursing colleges in co-location with the existing 157 medical colleges established since 2014
  • Currently, the hospital industry is facing high attrition as well shortage in nursing staff (more than 35-40% attrition). Such steps will help to address attrition

Oil & Gas

  • Capital support of Rs300bn for OMCs in FY24E vs nil last year is positive
  • LPG subsidy provision for FY24E stands at Rs22.5bn only vs FY23E RE Rs91.7bn
  • Government is likely to step in if LPG prices flares up, as they had provided incremental Rs220bn for losses in Q2FY23

Real Estate

  • Government schemes PMAY (Pradhan Mantri Awas Yojana) for Rural and Urban have increased to Rs790bn
  • This is 66 per cent higher than the Rs275bn budget allocation made in FY2021-22.
  • This will continue to boost affordable housing segment


  • To facilitate availability of raw materials for the steel sector, exemption from Basic Customs Duty on raw materials for manufacture of CRGO Steel, ferrous scrap and nickel cathode is being continued
  • Similarly, the concessional BCD of 2.5 per cent on copper scrap is also being continued to ensure the availability of raw materials for secondary copper producers who are mainly in the MSME sector

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