India's Union Budget 2023, a pre-election year budget, is "beautifully tailored" to boost growth while keeping inflation risks and macroeconomic challenges at bay, according to Ridham Desai, managing director of Morgan Stanley India.
Terming it a different budget compared to previous pre-election budgets, Desai highlighted that the ministry has chosen to use revenues to spend on creating capacity instead of boosting consumption.
The government has astutely chosen not to boost consumption as a means to support growth but has chosen capex, he said. "That is why we call it a good growth budget," Desai told BQ Prime.
"So, you are de-risking inflation and the global slowdown, allowing central banks to end their rate cycle and get more dovish, allowing more liquidity to go into the system," he said.
Stressing the risk associated with the global slowdown, Desai said that the export impetus this year would be slower. Even as India performs better than other economies and gains market share, some of the growth impulses will fade.
Amid this, the government will step in and strengthen the domestic economy through capital expenditure in order to keep it safe from recessionary woes, Desai said.
The other means could be to strengthen the economy by boosting consumption. But that would have been "risky" given the looming inflationary cloud, he said.
The tax rate changes for the new tax system will not boost consumption, Desai said. According to him, "People are making a big deal out of this."
Finance Minister Nirmala Sitharaman, while presenting the Union Budget 2023 on Wednesday, proposed numerous changes in tax, including the reconstitution of the income slabs and the introduction of the standard deduction.
According to the market expert, the new tax regime launched by the government wasn't "good enough" from an economic perspective and failed to garner interest.
"What appears to be incentives thrown to taxpayers is really a compensation for the loss that people are suffering while moving from the old to the new system," Desai said.
So, as a consequence, taxpayers are not really going to get more money in their pockets, Desai said. The tax changes will indeed not boost consumption, he said.
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