Union Budget 2023: Five Sectors that will Benefit the Most

Sudhakar Singh, Editor

Finance minister Nirmala Sitharaman started this year’s budget speech by naming the accomplishments of the government. She hailed the achievements in the areas of digital public infrastructure, Covid vaccination, climate related goals and more. Contrary to the expectations of the budget 2023 being a populist one owing to the upcoming Lok Sabha elections in 2024, she made it evident from the very beginning that the government’s focus was on accelerating the economic growth.

With sharp focus on infrastructure and investment, the budget is likely to give a fillip to growth and employment. At the same time, policies aimed at enabling environmentally sustainable growth will bring the country closer to achieving the set goal of reducing Emissions Intensity of the GDP by 45 percent by 2030. Without ruling out the budget’s benefits to any industrial sector, let us have a look at those which are liable to profit the most.

Agriculture: Boosting Accessibility and Inclusion

India's agriculture is an important sector in the Indian economy. Half of rural households rely on agriculture for their livelihoods as well. The industry amounts to almost 19% of GDP and it provides employment for more than 45% of the population. Infrastructural renovations in the road, power generation, knowledge transfer and reforms are the main reasons for the growth of the agricultural productivity in India.

Nevertheless, India has made massive productivity gains in plant yields recently, but they are far from the optimal 30 to 60 percent of what can be achieved on farms of developed and other developing countries. Additionally, the increase in agricultural productivity does not completely eliminate the food losses due to the inefficient infrastructure and the frequent disorder in the retail trade in India, which is among the worst in the whole world.

To solve the existing challenges in the agriculture sector, finance minister introduced several commendable reforms. She proposed for a digital public infrastructure to be built which will be accessible, inclusive and informative solution for farmers.

“Digital public infrastructure for agriculture will be built as an open source, open standard and inter operable public good. This will enable inclusive, farmer-centric solutions through relevant information services for crop planning and health, improved access to farm inputs, credit, and insurance, help for crop estimation, market intelligence, and support for growth of agri-tech industry and start-ups,” she said in her budget speech.

The agricultural credit target is going to be increased to Rs 20 lakh crore which will be aimed at animal husbandry, dairy, and fisheries sector. Moreover, an Agriculture Accelerator Fund is going to be set-up to support agri-startups founded by young entrepreneurs in rural areas.

The focus will be on bringing innovative and affordable solutions for challenges faced by farmers. In addition, an Atmanirbhar Clean Plant Program will be launched to enhance availability of disease-free, quality planting material for high value horticultural crops. The program will materialize at an outlay of Rs 2,200 crore.

Pharmaceuticals: Giving a Fillip to Research

Indian pharmaceutical industry occupies a pivotal position in the global pharmaceutical industry. The country is the world's largest supplier of generic drugs, comprising more than 20 percent of the global supply, and is the world's leading producer of vaccines. The market worth of India's pharmaceutical industry is 42 billion US dollars, the output value ranks the third in the world, and thirteenth in the world.

The country exported more than 23 crore doses of coronavirus vaccine to 101 countries during the pandemic. However, the industry struggles to address the challenges pertaining to research and development and is dependent on imports for Active Pharma Ingredients (API). 80 percent of the APIs are today imported from China. Hence, Indian pharma market is prone to supply disruptions and unpredictable price fluctuations.

Acknowledging the need to boost pharmaceutical research, finance minister announced a new programme to promote research. “A new programme to promote research and innovation in pharmaceuticals will be taken up through centers of excellence. We shall also encourage industry to invest in research and development in specific priority areas,” said FM.

Infrastructure: Enhancing the Growth Potential

When it comes to the infrastructure sector, projects require a huge investment, which is often difficult to secure in a short span of time. This is primarily due to the unorganized nature of the investor base in India, which is largely dominated by public-sector banks. Infrastructure projects often take back seat when it comes to policy formulations, which makes it difficult to keep up with the rapidly growing requirements. Political interference has also been a big factor hindering infrastructure growth, leading to delays and cost overruns. This reduces the incentive to invest in infrastructure projects.

To fuel the growth of infrastructure sector, FM announced the capital investment outlay to be increased steeply for the third year in a row by 33 per cent to Rs 10 lakh crore, which would be 3.3 per cent of GDP. The allocation will be almost three times of that in 2019-20. “This substantial increase in recent years is central to the government’s efforts to enhance growth potential and job creation, crowd-in private investments, and provide a cushion against global headwinds,” said FM.

Energy: Paving the Way for Sustainable Development

India has witnessed a remarkable increase in energy demand over the past few decades due to a rapidly growing population and economic development. This rapid demand growth has outpaced supply, creating an energy deficit which must be addressed. India’s energy infrastructure is not equipped to meet the growing demand for energy. Due to inadequate investments, there are frequent power outages, unreliable transmission networks and high peak-load deficits. This has limited the growth of energy sector in India.

In a bid to overcome the challenges faced by energy sector, the budget provides Rs 35,000 crore for priority capital investments towards energy transition and net zero objectives, and energy security by Ministry of Petroleum & Natural Gas. Furthermore, Battery Energy Storage Systems with capacity of 4,000 MWH will be supported with Viability Gap Funding to steer the economy on the sustainable development path.

Financial Sector: Financial Inclusion at Scale

India has made great strides in digital payments and banking services in the past two years. However, a significant proportion of the population remains using traditional forms of payments, favoring cash and other nondigital instruments. This has had a very adverse impact on the growth of the financial sector in the country. The Government of India has introduced many laws and regulations to preserve and also to inform the people about the inherent danger in the financial decisions. In this respect, on the bright side, the introduction of these laws has led to an increase in the financial sector, but the negative side of this is the cost and complexity of the system which might have prevented the continued growth of the sector.

She has remained committed to her last year’s proposal, declaring the modified credit guarantee scheme for the MSMEs, which became effective from March 31st, 2013. The practice of lending a sum of Rs. A credit of Rs. 9,000 crore would be achieved through the infusion. Two lakh crores for the guaranteed loans without the need of the collateral. To add, the credit price will be decreased by 1 per cent, or roughly 5%.

Certainly, these considered approaches indeed do the Union Budget 2023 the very changemaker in the sense it is a force to reckon with in the terms of the economic growth in India. Restraining the private sector or the investment attraction in the public sector enterprises will improve efficiency and hence accelerate economic growth. A lot of money will be allocated to renovate infrastructure in India and this will make for a very nice operating environment for business.