Union Budget 2023: Five Sectors that will Benefit the Most

By: 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

Agriculture plays an important role in the Indian economy. More than 70 percent of rural households depend on agriculture for their livelihood. The sector contributes to more than 19 percent of GDP and provides employment for about 45 percent of the population. Improvements in road and power generation infrastructure, access to knowledge and reforms have allowed India to increase agricultural productivity.

However, India's recent achievements in crop yields, while impressive, still represent only 30 to 60 percent of the optimal crop yields achievable on farms in developed and other developing countries. Furthermore, despite improvements in agricultural productivity, post-harvest losses due to poor infrastructure and disorganized retail trade mean that India experiences one of the worst food losses in the 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 seen extensive growth in the use of digital payments and banking services in the past couple of years. However, there is still a large portion of the population that is using traditional payment methods, preferring cash or other non-digital options. This has limited the growth of the financial sector in the country. The Government of India has implemented several laws and regulations to protect people’s money and make them aware of the risks involved in financial decisions. Although these laws have had positive effects, they have also resulted in increased cost and complexity for the financial sector which may have inhibited the sector’s growth.

Staying true to her last year’s proposal, finance minister announced revamped credit guarantee scheme for MSMEs which will take effect from 1st April 2023. It has been done through infusion of Rs 9,000 crore in the corpus, enabling additional collateral-free guaranteed credit of Rs 2 lakh crore. In addition, the cost of the credit will be reduced by about 1 per cent.

With these prudent initiatives, the Union Budget 2023 is set to be a game-changer in terms of the economic growth of India. Being supportive of the private sector as well as driving investments into public-sector enterprises will boost their efficiency, contributing to accelerated overall growth. Allocating considerable resources to modernizing India's existing infrastructure will create a conducive environment for businesses to thrive.