With a special focus on dynamic areas such as artificial intelligence, data governance, green hydrogen, sustainable urban infrastructure and skilling programmes, the government has taken a bold step forward with the 2023-24 Union Budget, moving steadily towards a future of innovative solutions and unlocked potential.
Some of the key themes that stand out are as follows:
A boost for infrastructure
With a 33 percent increase in capital expenditure for infrastructure development, the Government has sent a clear message that it is willing to double down on its promise to boost the economy. This increase in outlay will further strengthen the infrastructure space. The setting up of an urban infrastructure fund is also a welcome move and will not only spur investment, but also create many more jobs.
The commitment to ‘green growth’
There has been a sharp focus on sustainable growth, or ‘green growth’, and it has been one of the key themes this year. Right from a fillip to green hydrogen players to an impressive outlay of INR 35000 crore towards energy transition and a green credit initiative for companies, several interesting announcements have been made in the budget speech. These initiatives bear testimony to India’s commitment to its sustainable development goals and are expected to augment opportunities for domestic and global businesses. This also puts the spotlight on environmental, social and governance themed funds and investors, encouraging more players to participate.
Prioritising inclusion
Financial inclusion is another key theme that has emerged in several places in this year’s budget. Reiterating the focus on technological innovation in the financial services and digital payments space, the government has announced setting up a National Financial Information Registry, a central repository of financial information. Along with the simplification of KYC processes and the widening of DigiLocker’s scope, these measures are commendable and will surely see the fintech space abuzz with activity in the coming months. However, it will be absolutely crucial to ensure that the digital infrastructure can stay abreast with these new initiatives and that a high growth rate does not result in widening of disparities.
The future is upon us
Artificial Intelligence (AI) is one such aspect of technological advancements that, when used efficiently and ethically, can bring about widespread transformative changes in all walks of life and work. It is extremely encouraging to see the Indian Government thinking ahead and looking to use AI across a range of sectors such as health, agriculture and sustainable urban development. The setting up of 100 labs to develop 5G applications, 3 centres of excellence for AI to develop cutting-edge solutions, along with the launch of a National Data Governance Policy to facilitate access to anonymised data are powerful steps on this front.
Ease of doing business – The work continues
Enhancing ease of doing business (EODB) in India has been a priority for the government for a while now. In this year’s budget too, we saw several steps aimed at this goal. A staggering 39,000 compliances have been reduced and over 3400 legal provisions have been decriminalised. Certain offences under the GST law have also been decriminalised, easing many concerns. Simplified KYC, a unified filing process, increased scope of DigiLocker and a common business identifier are all moves that will help India improve its position in global EODB standings.
Also read: Budget 2023 | Ease of doing business should be further streamlined to support the growth of startups
Another interesting proposal is a scheme for voluntary settlement with standardised terms in case of contractual disputes of government undertakings where an arbitral award is under challenge in court.
GIFT City in focus
On the Gujarat International Finance Tec-City (GIFT City) front, delegating powers of special economic zone to International Financial Services Centre Authority (IFSCA) and making IFSCA a single window authority for all relevant financial services regulators solidifies it’s the position as a unified regulator. Allowing acquisition financing by offshore banking units in GIFT City and recognising a GIFT City arbitration award as an international arbitration award are all significant moves towards enhancing EODB for foreign players in GIFT City.
New valuation requirement for investments by non-residents
While the exact provisions will require some more deliberation, the budget proposes that a non-resident investor should not invest above fair market value when investing in shares of an Indian company as any money invested above the fair market value will be treated as income in the hands of the company and taxed accordingly. This may potentially limit Indian companies’ ability to attract higher amounts of foreign investment by way of receiving a share premium beyond the fair market value of shares for growth purposes. While there has been such a provision since 2012 applicable to Indian resident investors to “prevent generation and circulation of unaccounted money through share premium”, the same is now proposed to be extended to non-residents.
The road ahead
An initial reading of all the Budget proposals point to a commendable roadmap ahead, focusing on inclusive and sustainable growth. The steps are ambitious and on-ground implementation will be a critical success factor. This is especially with respect to technological innovations and new laws to cover dynamic areas. The pace at which our legislation and infrastructure move forward will also be a crucial ingredient to the success of these plans and in building a sustainable future.
— The author, Haigreve Khaitan, is partner at Khaitan & Co, one of India’s leading full-service law firms. The views expressed are personal.
(Edited by : C H Unnikrishnan)
First Published: Feb 2, 2023 2:04 PM IST
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