Budget 2023 Outlook For MSME, Agriculture, Chemical, And Metal Sector

On 1 February 2023, Finance Minister Nirmala Sitharaman announced Union Budget 2023-24. The total budget of India for 2023-24 is estimated at ₹45 lakh crore, with a net tax receipt of ₹23.3 lakh crore. In the speech, the finance minister stated- “Our vision for the Amrit Kaal includes technology-driven and knowledge-based economy with strong public finances, and a robust financial sector”.

She shared that from the 10th largest, the Indian economy has grown to become the 5th largest economy in the last 9 years. Per capita income has increased (more than double) to ₹1.97 lacs. Here are the major announcements made by the finance minister during her Union Budget speech:

• ₹2.2 lakh crore cash was transferred to more than 11.4 crore farmers under PM Kisan Samman Nidhi.
• Atmanirbhar Clean Plant Program with an outlay of ₹2200 crore to be launched to enhance the availability of disease-free, high-quality planting material for high-value horticultural crops.
• Investment of ₹75,000 crores, including ₹15,000 crores from private sources, for one hundred critical transport infrastructure projects, for last and first-mile connectivity for ports, coal, steel, fertilizer, and food grains sectors.
• PM Awas Yojana’s outlay increased to ₹79000 crores (an increase of 66%). 
• Capital investment outlay increased to ₹10 lakh crores (an increase of 33%, approx 3.3% of GDP) in infrastructure and productive capacity.
• Effective Capex of ₹13.7 lakh crores (approx 4.5% of GDP). 
• Railway outlay ₹2.4 lakh crore, highest outlay ever (9 times the outlay of 2013-14). 
• ₹7000 crores for phase 3 of e-courts. 
• Mahila Samman Savings Certificate offers a deposit facility up to 2 lakhs for 2 years at a fixed interest rate of 7.5%. with partial withdrawal option.
• Maximum deposit limit for the senior citizen FD scheme enhanced to ₹30 lakhs.

MSME Sector Highlights

• The Union Budget provisioned a ₹9,000-crore corpus for a revamped credit guarantee scheme for MSMEs to enable additional collateral-free guaranteed credit of ₹ 2 lakh crore and reduce the cost of credit by 1%.
• The Post Office Monthly Income Scheme limit doubled to ₹9 lakhs and ₹15 lakhs for joint accounts. 
• A special package for traditional artisans and craftsmen under the PM Vishwa Karma Kaushal Samman to integrate them with the MSME value chain to improve the quality, scale, and reach of their products.
• Small businesses making up to 2 crores and certain workers making up to 50 lakhs can use a special tax rule. Budget 2023 provides an increase in limit up to 3 crores for businesses and 75 lakhs for workers if their tax amount is less than 5% of their total income.

Agriculture Sector Highlights

• ₹1,15,531 crore allocated to the Department of Agriculture and Farmers’ Welfare. 
• As farmers’ welfare measures, the agriculture credit target will be increased to ₹20 lakhs crore with a prime focus on dairy, fisheries, and, animal husbandry.
• The launch of a new sub-scheme under PM Matsya Sampada Yojana with a target to invest ₹6,000 crores to enable fish vendors, fishermen, and micro and small enterprises, to expand the market and improve value chain efficiencies.
• For the Agriculture Accelerator Fund, ₹500 crores allocated over 5 years to encourage agri-startups by young entrepreneurs.
• Overall, the Union Budget 2023-24 has demonstrated a compound annual growth rate (CAGR) of 11% in the past decade from the fiscal year 2013 to the fiscal year 2023. The allocation towards the agriculture sector and rural development have displayed a CAGR of approximately 12%, indicating a significant increase in investment towards these important areas.
• The budget announced an 11% hike in the agriculture credit and has proposed to increase the limit of collateral-free agricultural loans to farmers up to ₹2 lakhs.

Chemical Sector Highlight

• Allocated ₹1.75 lakh crores for the chemical industry.
• The government has set up 500 new Waste To Wealth plants under GOBARdhan (Galvanizing Organic Bio-Agro Resources Dhan) scheme to be established for promoting a circular economy at a total investment of ₹10,000 crores. 
• A reduction in import duty for the raw material of lab-grown diamonds.
• Fertilizer subsidies have been reduced from ₹225,220 crores to ₹175,100 crores for 2023-24.
• The PM Programme for Restoration, Awareness, Nourishment, and Amelioration of Mother Earth will be started to encourage states and territories to use alternative fertilizers and balance the use of chemical fertilizers.
• Basic customs duty has been exempted for denatured ethyl alcohol to boost its production. This will also affect the downstream industries (automobile industry, ethyl acetate industry, paints and inks industry). 
• The budget proposed a new program to promote research in pharmaceuticals and another to skill lakhs of youth under Pradhan Mantri Kaushal Vikas Yojana 4.0.

Metal Sector Highlights

• Customs duty exemption on the raw materials used to manufacture cold-rolled grain-oriented steel (CRGO), ferrous scrap, and nickel cathode to facilitate the availability of raw materials continued.
• The subsidized basic custom duty of 2.5% on copper scrap for the availability of raw materials for secondary copper producers (primarily in the MSME sector). This will assist metal companies in lowering their expenses.
• A higher budgetary allocation for incentivising investments in the metals sector, and bringing in non-ferrous metals under the purview of the PLI scheme.

Our Take

Overall, the budget is expected to have a positive impact on the economy by promoting personal consumption and boosting business and investment sentiment for various sectors. A new wave of agri-startups by young entrepreneurs will revolutionise the agriculture sector. Fund allocations and different schemes announced for the MSME sector will enable efficient credit flow and help it to grow at a fast pace.