Union Budget 2023-24 has enlarged the Government’s capex by a massive 33 percent, dominated by higher allocations for roads, railways and the interest-free capex loan for the states.
Additionally, Finance Minister Nirmala Sitharaman announced a change in income tax slabs, up to ₹7 lakh rebate under new income tax regime.
“I propose to change the tax structure in new regime by reducing the number of slabs to five and increasing the tax exemption limit to ₹3 lakh,” she further proposed.
BFSI leaders believe that the capex alongwith the new tax regime which will push consumption will together help uplift the credit growth in the coming years.
“Credit growth ultimately comes from either a good capex or it comes from increased consumer spending. On both these aspects, the capex investment from the government will percolate down directly or indirectly, and ultimately get funded by the financial sector and banks and therefore credit growth should get the incremental boost or maintain a relatively higher growth position the way it is now,” said Rajeev Yadav, MD & CEO, Fincare Small Finance Bank.
The banker further highlighted that on the consumption side the benefits of lower taxation for the middle class is to give out more cash in the hands of the consumers and therefore it increases the propensity of making additional personal consumption. So from both aspects there would be support for credit growth in the next couple of years.
The banks have been enjoying one of the highest credit growth phases over the last 6-9 months, revealed the BFSI leaders.
According to the recent data released by the Reserve Bank of India bank credit growth picked up in the fortnight ended January 13, 2023, with 16.5 per cent YoY growth to Rs 132.81 trillion.
Credit growth moderated to 14.9 per cent YoY in the fortnight ended December 30 due to base effect, as bank credit expanded by 9.2 per cent during the same period last year, the data further revealed.
“Indian economy is expected to grow at 7% and that really means that the credit growth will be needed. The 33% hike in capex, new tax regime, investment in aviation, railways, etc will all percolate down to the MSMEs, SMEs, mid and large corporates, so clearly it will spur credit growth, job creation, work in the economy, etc,” said Rakesh Singh, MD & CEO, Aditya Birla Finance.
In a big relief to Covid-hit micro, small and medium enterprises (MSMEs), Nirmala Sitharaman announced that the Credit Guarantee Scheme for MSMEs will be extended with an infusion of Rs 9,000 crore.
“The MSME sector is the backbone of the economy and it holds one-third of the GDP, so we see a big push, a big support with this corpus of 9000 crores which has been created as a credit guarantee for MSMEs and over this the banks, nbfcs can lend to the MSMEs so we see a multiplier effect here,” Rakesh highlighted.
With stabilising on the MSME side we see that the credit side will also come up in a big way,” the NBFC head stated.
The leaders during the panel discussion also exclaimed that it’s a pro-growth Budget with a strong push to the capex outlayers and it balances fiscal prudence both short term and long term.
The budget attempts for an inclusive growth structure for the economy through various measures that are expected to reach the last mile.
