The Government of India deserves to be congratulated for presenting a Union Budget for 2023-24 that takes a prudent medium term view in the management of the economy.
At this point in time, the economy needs a continued thrust on enhanced spending – to keep the production levels up, sustain the impressive growth the services sector had in the last three quarters and put additional disposable incomes in the pockets of the common man to manage the inflation we are witnessing. The Budget does exactly that – by way of allocating 33% higher resources for capital expenditure, as compared to the current year and changing the income tax slabs in the categories in which a majority of the taxpayers fall.
The second good aspect of the budget is that it also seeks to unleash the MSME sector by way of extended credit guarantees and reforms in compliance mechanisms. These, I believe, will collectively accelerate the much desired structural change we are witnessing in the MSME sector – that of increase in size and integration with the larger value chain.
There are many good things for the clean energy sector. I assess three of them, listed below, to be most important.
One, the Government’s commitment to the clean energy transition is unwavering, despite energy security concerns. The Finance Minister announced an allocation of Rs. 35,000 crores for energy transition and energy security. This is a significant step in the overall context of pressures to rein in fiscal deficit, inflation and yet achieving inclusive development. The allocation of Rs. 17,729 crores to the Ministry of New and Renewable Energy, an increase of 41% over the revised estimates for last year is also appropriate. It’s also heartening to see allocations for tapping the potential of bioenergy – a potential clean energy source that has lacked attention in previous budgets. Given the need to triple annual capacity addition to reach the 2030 target of 500 GW renewable energy capacity, these are steps in the right direction.
Two, the banking system is better placed to support the thrust on capital expenditure: The real effective capital expenditure outlay of Rs. 13 lakh crores has been proposed in the budget. This is a step change – an increase by 33% from the previous budget. With a multiplier of mobilising 2.5 times private capital, there will be a need for almost Rs. 30 lakh crores to be mobilised from the financial and capital markets. The good news from the Economic Survey is that the banking system is now much healthier in terms of asset quantity and quality, as a result of reforms undertaken in the previous 3-4 years. The capital markets are also recovering from the post pandemic shock – with number of firms opting to list on the bourses increased by 37 per cent between April and November 2022, as compared to the same period in the previous year.
Three, investments in green hydrogen and energy storage are now much more likely to pick up: Green Hydrogen and energy storage systems are critical to enabling the energy transition. A number of other countries have already announced large incentives and subsidies to support their domestic industries to build world class supply capabilities. The government’s recent publication of the National Green Hydrogen Mission and the announcements on Viability Gap Funding and reduction of duties on battery energy storage systems are very positive steps, responding to the asks of the industry, including ReNew. The fine print of the support mechanisms on both are yet to be announced, but we are hopeful and excited that these will improve investment attractiveness. A combination of ongoing support through the PLI Scheme for manufacturing and on the deployment front through the VGF and duty reductions will help India to create an ecosystem where domestically manufactured batteries become competitive with the ones imported from other countries, mostly China.
All-in-all, the government, under Prime Minister Modi’s leadership, has presented a very positive budget. It was much awaited, given the recent reports predicting an economic slowdown. I believe the budget takes the right approach of ensuring that ‘clean and green’ becomes a vehicle for growth and contributes to the PM’s mantra of Lifestyle for Environment (LiFE). We can certainly call this a ‘green budget’.
The writer is Chairman and CEO, ReNew Power