Union budget 2023: Impact on the luxury sector

Arushi Sakhuja 

The first day of February is synonymous with the budget announcement for the new financial year, and this year the budget 2023 holds a few notable changes. Finance minister Nirmala Sitharaman presented the union budget 2023 which is the last budget before the general elections next year. During her address to the nation, Sitharaman shared that the Indian economy is on the right path and heading towards a bright future.  “This Budget hopes to build on the foundation laid in the previous Budget, and the blueprint drawn for India@100. We envision a prosperous and inclusive India, in which the fruits of development reach all regions and citizens, especially our youth, women, farmers, OBCs, Scheduled Castes and Scheduled Tribes,” said Nirmala Sitharaman.

Here are some of the top highlights of the union budget for 2023.

Key highlights

Tax

– No tax on income up to Rs 7.5 lakh a year in the new tax regime

– Government proposes to reduce the highest surcharge rate from 37% to 25% in the new tax regime

– The income slabs under the new personal income tax regime have been revised from six to five. The tax exemption limit has been increased to Rs 3 lakh.

Jewellery 

– To encourage the indigenous production of lab-grown diamonds, a research and development grant is to be provided to one of the IITs for five years.

– Proposal to review customs duty of lab-grown diamonds to be included in Part-B of the budget document

Tourism 

– Promotion of tourism will be taken up on mission mode with the active participation of states, the convergence of government programs and public-private partnerships.

– 50 tourist destinations will be selected to be developed as a whole package for domestic and international tourism.

Ahead we spoke to industry experts to get their thoughts on the Union budget 2023.

Mr. Vivek Ramabhadran, CEO & Founder, Aulerth 

“The Indian government takes more purposeful steps to reduce the usage of physical gold/gold jewellery as investments – well it seems like it. Conversion of physical to digital gold at no added tax. Higher import duties on gold were maintained, and higher import duties were posed on articles made from gold, and silver. And somewhat related – Reduction of duties on lab-grown diamonds, support for the development of such facilities locally. The reasons behind this are the same as what has been the case for several years now: Gold imports fall second after crude which exerts downward pressure on the Rupee increases the trade deficit and reduces available dollars to manage for volatilities in global FII flows. And for comparatively a “non-productive” asset vs other asset classes available today.”

Gautam Gupta,  Co-owner of the label Asha Gautam and Founder of GG by Asha Gautam

“With personal tax slab getting better we can see more spending on Fashion and lifestyle products. Luxury pret and resorts will be a big gainer. An increase in the budget on textiles will also help in cost reduction and growth.”

Arun Ashok, Luxury Escapes Regional Manager India and Middle East for Luxury Escapes

“Increased focus on tourism was a welcome note in this budget. Everything from more spending on infrastructure to building Unity malls in capital cities showcasing local crafts augers well for the industry. Income tax slab revisions will also place more disposable income in the hands of middle-class Indians enabling them to make the most of the wide variety of local destinations that India has to offer.”

Mr. Lindsay Bernard Rodrigues, CEO & Co-Founder, The Bennet and Bernard Company

“We welcome the announcement of the well-thought-out Union Budget 2023-24 by the Hon’ble Finance Minister today which will propel growth through public investments, raise demand, create jobs, and savings and enhance consumption. A slew of pragmatic measures has been proposed to augment the nation’s economic growth. The Budget has seen an increase in infrastructure investment for the 3rd consecutive year and further infrastructure development will indirectly help the luxury real estate sector grow through allied urban activity growth. The government’s focus on creating jobs and skilled workers will be beneficial for the economy in the long run as there will be greater liquidity and money in the hands of people to buy luxury homes. The tax exemptions for the middle and salaried class will help increase home-buying activities this year. However, while consumers have been given relief, the government would need to give further impetus to the real estate firms. The real estate sector is one of the biggest contributors to the nation’s GDP and creates a high number of jobs through allied economic activities. Post the pandemic, the luxury real estate segment has been driving unprecedented growth for the sector. Driven by a new class of young and savvy Indians, we are expecting this trend to continue in 2023 as well. But there need to be further steps taken to help the sector in the form of a reduction in home loan rates which will enhance buying power of consumers. Over the coming months, we hope the government will announce new schemes that will provide overall relief to all stakeholders in the sector.”

Anoop Pandey, General Manager –JW Marriott Mussoorie Walnut Grove Resort & Spa

“After nearly three long, rocky years, the winds of change have started to blow for the travel and tourism industry. In 2022, there was a significant upswing in the sector, and the data are encouraging. The year is crucial for India’s tourism and hotel industry because we want to see robust growth following the pandemic-caused downturn. Despite the difficulties and the general inflation, travel is gradually returning to pre-pandemic levels. Planning ahead would appear to be a frequent theme as travellers would be making their way to every part of the world, even if it occasionally requires splurging. After Finance Minister Nirmala Sitharaman declared a special focus on the tourism sector on Wednesday, shares of companies involved in the travel and hotel industries have also witnessed a surge. The budget also includes the development of 50 tourist spots that will be chosen through a challenging method and offered as a complete package for both domestic and foreign tourists, which will undoubtedly revolutionize the travel sector for the better. I think that there is a lot of untapped potential in the tourism industry and that young people in particular have a lot of employment and entrepreneurial options in the travel and tourism sector. Overall, I can safely state Budget 2023 has bought a little sigh of relief for all of us although the expectations were many.’

Harshad R Ajoomal, Founder of H. Ajoomal Fine Jewellery

“It’s a positive and I am forward-looking budget but not much has been done for the jewellery sector. The government has increased the import duty on gold to 15% from 10% which will lead to higher prices and people holding off their jewellery purchases till prices stabilize. It will also lead some of our NRI & International visitor clientele to purchase fine jewellery from other places like Dubai & Singapore instead of India at the time of their visit. The one positive impact for our sector is the reduction in duty on cut & polished diamonds & gemstones. This encourages designers such as myself to use unusual gemstones from all around the world in our designs & add value addition to the pieces. The government has also introduced policy changes to facilitate the export of jewellery through e-commerce which will boost exports in this area and will have a greater impact on designers like us who also craft semi-fine casual jewellery to be sold on e-commerce platforms due to its lower pricing.”

Vijay Kg, Founder Luxepolis

“Hon. Finance Minister had proposed to increase the basic customs duties on clothes. This will increase the costs of importing luxury branded fashion products into the country. There is an increase in import duties on silver and fashion jewellery. So overall, luxury fashion apparel and fashion jewellery are set to become costlier. It will be interesting to observe if luxury brands decide to offset the BCD (Basic Custom Duties) hike by absorbing the same to maintain homogenous prices across the globe.”

Rohan Sharma, Managing Director, RK Jewellers 

“Due to the fact that lab-grown diamonds are environmentally benign, extremely affordable, and popular among millennial customers, demand them is growing both locally and internationally. The government’s support in the form of a grant will prove to be a bold decision and will quickly help India become one of the largest hubs for lab-grown diamonds”.

There are 6-7 million carats of lab-grown diamonds produced worldwide, with 1.5 million carats coming from India. This means that the lab-grown market has quick growth and demand as well as future possibilities for the Indian jewellery sector. Because they are more affordable and environmentally friendly than traditional diamonds, young diamond consumers are loving this lab-grown diamond jewellery. We hope the government would put forward a duty reduction proposal because it is urgently needed to make the trade and consumption of gold and silver simple and fair”

Mr. Sandeep Arora, Director of Brightsun Travel India

“Indian economy is expected to increase by 7% in the year 2023 and tourism is one of the major areas that contribute to it. Development of tourist infrastructure is the need of the hour so the announcement that 50 tourist destinations will be developed for domestic and international tourism is a positive step. Plus, the border village tourism initiative will bring tourists to these far corners helping the local communities earn livelihood and prosper. This year’s budget also saw the highest-ever capital outlay of 2.5 crore for the railways which may provide the push needed for the growth of domestic tourism in the country. Air travel is also expected to rise. Specific focus is needed for the tourism industry to rebound back to pre-pandemic levels and we hope that these initiatives will provide much awaited-relief to the Indian tourism sector.”

Banwari Lal Sharma, CEO, Consumer Business, CarTrade Tech Ltd.

” The Union Budget 2023-2024 announced by Finance Minister Nirmala Sitharaman is progressive, prudent and growth-led, with an eye to provide impetus on the savings of the public. It is a ‘green budget’ for the automotive and mobility sectors. The sustainability measures taken through announcements on green hydrogen and other energy sectors will help in furthering the government’s target of carbon neutrality by 2070. The increased Capex outlay on energy transition is likely to spur investments and skill development in a green economy. The viability gap funding for battery energy storage systems is also likely to create critical infrastructure, while custom duty reduction on capital goods for Lithium batteries manufacturing will facilitate faster adoption of EVs. An increase in spending on infrastructure, the setting up of 50 new airports and heliports, creation of 100 transport infrastructure projects are welcome moves, in addition to the central support for replacing old vehicles. All of these should drive consumption and overall demand of vehicles.”

Anuj Puri, Chairman, ANAROCK Group

“The new measures announced in the Union Budget 2023-24 may certainly help unleash the Indian economy’s potential. However, from a real estate point of view including luxury housing, there were no direct announcements that could be seen as immediate booster shots. Luxury housing received no direct or even indirect benefits.

On the contrary, the deduction on capital gains on investment in residential houses has been capped at INR 10 Crore. This is a negative on this segment as previously there was no such cap. This essentially means that if one sells a house, and gains are more than INR 10 crore, then the maximum benefit they can avail is up to INR 10 crore when invested into another property. Capital gains of over INR 10 Cr will now be taxed.”

You may also like: 

Indian luxury industry’s leaders react to the Union Budget 2021-22

Money management resolutions for 2023