In Summation: Budget 2022 Looks At The Future With Feet Firmly In Present

In the backdrop of the Omicron wave of the Covid-19 pandemic, Finance Minister Nirmala Sitharaman presented a highly futuristic, growth-oriented and capex intensive Budget 2022, in India’s seventy-fifth year of independence, Azadi ka Amrit Mahotsav.

Reading the budget for intent and not just for the measures that it talks about, this is a continuation of the reformist budget of last year and the structural reforms undertaken by the government such as Labour code, PLI schemes and reduction of corporate tax rates.

While past NDA governments have been fiscally conservative and relatively hawkish on inflation, the government in last year’s Budget marked a significant and welcome departure from that philosophy and prioritised growth.

This Budget continues with that economic philosophy that a wider fiscal deficit is acceptable as long as it is well spent (as reflected in the significant increase in capex outlay) that will help support economic growth. There is no better solution to India’s multiple problems from the common man’s poverty, to the young man’s lack of jobs to the lack of competitiveness for the entrepreneur than ‘growth’.

The outlay for capital expenditure in the Union Budget is once again being stepped up sharply by 35.4 per cent from Rs 5.5 trillion in the current year to Rs 7.5 trillion in 2022-23. This has increased to more than 2.2 times the expenditure of 2019-20. This outlay in 2022-23 will be 2.9 per cent of GDP.

With this investment taken together with the provision made for creation of capital assets through Grants-in-Aid to States, the ‘Effective Capital Expenditure’ of the central government is estimated at Rs 10.68 trillion in 2022-23, which will be about 4.1 per cent of GDP.

In 2022-23, in accordance with the recommendations of the fifteenth Finance Commission, the states will be allowed a fiscal deficit of 4 per cent of GSDP of which 0.5 per cent will be tied to power sector reforms, for which the conditions have already been communicated in 2021-22.

Under the PM Gati Shakti, the National Highways network will be expanded by 25,000 km in 2022-23. Contracts for implementation of Multimodal Logistics Parks at four locations through PPP mode will be awarded in 2022-23 and 2,000 km of network will be brought under Kavach.

Four hundred new-generation Vande Bharat Trains, 100 PM GatiShakti Cargo Terminals for multimodal logistics facilities will be made. Contracts for eight ropeway projects for a length of 60 km will be awarded in 2022-23.

Over the last seven years of Modi’s governance, certain themes have emerged:

- Make in India

- Start-up India

- Digital India

The PLI Scheme in 14 sectors has received excellent response, with potential to create 6 lakh new jobs, during next five years. To facilitate domestic manufacturing for the ambitious goal of 280 GW of installed solar capacity by 2030, an additional allocation of Rs 19,500 crore for Production Linked Incentive for manufacture of high efficiency modules, with priority to fully integrated manufacturing units from polysilicon to solar PV modules, will be made.

Extension of the 15 per cent concessional tax rate for newly incorporated domestic manufacturing companies from 31 March 2023 to 31 March 2024.

Sixty-eight per cent of the capital procurement budget will be earmarked for domestic industry in 2022-23, up from 58 per cent in 2021-22. Defence R&D will be opened up for industry, start-ups and academia with 25 per cent of defence R&D budget earmarked.

One of the most prudent but highly effective mechanism by government was to use the banks to extend credit on the back of government guarantee to the MSME sector. The government has extended the amount and time period by a year.

Amount of credit guarantee provided under CGS and ELCGS and margin money provided under PMEGP in FY21 and FY22

ECLGS will be extended up to March 2023 and its guarantee cover will be expanded by Rs 50,000 crore to total cover of Rs 5 lakh crore. Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) scheme will be revamped with required infusion of funds. This will facilitate additional credit of Rs 2 lakh crore for Micro and Small Enterprises and expand employment opportunities.

Raising and Accelerating MSME Performance (RAMP) programme with outlay of Rs 6,000 crore over 5 years will be rolled out. This will help the MSME sector become more resilient, competitive and efficient.

The Modi government has picked up on one social welfare scheme almost every year. The fundamental difference though is not to relieve the common man from temporary problem but to structurally enhance or enable. From Clean India (sanitation/ toilets) to Cooking Gas (Ujjwala) to Electrification of All Villages to Har Ghar, Nal Se Jal (providing water to every household).

Current coverage of Har Ghar, Nal Se Jal is 8.7 crore. Of this 5.5 crore households were provided tap water in last two years itself. Allocation of Rs 60,000 crore has been made with an aim to cover 3.8 crore households in 2022-23.

In 2022-23 80 lakh houses will be completed for the identified eligible beneficiaries of PM Awas Yojana, both rural and urban. Rs 48,000 crore is allocated for this purpose.

In 2022, 100 per cent of 1.5 lakh post offices will come on the core banking system enabling financial inclusion and access to accounts through 11 net banking, mobile banking, ATMs, and also provide online transfer of funds between post office accounts and bank accounts. This will be helpful, especially for farmers and senior citizens in rural areas, enabling interoperability and financial inclusion.

Education/Skilling India

Udyam, e-Shram, NCS and ASEEM portals will be interlinked. Digital Ecosystem for Skilling and Livelihood – the DESH-Stack eportal – will be launched. This aims to empower citizens to skill, reskill or upskill through on-line training.

‘One class-one TV channel’ programme of PM eVIDYA will be expanded from 12 to 200 TV channels. This will enable all states to provide supplementary education in regional languages for classes 1-12. A Digital University will be established.

We have harnessed the power of digital – Aadhar and UPI. An open platform, for the National Digital Health Ecosystem will be rolled out. It will consist of digital registries of health providers and health facilities, unique health identity, consent framework, and universal access to health facilities.

The adoption or linkage with National Generic Document Registration System (NGDRS) with the ‘One-Nation One-Registration Software’ will be promoted as an option for uniform process for registration and ‘anywhere registration’ of deeds and documents.

It is proposed to introduce Digital Rupee, using blockchain and other technologies, to be issued by the RBI starting 2022-23. Any income from transfer of any virtual digital asset shall be taxed at the rate of 30 per cent.

Making compliances easy – debottlenecking the legal system – creating a spirit of trust. A new provision 22 permitting taxpayers to file an updated return on payment of additional tax is being made. This updated return can be filed within two years from the end of the relevant assessment year.

The Budget shows a growth trajectory that will not be constrained by resources. What remains to be seen, is how well this government can execute the budgetary measures, which marks the continuation of a growth cycle to achieve the promise of a $5 trillion economy.