Budget 2022-of Near-term Needs and Long-term Priorities

Despite the perceived pressures of electoral politics, with five states in the country on the verge of Assembly elections, Budget 2022 has veered away from populism to present an economic growth-oriented Budget, with emphasis on investment, continuum, and a long-term future outlook

Budget 2022 presented in the Parliament seems to be a disciplined budget. Though the atmosphere is electrified due to elections in five states, including the biggest state of Uttar Pradesh, yet there is no announcement of a freebie as was expected. The emphasis is on the growth of the economy. It can be said that Budget-2022 is a continuation of Budget 2021 and the objective is a consolidation of programmes initiated in the earlier year. Economists have come with praise for the budget. Even the capital market responded positively on the budget day and the next day.

"Budget-2022 presented in the Parliament seems to be a disciplined budget. Though the atmosphere is electrified due to elections in five states, including the biggest state of Uttar Pradesh, yet there is no announcement of a freebie as was expected. The emphasis is on the growth of the economy"

Nirmala Sitharaman, Minister of Finance & Minister of
Corporate Affairs, Govt. of India, presenting the Budget 2022

Key features of the budget:

• Capital expenditure target was increased by 35.4% from Rs.5.54 lakh crore to Rs.7.50 lakh crore. The effective capex for FY 2022-23 is anticipated to be Rs.10.70 lakh crore.
• The Fiscal deficit for FY2022-23 has been pegged at 6.4% of the GDP while for FY2021-22, the same has been revised to 6.9% from the original 6.8%.
• The Government proposes to spend Rs.39,44,909 crores in 2022-23 which is an increase of 4.6% over the revised estimate of 2021-22. It is estimated that the Government will have to go for borrowing of Rs.15 lakh crores. Income from taxes (both direct and indirect) will be around Rs.22 lakh crore and in addition, there will be income from disinvestment and dividend. Borrowings will plug the gap between income and proposed expenditure.
• The budget this year has also a blueprint for the next 25 years. It draws a picture of India 100 years after independence.
• The Finance Minister in her budget speech said that India would be growing at the highest rate among the major economies of the world as the GDP in FY2021-22 will be around 9.2% while in FY2022-23 it will be between 8-8.5%.

The budget underlines:

• Focus on growth and all-inclusive welfare.
• Promoting technology-enabled development, energy transition and climate action.
• Virtuous cycle starting from private investment, crowded in by public capital investment.

The four priorities are:

• PM Gati Shakti.
• Productivity Enhancement.
• Inclusive Development.
• Financing of Investment.

Education:

• Universalisation of quality education.
• The class one TV channel programme to be expanded to 200 TV channels.
• A digital university will be established with world-class quality universal education.
• High-quality e-content will be delivered through digital teachers.
• Virtual labs and skilling e-labs.

Health:

• National Digital Health Ecosystem will be rooled out.
• National Tele Mental Health Programme for quality counselling.
• Launching of Mission Shakti, Mission Vatsalya, Saksham Anganwadi and Poshan 2.0
• Two lakh anganwadis to be upgraded to Saksham Anganwadis.

Welfare focus:

• 3.8 crore households to be covered under Har Ghar Nal Se Jal Yojana.
• Under the PM Awas Yojana, 80 lakh houses to be completed in 2022-2023.
• Funding of infrastructure and social development in the North-East.
• Digital banking by post offices as 100% of post offices to come under the core banking system.
• Targeted development of villages on the northern border.
• Scheduled commercial banks to set up 75 digital banking units in 75 districts.

Agriculture:

• An outlay of Rs.2.37 lakh crore for wheat and paddy MSP
• 2022-23 has been announced as International Year of Millets.
• Kisan drones for crop assessment, land records, spraying of insecticides.
• Ken Betwa River linking project of Rs.44,000 crores.
• Natural farming to be promoted along Ganga river corridor.

"Budget-2022, in essence, is a good balance of near term imperatives and long-term priorities. It lays the foundation for sustained high GDP growth. The large capital expenditure will serve as a booster dose for high growth. It also appears that technology has been fused with economics to get the best result"

Multimodal transport:

The budget adds to the roads, railways and even ropeways.

The Finance Minister spelt out a Gati Shakti Master Plan for expressways, adding another 25,000 km of roads to the existing 1.4 lakh km NH network. It will be the maximum-ever in any fiscal year. The railways will roll out 400 Vande Bharat trains. Moreover, 2000 km of railway network will be brought under ‘Kavach’, the indigenously developed train collision avoidance system. In the difficult hilly areas, ropeways will be developed on PPP model. Even in the congested urban areas where conventional mass transit system is not possible, ropeways work will be undertaken.

Productivity enhancement:

• Ease of doing business 2.0.
• Trust-based governance.
• Integration of central and state level systems through IT bridges.
• Unique land parcel identification number for IT-based management of land records.
• Establishing C-PACE to facilitate voluntary winding up of companies.
• End-to-end online e-bill system in government procurement.
• Support to 5G under the PLI Scheme.
• Issuance of chip-embedded e-passports.
• Implementing town planning schemes.
• Establishing centres of excellence in Urban Planning.
• Providing a battery swapping policy as an alternative to setting up charging stations in urban areas.

Investment:

• Public investment to continue to pump prime investment and demand.
• Introduction of the digital rupee by the RBI.
• Green Bonds to mobilise resources for green infrastructure.

Tax proposals:

• Allowing taxpayers to file updated returns within two years for correcting errors on payment of misused taxes.
• Tax relief to persons with disability.
• Reducing alternate minimum tax rate and surcharge for co-operatives.
• Benefits to startups.
• Income on the transfer of virtual assets (like crypto currencies) to be taxed at 30%.
• Better litigation management to avoid repetitive appeals.
• Surcharge or any cess on income will not be allowed in business expenditure.

Small changes under Customs Duty:

• Fully IT-driven Customs administration in SEZ.
• Phasing out concessional rates in capital goods gradually and applying a moderate tariff of 7.5%.
• Review of Customs exemptions.
• Calibration of rate structure to support domestic electronics manufacturing.
• Miscellaneous rate revision of a few items in the spirit of Atma Nirbhar Bharat.

The Rupee comes from:

• Income tax - 15%
• Corporate tax - 15%
• Union Excise Duty - 7%
• GST - 16%
• Customs - 5%
• Non Tax Revenue - 5%
• Borrowing and other liabilities - 35%
• Non-debt capital receipts - 2%

The Rupee goes to:

• Pensions - 4%
• Other expenditure - 9%
• Central sector schemes - 15%
• Finance commission and other transfers - 10%
• States share of taxes and duties - 17%
• Interest payment - 20%
• Defence - 8%
• Subsidies - 8%
• Centrally sponsored schemes – 9%

Budget-2022, in essence, is a good balance of near term imperatives and long-term priorities. It lays the foundation for sustained high GDP growth. The large capital expenditure will serve as a booster dose for high growth. It also appears that technology has been fused with economics to get the best result. We have to look forward to good implementation of the proposals so as to achieve the goals set in the budget.