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India Budget 2022–23

India Budget 2022–23

Budget for Resurgent India
According to the Union Minister for Finance and Corporate Affairs, Ms. Nirmala Sitharaman, India’s economic growth is estimated to be 9.2%, highest among all the large economies of the world. The steep recovery in the Indian economy after the implementation of COVID-19-related restrictions showcases the country’s firm resilience. The vision highlighted by the Prime Minister of India in his Independence Day speech focuses on macro-economic development along with micro-economic welfare, to enhance an all-inclusive growth. Furthermore, the vision aims to promote technology, digital economy, fintech, climate action and energy transition, and the government plans to rely on a virtuous cycle beginning from private financing and on public capital investment to drive private sector investment.

Real GDP of India

Source: National Statistical Office (NSO)

Since 2014, the government has been focusing on empowering citizens, especially the lower class, by helping them meet requirements related to housing, cooking gas, electricity, and water. The finance minister stated that the implementation of the Productivity-Linked Incentive (PLI) scheme would help in achieving the Atmanirbhar Bharat vision; she also stated that the scheme, which aims to create six million new jobs in 14 sectors and generate US$ 401.7 billion (Rs. 30,00,000 crore) during the next five years, has received an overwhelming response. Moreover, the finance minister announced that the transfer of Air India has been completed and a strategic partner for Neelanchal Ispat Nigam Limited (NINL) has been selected; she also highlighted the LIC issuance process for 2022–23. The finance minister outlined the following four priorities aimed at enhancing inclusive growth:

Four Priorities of Budget 2022–23

Outline of Union Budget 2022–23

Master Plan for state-of-the-art infrastructure
The government plans to create a world-class infrastructure for economic enhancement and sustainability growth. PM Gati Shakti, a transformational approach for creating a state-of-the-art infrastructure, would be driven by seven engines, including railways, roadways, waterways, mass transportation and logistics infrastructure. The Gati Shakti Master Plan aims to expand the national highway framework by 25,000 km between 2022 and 2023, award Multimodal Logistics Park contracts for four locations between 2022 to 2023, integrate railways and postal networks, help local businesses and supply chains through the concept of One Station One Product, develop 400 Indigenous new-generation Vande Bharat trains and set up 100 cargo terminals for enhancing multimodal logistics facilities during the next three years.

Budget for rural India
On the agricultural front, the government aims to promote chemical-free natural farming; and use of farmer drones for assessing crops, digitising land records, and spraying nutrients and insecticides. It also aims to reduce dependence on imports of goods such as oilseeds by developing a comprehensive scheme to enhance the domestic production of oilseeds. Moreover, the government aims to implement the Ken-Betwa Link Project for providing irrigational benefits to around 9,08,000 hectares of farmland. Furthermore, it plans to launch a fund with blended capital to aid agricultural start-ups.

Steep growth in MSMEs and road ahead
The government aims to interlink the Udyam, e-shram, NCS, and ASEEM portals to widen their scope. Additionally, under the Emergency Credit Line Guarantee Scheme (ECLGS), the guaranteed cover will be extended by US$ 6.7 billion (Rs. 50,000 crore) to US$ 67.0 billion (Rs. 5,00,000 crore). The additional amount would be allocated to the hospitality sector and related enterprises. For making the MSME sector robust, efficient, and competitive, the Raising and Accelerating MSME Performance (RAMP) programme, valued at around US$ 803.4 million (Rs. 6,000 crore), would be implemented over the next five years.

Education for masses and enhanced skill development          
One Class-One TV channel programme would be rolled out to help states deliver supplementary education in different languages for classes 1–12. For providing digital access to students across the country, a digital university offering personalised learning experience would be established and the same will be made available in ICT formats and different languages. Furthermore, the finance minister announced that 75 skilling e-labs and 750 virtual science and mathematics labs would be set up which would help build a smart India with enhanced skills.

Creation of robust health infrastructure
The finance minister announced that a resilient open platform for the National Digital Health Ecosystem including digital registries of health service providers and facilities, unique health identity, and inclusive access to health facilities would be created. Furthermore, a ‘National Tele Mental Health Programme will also be launched, equipped with 23 tele-mental health centres of excellence for providing access to mental health counselling.

Road towards investment, productivity, and enhancement
The finance minister announced expansion of five existing academic institutions across various regions to develop country-specific knowledge in design and urban planning and to provide certified training in these areas; an endowment fund of US$ 33.5 million (Rs. 250 crore) would be awarded to each of the institutions. Additionally, the defence sector would receive 68% of the capital procurement budget, reserved for domestic industry, between 2022 and 2023.

Road to greener economy
An additional amount of US$ 2.6 billion (Rs. 19,500 crore) would be allocated for the PLI scheme to facilitate domestic manufacturing of high-efficiency modules, to meet the installed solar capacity goal of 280 GW by 2030. Furthermore, the government plans to issue Sovereign Green Bonds for channelising resources to achieve a green infrastructure; the proceeds would be directed towards carbon intensity reduction in public sector projects.

Direct tax proposal
Taxpayers would be allowed to file an updated income tax return within two years which would help address omissions and errors. The budget also provided relief to taxpayers with disabilities. Furthermore, under the new taxation policy, income from transfer of virtual assets would be taxed at 30%. Moreover, the tax deduction limit on employer’s contribution has been increased, and for cooperatives, the Alternate Minimum Tax and surcharge have been reduced. These measures would help create a more transparent tax regime.

Sector-Wise GDP of India

Source: Statistics Times 2021

Impact of Budget 2022–23 on Key Sectors

  • The budget is expected to have a positive impact on the agricultural sector, one of the biggest contributors to GDP, with the government focusing on developing new-age technologies, providing support to start-ups, establishing modern-day agricultural universities, and promoting public–private partnerships.
  • The metals and mining industry would gain from the outlay of capital expenditures and transition to a carbon neutral economy. Revocation of anti-dumping and exemption on scrap steel import duty would help the industry outperform.
  • The Gati Shakti initiative would help reduce the average logistics cost (as a percentage of GDP). Furthermore, the focus on green bonds and various infrastructure investment options would lead infrastructure development towards a sustainable future.
  • Inclusive growth, housing for all, quick construction approvals, state partnership for creating enterprises and service hubs, and digitisation would help the real estate sector recover after the pandemic.
  • The transformation to a digital India would create many direct and indirect opportunities in the IT space. It would provide significant downstream opportunities for software, hardware, and service companies. Digitisation across industries would help create a start-up ecosystem, which would lead to an entrepreneurship wave.

The budget prioritises development over fiscal consolidation in an uncertain economic environment. A sharp growth in the capital and infrastructure spending is a crucial factor for achieving a US$ 5 trillion economy. Government spending on key sectors such as housing, infrastructure, defence, and agriculture would have a multiplier effect on the Indian economy.