Union Budget 2022: Enabling India’s Resurgence

Aimed to put the Indian economy on an accelerated growth trajectory after the impact of the pandemic, the Union Budget 2022 will lay the foundation of the economy for the next 25 years.

Earning a boost from rising infrastructure expenditure, strong capital flows, robust exports, and a stunning vaccination rate, the economy is projected to grow by 9.2% in FY22, and 8.0-8.5% in FY23.

Key Highlights:

Economy

Capex target expanded by 35.4% — from Rs 5.54 lakh crore to Rs 7.50 lakh crore. FY23 effective capex seen at Rs 10.7 lakh crore
The goal is complementing macro-growth with micro-all-inclusive welfare, digital economy and fintech, tech-enabled development, energy transition and climate action
ECLGS cover expanded by Rs 50,000 to Rs 5 lakh crore
Productivity-linked incentive schemes in 14 sectors have received excellent response; received investment intentions worth Rs 30 lakh crore
In 2022-23, states will be allowed fiscal deficit of up to 4 pc of GSDP

Expenditure, Deficit & Other Key Numbers

Proposed fiscal deficit of 4.5% of GDP by 2025/26 and of 6.4% of GDP in 2022/23
Revised fiscal deficit for 2021/22 at 6.9% of GDP
50 year interest free loans over and above normal borrowing allowed for states
Receipt from disinvestment proceeds in next financial year pegged at Rs 65,000 crore, lower than the current year’s mobilisation of Rs 78,000 crore

Taxes

Desh stack e-portal to be launched to promote digital infra
Four multi-modal national parks contracts will be awarded in FY23
Focus on public investment to modernise infrastructure over the medium term, leveraging tech platform of PM Gati Shakti via a multimodal approach
Concessional corporate tax rate of 15% would be available for 1 more year till March 2024 for newly incorporated manufacturing companies

Steps on Digital Currency

Launch of blockchain-based digital rupee starting 2022-23
Launch of scheme for taxation of virtual digital assets
Income from virtual digital assets to be taxed at 30%

Housing & Urban Planning

Rs 48, 000 crore allocated for PM Awas Yojana
Proposal to reduce Minimum Alternative Tax to 15% for co-op societies, at par with corporate
5 existing academic institutions for urban planning to be designated as Centre for Excellence with endowment fund of Rs 250 crore
In 2022-23, 80 lakh houses will be completed for identified beneficiaries of PM Awas Yojana; 60,000 houses will be identified as beneficiaries for PM Awas Yojana in rural & urban areas

MSMEs & Startups

Rs 6,000 crore programme to rate MSMEs to be rolled out over 5 years
MSMEs such as Udyam, e-shram, NCS & Aseem portals will be inter-linked, their scope will be widened
PE/VC invested Rs 5.5 lakh crore in startups, expert committee will be set up to suggest measures to help attract investment
Existing tax benefits for startups, which were offered redemption of taxes for 3 consecutive years, to be extended by 1 more year

Finance & Inclusion

Rs 1 lakh crore financial assistance to states to be provided in 2022-23 to catalyse investments
Proposed to introduce Digital Rupee by RBI using blockchain technology, starting2022-23
Digital Rupee to be rolled out by 2023
The use of surety bonds as a substitute for bank guarantee will be made acceptable in government procurements

Ease of Business & Living

75,000 compliances have been eliminated and 1,486 union laws repealed to make it easier for businesses
India to launch the next phase of Ease of Doing Business EODB 2.0 and Ease of Living
Voluntary exit for corporates to be cut down to 6 months from 2 years
Special Economic Zones Act to be replaced with new legislation

Climate & Net Zero

Funds will be used for projects that will help reduce carbon intensity of the economy
Sovereign green bonds to be launched to fund green infra, to be part of government’s borrowing programme in FY23
4 pilot projects for coal gasification to be set up
Rs 19,500 cr additional allocation for PLI for manufacturing high efficiency solar modules has been made

Assisting the transition of India’s growth from India at 75 to India at 100, the budget has been built around four strategic pillars:

Inclusive Development

Increasing the use of technology in the agriculture sector to deliver high-tech services to farmers was a key focus of the budget. Increasing farmers’ digital presence from Kisan drones, the proposal also includes a fund facilitated through NABARD to provide a boost to agritech startups. Moreover, chemical-free farming will be promoted throughout the country with the initial focus on farmers’ lands in 5 km wide corridors across the Ganga.

Other initiatives include Har Ghar Nal Se Jal, where water supply will be provided for 3.8 crore households. Empowering citizens to skill, re-skill or upskill through online training, the Digital Ecosystem for Skilling and Livelihood (DESH-Stack e-portal) will be launched. To fund infrastructure and social development projects in the Northeast, a new scheme, PM -DevINE will be launched. Vibrant Village Programme will target the development of villages on the Northern Border.

Productivity Enhancement

Reinforcing the commitment to reducing imports and promoting AtmaNirbharta, 68% of capital for the defence sector is earmarked for domestic industry. 100% of 1.5 lakh post offices to come on the core of banking system and 75 Digital Banking Units will be set up in 75 districts under Scheduled Commercial Banks. For speedy winding-up of companies, a centre for Processing Accelerated Corporate Exit will be established. To realise the potential of the AVGC sector, a promotion task force will be created.

Deciding on mobilising capabilities in the sunrise sectors by contributing to R&D through supportive policies and light-touch regulations will guide the government’s approach in creating job opportunities and moving up the value chain.

Financing Investments

Choosing an investment-led growth strategy to ramp up capital expenditure, public investment will continue to take the lead and drive private investment and demand. World-class foreign universities and institutions will be allowed in GIFT City. For timely settlement of disputes under international jurisprudence, an International Arbitration Centre will be set up.

The introduction of the digital rupee by RBI will enable a more efficient and cheaper currency management system. Mobilising resources for green infrastructure, Sovereign Green Bonds will be issued.

A scheme for the taxation of virtual digital assets at the rate of 30% will also be introduced.

PM GatiShakti

Encompassing the seven engines, i.e., road, railways, airports, ports, mass transport, waterways, and logistics infrastructure, the PM GatiShakti National Master Plan is a transformative approach to boost economic growth and sustainable development.

The budget also proposed a new plan for expressways to facilitate faster movement of people and goods. Providing a push to infrastructure and logistics, Gati Shakti will enhance the competitiveness of Indian industry and create 60 lakh new jobs.

The One Station, One Product concept of the railways will help local businesses and supply chains. Showcasing India’s indigenous world-class technology and capacity, 2,000 km of the railway network will be brought under Kavach. And 400 new generation Vande Bharat trains to be manufactured during the next three years.

Impact on Financial Sectors

Source: https://www.5paisa.com/blog/union-budget-2022-and-the-sector-impact

Over the years we have seen rapid adoption of digital technology by people in their daily lives, driven by mobile penetration, internet availability, and low-cost data plans. Capitalising on this, the focus of the budget has been on digitalising finance and the finance sector as a whole.

Propelling the economy towards a high growth rate, with the expenditure of Rs. 39.45 lakh crore, particularly capital expenditure of Rs. 7.05 lakh crore is vital for the nation.

With the introduction of Digital Rupee, many uses, such as programmable payments for subsidies and by financial institutions for quicker lending and payments are possible. It can also impact real-time cross border remittances with interoperability and increased usage.

India could become a true digital finance state if an ecosystem combination of Open Network for Digital Commerce, blockchain-enabled financial systems, Open Credit Enablement Network, and Digital Rupee along with the move towards green-transition is implemented.

The Way Forward

Tackling India’s current and future needs, the budget seeks to revive economic growth. With a focus on promoting digital, infrastructure, and inclusive development, the Union Budget 2022 will enhance productivity and attract private and foreign investment. With a growth-oriented approach, the budget is set to get India future-ready. To increase capital expenditure by 35%, it will adopt efficient tools by mobilising private capital, increasing the use of digital technology, and supporting climate-sensitive development to achieve this growth. The key to success will be the effective implementation of the budget.

Sources

https://pragativadi.com/union-budget-2022-23-is-a-direction-for-making-indias-future-ready-piyu sh-goyal/

https://www.timesnownews.com/business-economy/budget-2022-inclusive-development-to-benefit-farmers-article-89276881

https://indianexpress.com/article/explained/union-budget-2022-explained-nirmala-sitharaman-live-updates-7750628/

https://www.thehindu.com/business/budget/a-growth-oriented-pragmatic-budget-2022/article38361216.ece

https://economictimes.indiatimes.com/news/economy/policy/union-budget-2022-speech-highlights-will-sitharaman-live-up-to-indias-expectations/articleshow/89261195.cms