Budget 2022

What Smt Nirmala Sitharaman had in her bahi-khata is no mystery now. She unveiled the pro-growth and development-oriented Union Budget 2022-23 which is supposed to underline the foundation of the economy for the coming 25 years. Despite the hit that the economy has taken in the past few years due the reoccurring waves of coronavirus, surging rates of inflation, and disruptions in supply chain, the expected growth rate for the Indian Economy is 9.27% in the FY22. This implies that the economy is starting to circle back to pre-pandemic levels.

With the objective of boosting macro-economic growth while keeping in mind the micro-economic welfare, the Union Budget 2022-23 has four key pillars:

•           Inclusive Development

•           Productivity Enhancement

•           Financing Investments

•           PM GatiShakti

Budget Highlights

Top Economic Indicators

Economic IndicatorsAnalysis
Growth estimates9.2 % growth in GDP in FY228−8.5 % GDP growth for FY23 projected
DeficitThe Fiscal Deficit is estimated to be 6.9% of GDP in current year.In 2022-23 it is estimated at 6.4% of GDP
Capital expenditureIncrease in capital expenditure by 35.4 %: From Rs 5.54 lakh crore in the current year to Rs 7.50 lakh crore in 2022-23
Repo rateRepo rate remains at 4% with RBI still following an accommodative monetary policy
InflationCPI of 5.2% 2021, as result of mainly high fuel prices and food inflation

Sector Announcements

Infrastructure●   PM Gati Shakti National Master Plan (₹20,000 crore)
●   Incentives for 5G technology
●   To award contracts to lay optical fibre in rural areas by 2025
●   To allocate additional 195 billion rupees for production-linked incentives towards solar equipment manufacturing
Education●   Digital University will be established along One Class, One TV channel to have 200 TV Channels to provide supplementary education in all regional languages
Health●   National Digital Health Ecosystem to be rolled out
●   National Tele Mental Health program to be set up to focus on mental health
Agriculture●    Domestic scheme introduced to reduce dependence on oilseed imports
●    NABARD to facilitate funds with blended capital to finance startups for agriculture & rural enterprise.
●    Chemical-free, natural farming to be promoted across the country.
●    2022 to be Year of Millet – support for post-harvest value addition for millet products
●    Using Kisan drones for crop assessment and spraying of pesticides
Defense●   Budget 2022-23 would give a push to self-reliance in defence production as part of the Atma Nirbhar Bharat initiative.
●   The 68 per cent capital procurement budget in the sector was earmarked for domestic procurement
Finance●   Long term capital gain surcharge to be capped at 15%
●   Public issue of Life Insurance Corporation expected shortly
Railways●   As part of the PM Gatishakti Masterplan, 2,000 kilometres of railway network will be brought under Kavach
●   Also, 400 new-generation Vande Bharat Trains with better energy efficiency and passenger riding experience will be developed and manufactured during the next three years
MSMEs●   Raising and Accelerating MSME Performance (RAMP) programme will be rolled out with a Rs 6,000 crore outlay spread over 5 years for MSMEs

Tax Policy Highlights

Income tax●   No change to corporate or personal income tax rates
Revised Income Tax return policy●   Taxpayers now have a two-year window to correct errors and file a revised income tax return for the relevant assessment year
Cess●   Retrospective amendment to deny the deduction of any surcharge or cess paid on income and profits
Virtual Digital Assets●   Gains taxed at 30 percentTax deduction at source (TDS) at 1 percent introduced

The Hits

On the outside, it seems that the government keeps out rolling hundreds of schemes each year in order to achieve the same proposed targets. However, a closer look at the budget clearly makes the frugality of the government stand out. The previous schemes and policies are being merged or limited as new policies come into picture. The much talked about pillar, PM Gati Shakti is nothing but an amalgamation of the schemes like PM Awas Yojana.

It is commendable that the budget this year reflects the efforts of the government to reduce the dependency on off-balance sheet items. The following is a way to support revenues. Moreover, the usage of disinvestment proceeds to hike revenues and show a highly optimistic deficit figure have been reduced. Notwithstanding the ensuing public offer of LIC, the disinvestment budgeted receipt from government is only of Rs. 78k crores as compared to the estimate of Rs. 1.75 lakh crores and projected estimate of Rs. 65k crore.

The investors and businesses working with digital assets, especially the crypto currency web cheered the announcement of taxing any income from transfer of any virtual digital assets at the rate of 30%. Although the exorbitant tax rate does extinguish some cheers, many see it as a step to eventually legitimize the digital asset classes.

The Misses

While the budget aims to boost economic growth by being in line with promoting domestic production and public welfare, it does so in a very conventional way. If looked at closely, one can identify the lack of ideation on the front of growth invigoration. With the economy still requiring the much needed push to recover from the previous year’s economic contraction and being at the risk of being stuck in the middle-income trap, the budget seems to ignore the factor of consumer spending. The abatement in consumer spending is a result of deterioration of real incomes and savings in the hands of a typical consumer through tax breaks and cash hand-outs. It should be acknowledged that public capital expenditure is a major factor in crowding-in private investment. Therefore, particularly at the time when private investments need to gain momentum to pump the demand in the economy, the budget has an increased allocation of 24.4% in capital accounts (Rs 7.5 lakh-crore as compared to Rs 6.03 lakh-crore estimated this year).

One of the pillars of the budget, PM Gati Shakti, aims at enabling economic growth and sustainable development through transformation powered by the engines of roads, airports, railways, ports, mass transport, waterways, and logistics infrastructure. However, much of the transformative power of such a programme is highly dependent on its execution.  The budget does not provide the details on every one of the seven engines of the road and only mentions a few figures for railways and roads.

Some of the important sectors of the economy such as health care, rural development, along with employment guarantee schemes have seen a shrink in their allocated budget outlay as they have been limited to a percentage of current fiscal year’s estimates. One possible explanation of such an allocation is the government’s desire to reduce the fiscal deficit to 6.4% of the GDP from that of 6.9%. The government wants to tread on a fiscal consolidation route and it is no surprise that some sectors will have to bear the impact of the same. In a common sensible way, government expenditure of health care should have increased to expand the public health infrastructure, but it is not the case.

In order to be highly reflective of Modi’s Atma Nirbhar mission, the budget aims to increase domestic manufacturing by employment of certain tariff and policy changes. One such change to phase out imports, which is imposition of 7.5% tariff rate, can hurt the much required infrastructure projects, including the setting up of capacity for manufacturing.

While the budget claims to address various problems pertaining in the economy, there are certain contentions about the size and allocation of the budget to do away with these problems. It must be noted that effectiveness of the budget only lies in its effective implementation and the kind of impact it brings about.


Aishwarya | Ayush | Bhavya | Jayati | Shivika | Varshita

Apoorva | Jeevan | Priyank | Rajdeep | Sakshi | Shelly | Varnika

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