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In an apparent bid to build as well as sustain the economic recovery seen in the post-pandemic era, the Union Finance Minister Nirmala Sitharaman on Tuesday announced an expansionary Budget that included a massive 35.4 per cent increase in government’s capital expenditure for 2022-23 at ₹7.5 lakh crore as against Budget estimate of ₹ 5.54 lakh crore in 2021-22.
The effective capital expenditure in 2022-23 is estimated to come in at ₹10.5 lakh crore. In another pro-growth move, even the current fiscal’s government capex spend have been revised to over ₹6 lakh crore.
Fiscal Deficit
Sitharaman used the occasion of her fourth Budget speech — which was the shortest but the most impact full so far at about 90 minutes —to highlight that the government is keen to “nurture growth” in the economy through public investments and help “crowd in” private investments, which are showing signs of pick up in the current year.
Her growth oriented Budget has also clearly focused on boosting economic growth over fiscal prudence and overshot the fiscal deficit at the revised level in 2021-22 to 6.9 per cent as against previously budgeted 6.8 per cent. For next fiscal, the fiscal deficit target has been pegged at 6.4 per cent even as Sitharaman noted that she was mindful of the medium term fiscal deficit target of 4.5 per cent for 2025-26 announced in last year Budget. This stance on fiscal deficit and promised capex spend increase clearly cheered the capital markets, with the benchmark indices up by 878 points (Sensex) and 237 points (nifty) till the disinvestment numbers became public.
Disinvestment
On disinvestment receipts, which has created some worry among market observers, the government has scaled down the revised estimated to ₹78,000 crore for the current fiscal as against ₹ 1.75 lakh crore at the Budget estimate level.
For 2022-23, the disinvestment receipts has been pegged at ₹ 65,000 crore. The nominal economic growth for 2022-23 has been pegged at 11 per cent at 258 lakh crore, Budget documents showed.
The latest Budget announcement comes in the backdrop of Covid-19 third wave impact amid rising inflation and increased unemployment and ahead of Assembly elections in five States including Uttar Pradesh and Punjab.
The expansionary nature of Budget can also be gauged by the fact that government will in 2022-23 go in for borrowing of ₹14.95 lakh crore, up from ₹12 lakh crore estimated for 2021-22.
MSMEs
To help micro, small and medium enterprises (MSMEs) — who are the backbone of the Indian economy— to cope with pandemic losses, Sitharaman also announced extension of the emergency credit line guarantee scheme (ECLGS) by one year to March 31, 2023 and the guarantee cover has been expanded by ₹50,000 crore to take the overall cover under the scheme to ₹5 lakh crore.
Sitharaman also announced that the credit guarantee trust for micro small enterprises (CGTMSE) will be revamped with required infusion of funds.
Income tax
Besides continuation of its policy to encourage public investments, the Budget has kept the tax slabs unchanged. The slew of measures announced in the latest Budget include steps to encourage the start-ups ecosystem, usage of electric vehicles, and 5G spectrum auction in 2022-23.
On digital currency and digital assets, Sitharaman also announced that the Reserve Bank of India (RBI) will in 2022 issue “digital rupee” as central bank digital currency (CBDC). She also announced a specific taxation regime for transfer of any virtual digital asset at 30 per cent.
On exports, Sitharaman said that a new modern Special Economic Zone ( SEZ) law will be enacted and customs administration of such zones with be improved through technology and IT adoption.
Ease of doing business
Sitharaman also said that government will undertake ‘Ease of Doing Biz 2.0’ and take steps to accelerate the pace of exits for businesses.
Also, the insolvency and bankruptcy code ( IBC) will be amended to enhance the efficiency of resolutions and also introduce a comprehensive framework for cross border insolvency.
Budget lays the blueprint from India at 75 to India at 100. It gives blueprint of economy over ‘Amrit kaal’ of next 25 years — from India at 75 to India at 100 years.
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