Finance Minister Nirmala Sitharaman presented the Union Budget for the year 2022-23. Considering elections in key states like UP etc, it is surprising that the budget did not resort to populist announcements.
The budget unveiled a long-term focus on the economy. The FM in her speech referred to the Amrit Kaal (that is, in 25 years India will complete 100 years of independence).
[You may also read: What is Union Budget? How is it prepared?]
The Budget mentioned goals to help attain the vision for India@100:
- Inclusive growth
- Promoting technology-enabled development, energy transition and climate action
- Public sector investment to crowd-in private investment.
- The key highlights of the budget announcements are:
Capital Expenditure
The biggest takeaway from the budget is that Capital expenditure has been increased sharply by 35.4 %. This is done to revive or ‘crowd-in’ private investment which in turn will support growth.
[The Government will spend money on making capital assets (long-term assets) like roads, bridges, etc. It will create jobs and revive demand in the economy. It will also boost industries like cement, steel, etc which provides input.]
Revenue growth in the current year provided the Government with the fiscal space required to increase CAPEX.
[ India’s growth has been slowing since 2017-18. In 2019-20, the growth rate was 3.7 % and then COVID hit and worsened the situation.
Growth has revived. It is estimated to be 9.2 % in the current year (highest among all large economies), and 8 to 8.5 % in 2022-23, but the recovery is K-shaped.
K-shaped recovery is when one part of the economy which is affluent recovers, but the poorer sections lag behind. This K-shaped recovery has widened inequality in India. The income of the poorest 20 % of India’s households plunged 53 % in 2020-21 while the richest 20 % has increased by 30 %.
Private Final Consumption Expenditure (consumer demand) is below pre-pandemic levels. Private investment is also weak. This is where Capital Expenditure (CAPEX) comes in
It is to be seen if the increase in CAPEX helps in inclusive growth for all sections of the society as building capital assets takes time (has a long gestation period]
Infrastructure
The Government aims for faster movement of people and goods through the PM Gati Shakti National Master Plan. It will focus on roads, railways, mass transport, seamless multi-modal connectivity, and logistics. It will subsume other infrastructure schemes like Bharatmala, Sagarmala, etc.
- The National Highways network will be expanded by 25,000 km in 2022-23.
- 400 energy efficient Vande Bharat manufactured in next 3 years.
- 8 ropeway projects in hilly areas.
Other schemes
- Nal se Jal scheme- Rs.60000 crore has been allocated to provide piped drinking water to 38 million households
- PM housing scheme – Rs.48000 crore has been allocated to provide affordable housing to 8 million households under PM Awas Yojana
- Ujjwala scheme (for gas cylinders) extended to 1 crore more households
Emergency Credit line Guarantee
ECLG scheme was extended till March 2023 to alleviate the distress in the MSMES sector and help them in availing credit.
Additional guarantee of Rs.50000 to the hospitality sector which has been worst hit by the pandemic
Agriculture
- Chemical free natural farming or zero-budget natural farming will be promoted.
- Use of ‘Kisan Drones’ will be promoted for crop assessment, digitization of land records, spraying of insecticides, and nutrients.
- States will be encouraged to revise syllabi of agricultural universities to meet the needs of natural, zero-budget, and organic farming, modern-dayagriculture, value addition, and management.
The Government had aimed to double farm income by 2022, but could not deliver. There is a need for more support to the agricultural sector.
Crypto
- Income on crypro assets tranfers to be taxed at 30 %. (No deduction allowed for computing income except acquisition cost.)
- Losses from tranfer of such assets cannot be set off against other income. Let’s say: you have made a loss of Rs.300 while selling Bitcoin and profit of Rs.500, while selling the shares of Zomato. You’ll not be allowed to set-off the loss of Rs.300 against the profit of Rs.500. )
- Crypto gifts will also be taxed
- TDS at 1 % on all payments using digita assets (crypto) to capture all transactions
- RBI will launch its own digital currency Central Bank Digital Currency (CBDC) backed by blockchain.
Effectively, the Government has legalized crypto by imposing taxes on its transfer
Taxation
- There has been no change in income tax slabs and tax rates
- High Custom duties on umbrellas, headphones, earphones, loudspeakers, smart meters and imitation jewelley to protect domestic industries
- Custom duties reduced on cut and polished diamond, asofoetida, cocoa beans, methyl alcohol
- Cess and surcharge will not be allowed to be claimed as a deduction. It means when you are computing your income to pay taxes, you’ll not be able to deduct cess and surcharge as expenses. It will be effective from 1st April 2005. [This is because education cess was brought in for the first time by the Finance Act, 2004].
- Amount received for medical treatment/ death owing to COVID 19 will be allowed as exemption. That is, you’ll not have to include this amount in your income to compute tax. This amount is exempt from taxation.
Energy transition
- Unveil a battery swapping policy and set standards for interoperability.This will help the EV sector
- Production-linked initiative (PLI) extended to cover high efficiency solar modules. This has been done to achieve the ambitious goal of achieving 280 GW of installed solar capacity by 2030.
- EV charges and battery storage will be given infrastructure status. This will help them in raising credit
- The Government will issue green bonds to mobilise resources for ‘green infrastructure’
Health
- National programe for mental health related probems which has exacerbated due to the pandemic imposed lockdowns.
- Upgrading anganwadis to focus on child health
Banking
- 75 digital banking units to be opened in 75 distrcits
- Digital integration of post offices with core banking system.
This will help in financial inclusion
Education
- e-Vidya will be launched to provide access to IT-based education.
- Digital university will also be launched
Lastly, the fiscal deficit is estimated at 6.9 % for 2021-22 and 6.4 % for 2022-23. The Government has targeted a deficit of 4.5 % of GDP by FY 26. The Budget has managed to walk the fine line between fiscal consolidation and providing support to the pandemic-battered economy.
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