Can the Union Budget 2022 give the Indian economy the shot in the arm that it needs?
India is on the heels of recovering from the Omicron variant, and the Union Budget is perhaps the booster shot that the country needs for an economic revival. Today, saw a myriad of emotions from all quarters as the Finance Minister Nirmala Sitharaman presented the Union Budget for 2022 which projects economic growth at 9.27% in the coming year. The budget has focused on digital inclusion, productivity enhancement, energy transition and climate action. According to Sitharaman, the Budget gives an ‘amrit kaal’ roadmap of the economy for the next 25 years from India@ 75 to India@100.
India Inc lauded the budget as progressive and needed to resuscitate the economy. Some reacted to the budget via Twitter as Anand Mahindra felt it was the ‘most impactful’ budget, while Kiran Mazumdar-Shaw called it a ‘balanced budget.’ Several quarters have welcomed the tax regime on cryptocurrency, as head-honchos at tech-based firms feel that this is a thrust to enabling a robust digital infrastructure. Many supported the initiatives in the EV (Electric Vehicle) market as a key to addressing e-mobility and supply chain issues. Let’s take look at some key features of this year’s budget:
Industry players receive Gati Shakti and PPP plans with a smile: The budget’s key highlight has been the targeted infrastructure capital expenditure of Rs. 7.5 lakh crore which sets the course for economic growth, and forms 2.9% of the GDP. Major impetus for crowding in private investment and driving employment. It is 35.4% more than last year’s Rs. 5.5 lakh crore capex.
Letting go of the Air India baggage: India’s largest disinvestment of Air India has led the government to retire the airline’s debt that it transferred to the Special Purpose Vehicle (SPV). It has allocated an additional Rs 51,971 crore towards meeting the outstanding guaranteed liabilities of Air India and its other sundry commitments.
Tax tweak will ease VC investors and startups woes: Venture capital investors and new-age companies will see a relief from the 15% cap on tax surcharge. Now, unlisted firms will be taxed at par with the listed ones, ie., the surcharge on unlisted share sales.
New cryptocurrency law and digital rupee: The Government has taken a conservative stand on taxation of crypto assets by announcing flat 30% on income from such income. [box type=”info” align=”” class=”” width=””]Blockchain-based Central Bank Digital Currency (CBDC) to be introduced from FY 2022-2023. As an initiative to cheaper currency management, the strategic implementation of this currency will be introduced in a phased manner by 2023.[/box]The aim of the RBI is to reduce dependency on cash, reduce costs incurred in transactions and reduced risk in settlements. In transactions, every transaction will be subjected to TDS deduction at 1% at source.
5G Spectrum auctions and 27% expected fall in revenue from telecom in FY23: Private telecoms will benefit from the roll-out of 5G mobile services. Major cities such as Mumbai, Delhi, Chennai, Kolkata, Bengaluru, Hyderabad, and Ahmedabad will gain from this. At Rs 52,806.36 crore in FY23 versus the more-than-expected Rs 71,959.24 crore it earned in the current fiscal year to March 31; the government expects a 27% fall in revenue in FY 23.
Major booster for Hospitality: A decision to extend the ECGL service by March 2023 with an increased cover of Rs 50,000 crore to Rs. 5 lakh crore. The government had launched the Emergency Credit Line Guarantee Scheme (ECGLS) in May 2020, as part of its Rs 20 lakh crore comprehensive package has been announced.
Enabling a Sunrise economy: Rs 19,500 crore for PLI for manufacturing high-efficiency modules with a priority to fully integrate manufacturing units from polysilicon to solar PV modules will be made, the FM said. The government intends to achieve 280 GW of installed capacity of solar energy by 2030. More thrust has been given for green bonds that mobilise resources for enabling a green infrastructure.
Fostering greater urban development and enabling efficiency in the EV market: Plans are on-the-cards to setup a high-level committee of economists, planners and institutions to provide recommendations on urban sector policies, capacity building, planning, implementation and governance. The govt. intends to foster greater urban transport by reducing dependability battery-led energy storage and deploy a conducive battery-swapping policy for the EV market. This will also help overcome global supply chain and geopolitical issues.
Major booster for Hospitality: A decision to extend the ECGL service by March 2023 with an increased cover of Rs 50,000 crore to Rs. 5 lakh crore. The government had launched the Emergency Credit Line Guarantee Scheme (ECGLS) in May 2020, as part of its Rs 20 lakh crore comprehensive package announced.
Key Indirect Tax Changes to make states more active stakeholders in development: Reductions in custom duty on petroleum oil, jet fuel may perhaps boost the ease of doing business within the economy. This will promote domestic manufacturing and address some of the key issues faced by core sectors.
Creating a level-playing field in gas transmission: By setting up an independent gas transmission operator, it will facilitate, coordinate the booking of common carrier capacity in all natural gas pipelines, which will be done on a non-discriminatory open-access basis.
[author title=”” image=”http://”] By Anupama Sughosh[/author]
