DECODING UNION BUDGET 2022-23

Empty Promises or Solid Deliverables ?

Union Finance Minister Nirmala Sitharaman on February 1 presented the Union Budget 2022-23, her 4th Budget, which pegged the government’s fiscal deficit for the financial year at 6.4% of gross domestic product. This budget has been named as ‘AMRIT KAAL’ whose goals are : focus on growth and all inclusive welfare, Promoting technology enabled development, energy transition and climate action, virtuous cycle starting from private investment, crowded in by public capital investment. There are four priorties i.e. Inclusive Development, PM GatiShakti, Financing of Investments, Productivity Enhancement and Investment, Sunrise Opportunities, Energy Transition and Climate Action. Let’s dig deeper to figure out whether the Budget poses empty promises or solid deliverables.

                                                    Pegged as growth-oriented, the Union Budget 2022-23 injected Dalal Street with enthusiasm, and stock market trading ended on a high note after the tabling of the budget. The promise of increasing capital expenditure by 35 percent was the defining feature of the budget. Recovery from the pandemic demanded a strong commitment to growth, and the budget appears to have made that commitment. The other key highlight of the budget, inter-alia, was an accentuated emphasis on digitisation and ease of doing business. The budget has also refrained from providing direct tax concessions, which could boost consumption. Given the prevalence of stagflation in the Indian economy, the budget could have taxed the wealthiest while providing some relief to the middle class. The budget has not done so.

                                                     There was not even a mention of privatisation or asset monetisation in Sitharaman's budget speech this time. Any income from the transfer of any virtual digital asset shall be taxed at the rate of 30 per cent. While the budget claims that India has realised the dream of ‘one market-one tax’, this is far from the reality. The nation continues to rely significantly on Union excise duties and service tax as well, apart from the goods and services tax (GST). In the current budget, while GST accounts for 59 percent of indirect taxes, Union excise duties and service tax account for a sizeable 25 percent. The proposals for the development of the agricultural sector have been technology-centric rather than focusing on sustainable agricultural systems and practices, which are generally based on cost-effective natural solutions and the principles of circular economy, and do not demand too much reliance on technology.

                                                        The Budget speech addressed not just the need to sustain megacities, but also boost development of Tier 2 and 3 cities. It also mentioned that urban planning support will be extended to states. While this may seem like a significant thrust is being placed on urban development, the actual allocations do not substantiate this promise. The budget has also refrained from providing direct tax concessions. The government appears willing to be a part of the global digital transition. Initiative to increase the use of digital technologies in key sectors like education, health, logistics, and agriculture is a good omen. Infrastructure status to data centres is a step in the right direction. The initiatives like digital education platforms, health registry, and documents registry could potentially bring a meaningful difference to many lives. India may be running 10-12 years behind in adopting digital as a way of life and governance, but hopefully no more delays will happen and the proposals will be implemented quickly. Recognition of the animation, visual effects, gaming, and comic (AVGC) sector as a high potential employment opportunity for youth; introduction of digital currency; and recognition of virtual digital assets (VDAs) like cryptocurrencies and NFTs as legitimate assets, demonstrate the change in bureaucratic mindset.

                                                            2023 has been announced as the International Year of Millets. Support will be provided for post-harvest value addition, enhancing domestic consumption, and branding millet products nationally and internationally. Recognition of mental health as one of the top priorities. Need for a paradigm shift in urban planning process recognised. Transparency and promptness in government payments to contractors and suppliers. Required spectrum auctions to be conducted in 2022 to facilitate rollout of 5G mobile services within 2022-23 by private telecom providers.

                                                           On the whole, Sitharaman's budget holds no big surprises. To a large extent, it does good by not doing bad. The markets have heaved a sigh of relief not only because of the step-up in capital outlays, but also because of the absence of any proposals on wealth or inheritance tax or grandiose new schemes. Now, the focus needs to shift to implementation of schemes that are already drawn out, such as production-linked incentives and the ambitious Gati Shakti digital platform. Bringing back growth is not just an economic necessity, but also a political imperative. It is important to do this in a manner that is fiscally sustainable, while bringing down general government debt to much below the existing 90 per cent of GDP. The finance minister may not have answered the wishes of many people. They can see it as a key negative takeaway of the budget.