Focus on accelerating growth with stability
- In the circumstances, the budget is heading in the right direction, but its economic impact will be determined by how well it is implemented.
- With international commodity prices, particularly crude oil prices, rising and advanced countries draining liquidity and hiking interest rates, monetary policy has limited impact, and fiscal policy must do the heavy lifting to accelerate development.
- In this setting, the attention shifted to the Budget in order to solve the goal of increasing growth and creating new job prospects, with fiscal austerity taking a back seat.
Accelerate growth, create jobs
- At 2.9% of GDP, the budgeted capital expenditure for 2022-23 is higher than the revised estimate for the previous year by 24.5% even as the overall growth of expenditure is just 4.6%.
- Majorly devoted for developing multi-modal transportation networks.
- In addition, about ₹60,000 crore has been budgeted for providing tap water for 3.8 crore households and another ₹48,000 crore for affordable housing.
- Capital Expenditure: The increase in capital expenditure is to be accomplished even as the fiscal deficit is budgeted to be reduced to 6.4% in 2022-23 from 6.9% in the current year.
- Total revenue receipts: Estimated to increase by just 6% over the revised estimate and this is partly due to the high base figures as the revised estimate for 2021-22 is higher than the Budget estimate by 16.4%.
- Non-tax revenues: A sharp decline of 14% is budgeted mainly due to lower estimates of dividends from public sector enterprises and the Reserve Bank of India.
- Disinvestment proceeds: Against the budgeted ₹1.75 lakh crore in 2021-22, the revised estimate is placed at ₹78,000 crore and for the next year, it is budgeted at ₹65,000 crore.
- Digital currency: The most notable measure is the decision to levy tax on transactions in virtual digital assets in the hands of the recipient with 1% deducted at the source.
- Personal income tax: Remained Same
- Long term capital gain: There is a proposal to levy surcharge on long-terms capital gains uniformly at 15% for all types of capital assets.
- Introduction of a number of measures to reduce compliance burden, encourage voluntary compliance, reduce litigation, and improve the ease of doing business.
Role of Production Linked Incentives
- PLI seems to be helping some of the newer industries and is helpful in increasing exports, it is necessary to erect a competitive wall rather than relying on scaffolding through incentives.
- On the expenditure side PLI schemes for 14 sectors are expected to improve the competitiveness of Micro, Small and Medium Enterprises (MSMEs), help in increasing exports and create 60 lakh new jobs.
- There are proposals to spend ₹2.37 lakh crore direct payment of MSP value to farmers’ accounts as well as ₹1,400 crore in 2022-23 on the Ken-Betwa river-linking project.
- Creation of 100 new cargo terminals in the next three years, and during the year, build 25,000 km of highways.
- By and large, the Budget is in the desired direction in the given circumstances.
- However, it must be noted that despite the hype regarding the Union Budget, almost 60% of the actual spending is at the State level.
- Besides, the impact of the Budget on the economy will depend on the efficiency with which the various proposals are implemented.