Capital Expenditure Hike, Boost For Infra And Other Highlights

While presenting the budget for the fourth straight time, Finance Minister Nirmala Sitharaman said that the country is expected to grow at 9.27 per cent in the coming year

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The much awaited ‘economy booster dose’ Union Budget 2022 was presented by Finance Minister Nirmala Sitharaman today in the Parliament. While presenting the budget for the fourth straight time, Sitharaman said that the country is expected to grow at 9.27 per cent in the coming year. She also added that the budget seeks to lay foundation and give blueprint of economy over ‘Amrit Kal’ of next 25 years - from India at 75 to India at 100. 

The budget, which was delivered usig a 'Made in India' tablet, comes at an important time for the public because of the upcoming elections in five states and the omicron wave. Here are the key takeaways of India's second paperless budget. 

Outlay for Capex Increased

The budget estimates the effective capital expenditure of the Central government at INR 10.68 lakh crore in 2022-23, making up about 4.1 per cent of the GDP. The outlay for capex expenditure has been increased by 35.4 per cent from INR 5.54 lakh crore to INR 7.50 lakh crore in 2022-23 to fund various infrastructure projects. “The capital expenditure for FY23 will be 2.9 per cent of the GDP,” Sitharaman said in her speech.

Further, the gross GST collections for the month of January 2022 are INR 1,40,986 crore, the highest since the inception of the tax in 2017, the Finance Minister said. 

Reacting on the announcement, YS Chakravarti, MD and CEO, Shriram City said, “The Union Budget 2022 is a CAPEX-driven budget with a slew of measures across sectors, leaving no stone unturned. Given the challenging circumstances, it’s a bold budget, a growth-oriented budget that will result in a multiplier effect and benefits to all."

 

Fiscal Deficit at 6.4% of GDP for FY23

The Finance Minister pegged the government’s fiscal deficit for the financial year 2022-23 at 6.4 per cent of the GDP. The Union government’s fiscal deficit was down 35.3 percent year-on-year at INR 6.96 lakh crore between April-November 2021 period. This accounted  for 46.2 per cent of the budget estimate for the current financial year.

The fiscal deficit for the full year was pegged at INR 15.07 lakh crore, or 6.8 percent of GDP, which has been revised to 6.9 per cent.

Surcharge On Cooperatives Reduced, No Changes in Personal Tax Structure

The Finance Minister announced that the corporate surcharge will be reduced from 12 per cent to 7 percent. Further, there will be no change in the personal tax structure. Additionally,  long-term capital gains on listed equity share units are subject to a maximum surcharge of 15 per cent. The budget also proposed to increase the tax deduction limit to 14 per cent on employers contribution to NPS account of state govt employees. 

“The road to tax parity between listed and unlisted securities has seen a great leap forward, with the surcharge between listed and unlisted securities being bought on par at 15 per cent, as opposed to the 37 per cent that used to apply on unlisted securities. This will keep the effective long term capital gains rate at 23.92 per cent as opposed to 28.5 per cent previously,” said Siddarth Pai, founding partner, 3one4 capital and co-chair regulatory affairs committee, IVCA.

“One of the key highlights of this Union Budget is the consideration to extend the redemption of existing tax incentives for startups, until March 31, 2023. This will benefit the overall startup ecosystem in the country post this pandemic wave," said Srikanth Iyer, CEO and co-founder, HomeLane.

Crypto Tax and Digital Rupee

Sitharaman announced that digital currency will be issued by the Reserve Bank of India (RBI) in 2022-23. The digital rupee or central bank digital currency will be introduced using blockchain, said the minister, while adding that it will give a big boost to the economy. Simultaneously, Sitharaman also announced a 30 per cent tax on the proceeds of virtual or digital assets. “Income from transfer of digital assets to be taxed at 30 per cent,” she said. A TDS of 1 per cent will be levied for transactions above a certain threshold. Further, recipients will be taxed in case of a gift of virtual digital assets. 

Welcoming the government’s decision, Ashish Singhal, founder and CEO, CoinSwitch and co-chair Blockchain and Crypto Assets Council (BACC), said, “The regulatory guidance on tax from the government furthers the mainstreaming excitement of this emerging asset class with over $6bn worth of investments in India. It is also the gateway to the future decentralized world, aka Web3.0. Today’s digital-savvy Indians are willing to experiment with this emerging asset class. The budget provides clarity on taxation and shows the government’s intent to take a business-friendly approach while protecting the interest of consumers and the exchequer.”

Gati Shakti Gets First Fund Allocation 

The INR 100-lakh-crore project for building holistic infrastructure in India, received its first-ever outlay of INR 20,000 crore for the FY 2022-23. "PM Gati Shakti will encompass the seven engines for multi-modal connectivity for the states with speedier implementation of development projects through technology to facilitate faster movement of people and goods through INR 20,000 crore financed by the government to speed up this project,” said the Finance Minister.

"PM Gati Shakti is a transformative approach, driven by roads, railways, ports, airports, mass transport, waterways and logistics infrastructure. All seven engines will pull the economy forward in unison. The project will expand the national highway network by "25,000 km in 2022-23,” Sitharam further noted. 

"I think it's a great budget in terms of the infra & the capital goods push so every startup that is probably serving these industries will get a leg up,” said Yagnesh Sanghrajka, founder and CFO, 100X.VC. 

Additionally, 2,000 km of rail network will be brought under the indigenous world-class technology KAWACH, for safety and capacity augmentation. Further, 400 new generation Vande Bharat trains with better efficiency will be brought in during the next 3 years and 100 PM Gati Shakti Cargo terminals will be developed during the next 3 years.

Boost for Manufacturing of Solar Modules 

Sitharaman also announced to allocate INR 19,500 crore to boost manufacturing of solar modules under the government’s flagship Production Linked Incentive scheme, while mentioning that the scheme has the potential to create 60 lakh new jobs and additional production of 30 lakh crore jobs during the next five years. “To facilitate domestic manufacturing for the ambitious goal of 280 GW of installed solar capacity by 2030, an additional allocation of INR 19,500 cr for PLI for manufacturing of high-efficiency modules with priority to fully integrate manufacturing units to solar PV modules will be made,” said FM.

Commenting on the same, HomeLane's Iyer said, "The PLI scheme is highly relevant especially for the real estate and organized home interiors sector, who are dependent on other countries as the overall costs are still much higher for manufacturing in India, given the continued global crisis in the supply chain. I am confident that this will enable to further boost the organized home interiors sector in India and ensure increased dependency on the manufacturing requirements domestically.”

Agri Funding, Natural Farming and Kisan Drones

Chemical-free natural farming will be promoted throughout the country with a focus on farmers' land in 5 km wide corridors along the river Ganga, in the first stage, said FM, while adding that procurement of wheat in Rabi season 2021-22 and the estimated procurement of paddy in Kharif season 2021-22 will give cover 1208 lakh metric tonnes of wheat & paddy from 163 lakh farmers and INR 2.37 lakh crores will be the direct payment of MSP value to their accounts. 

The FM also announced that a fund with blended capital raised under co-investment model will be facilitated through the NABARD to finance agritech startups. Additionally, the use of ‘kisan drones’ will be promoted for crop assessment, digitization of land records and spraying of insecticides and nutrients. 

Push To Aid MSME  

The government announced that MSMEs such as Udyam, e-shram, NCS and Aseem portals will be inter-linked and their scope will be widened. Further, the Emergency Credit Line Guarantee Scheme (ECLGS) will be extended up to March 2023, with a guaranteed cover extended by another INR 50,000 Cr and the total cover under the scheme will now be INR 5 lakh Cr.  The ECLGS was released as part of the INR 20 lakh crore package announced by the Finance Ministry in 2020 to aid MSMEs in the pandemic 

DESL Stack Portal and Digital university

The Finance Minister proposed to set up a digital university to provide education that will be built on a hub and spoke model. This comes as part of the digital blueprints designed in the National Education Policy. Further, she also proposed to align the National Skill Qualification Framework with industry needs. 

“A digital ecosystem for skilling & livelihood (DESL) portal will be launched,” she said, adding, “The e-stack will be launched to empower citizens to skill, reskill, upskill through online training. It will also provide API-based trusted skill credentials, payment and discovery layers to find relevant jobs and entrepreneurial opportunities.”

She also said that the ‘One Class, One TV Channel’ programme of PM e-vidya will be expanded from 12 to 200 TV channels which will enable all states to provide supplementary education in regional languages for K12 sections.

Tele Mental Health Programme

To improve the access to quality mental health counseling and care services, a National Tele Mental Health program will be launched. However, there was no clarity on the healthcare allocation, feel experts. “It is understood that the government has been spending heavily on healthcare services and the vaccination drive in the wake of the pandemic. However, there is an urgent and humongous need for investment in the country’s healthcare infrastructure, and towards chronic disease management and elderly healthcare. These areas haven’t been mentioned in the budget,” said Meena Ganesh, MD and Chairperson, Portea Medical, a home healthcare brand.

Push for Adoption of Digital Banking

The FM announced that 100 per cent of post office banks will come under the core banking umbrella in 2022. “All 1.5 lakh post offices in India will be connected to the core banking system that will enable people to access their account online and also transfer money within post office accounts and to other banks,” she said. 

She further said that to mark 75 years of India’s independence, 75 digital banking units in distinct districts will be set up by scheduled commercial banks. Moreover, the allocation announced last year to boost digital payments will continue in 2022-23 as well

Besides the above, the other takeaways include:

  • The initial public offering of Life Insurance Corporation of India is expected shortly. 
  • 68 per cent of the capital procurement budget for Defence to be earmarked for domestic industry to promote Aatmanirbharta and reduce dependence on imports of defence equipment. This is up from 58 per cent last fiscal.
  • 5G spectrum auction to be conducted in 2022.
  • Customs duty on cut and polished diamonds, gems to be reduced to 5 per cent, duty on umbrellas raised to 20 per cent and customs duty exemption to steel scrap will be extended.
  • A battery swapping policy will be brought out and interoperability standards will be formulated to set up charging stations at scale