The government focuses on developing infrastructure, increasing capital expenditure, and boosting the digital and start-up ecosystem, electric vehicles and renewable energy.
On the 1st of February 2022, the Union Finance Minister Nirmala Sitharaman presented a growth-oriented budget in Parliament. The budget shows a modest fiscal consolidation.
The other focus of the budget was infrastructural development done through the PM Gati Shakti scheme.
There is also an increase in outlay on capital expenditure by around 36% to ₹7.50 lakh crores. It also boosts the digital ecosystem, support for start-up ecosystems, renewable energy, electric vehicles and similar new age trends.
To mobilize green infrastructure, Sovereign Green Bonds will be issued, which will also be the market’s overall borrowings in 2022-23.
This will be issued, for government green projects with added focus on raising ESG ratings and also keeping up with the global green market.
The IPO for LIC will be released this year and Digital Rupee will be issued by the RBI starting 2022-23. The government will also focus on PSU disinvestment within the span of 1-2 years, with ₹65,000 crores being earmarked for this.
The revenue targets in the budget look credible, and in the light of economic recovery, there is a limited risk of a slippage next fiscal year. The budget is focused on modest fiscal consolidation with the FY22-23 fiscal deficit pegged at 6.4% of GDP.
The government also maintained its intention to meet the medium-term fiscal deficit consolidation glide path by expressing confidence in reducing the fiscal deficit to 4.5% of GDP by the end of FY25-26.
The tax revenues are expected to grow by 9.6% year-over-year.
The total expenditure is projected to increase by 4.6% year-over-year, with capital expenditure being the key priority.
In all, the budget is aimed for national development for 25 years, when India celebrates its 100 years of independence.
The means to reach this target is through infrastructural development, which the government is trying to achieve through the PM Gati Shakti scheme.
The scheme highlights the importance of quality multi-modal transport in achieving overall cost competitiveness. Even the global studies peg India’s average logistics costs at around 14% of GDP against 8-9% for advanced economies.
Thus, development on a similar scale is necessary to attract investors and for development. Another area of focus is the Social Stock Exchange.
For that, there is an increase in outlay on capital expenditure by around 36% to ₹ 7.50 lakh crore, with an increase in infra spends in PPP mode, steps for urban capacity building, thrust on the digital ecosystem, support for start-up ecosystem, sustainable development.
The budget has a good balancing act between fiscal consolidation and growth prioritization.
The other positive announcements are the extension of ECLGS by a year to March 2023 and an increase in outlay by ₹50,000 crores. This will help the MSME sectors and the hospitality sector.
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