Growth-oriented but fiscally prudent

The best thing about Budget 2022-23 is that Finance Minister Nirmala Sitharaman has succeeded in keeping the fiscal deficit in control, at 6.4 percent, for the next fiscal despite increasing capital expenditure sharply by 35.4 percent to Rs 7.5 lakh crore from Rs 5.54 lakh crore in the current fiscal. In the current fiscal, the deficit is estimated to be 6.9 percent.

The effective capital expenditure of the Central Government, however, is estimated at Rs 10.68 lakh crore in 2022-23, which is about 4.1 percent of GDP. For income taxpayers, however, there is no change in slabs, though there is minute relief by way of changes in surcharges.

“India’s economic growth in the current year is estimated to be 9.2 percent, highest among all large economies;’ she said in her Budget speech. For 2022-23, GDP expansion is forecast at 8-8.5 percent.

“The productivity-linked incentive in 14 sectors for achieving the vision of Atmanirbhar Bharat has received an excellent response, with potential to create 60 lakh new jobs, and an additional production of Rs 30 lakh crore during next 5 years:’ she said. A top priority is PM Gati Shakti, she said. It “is a transformative approach for economic growth and sustainable development. The approach is driven by seven engines, namely, Roads, Railways, airports, ports, mass transport, waterways, and logistics infrastructure. All seven engines will pull forward the economy in unison:•

The Government has accorded some sort of legitimacy to digital or cryptocurrencies like Bitcoin by imposing a flat tax of 30 percent on the income accrued from them. It may be recalled that the Reserve Bank of India had banned crypto-currencies, but the ban was invalidated by the Supreme Court. “Introduction of Central Bank Digital Currency (CBDC) will give a big boost to a digital economy. Digital currency will also lead to a more efficient and cheaper currency management system. It is, therefore, proposed to introduce Digital Rupee, using blockchain and other technologies, to be issued by the Reserve Bank of India starting 2022-23:’ the Finance Minister said.

The budget estimate of expenditure in 2021- 22 was Rs 34.83 lakh crore; the revised estimates were Rs 37.7 lakh crore. Total expenditure in 2022-23 is estimated at Rs 39.45 lakh crore, while total receipts other than borrowings in 2022-23 are estimated at Rs 22.84 lakh crore.

The Finance Minister wants to garner Rs 65,000 crore from selling PSUs in 2022-23. She said, “Towards implementation of the new public sector enterprise policy, the strategic transfer of ownership of Air India has been completed. The strategic partner for NINL (Neelanchal Ispat Nigam Limited) has been selected. The public issue of the LIC is expected shortly. Others too are in the process for 2022-23:’

The disinvestment target for 2020-21 was Rs 1.75 lakh crore, which has been revised downwards to Rs 78,000 crore. Sitharaman has imposed an additional excise on unblended fuel. “Blending of fuel is a priority of this Government. To encourage the efforts for blending of fuel, unblended fuel shall attract an additional differential excise duty of Rs 2/liter from the lstdayofOctober2022:’ she said.

She raised the duty on umbrellas to 20 percent. Exemption to parts of the umbrella is being withdrawn. The exemption is also being rationalized on implements and tools for the agri-sector which are manufactured in India. Customs duty exemption given to steel scrap last year is being extended for another year to provide relief to MSME secondary steel producers. Certain anti-dumping and countervailing duties on stainless steel and coated steel flat products, bars of alloy steel, and high-speed steel are being revoked in larger public interest considering prevailing high prices of metals.

To boost electronic manufacturing, customs duty rates are being calibrated to provide a graded rate structure to facilitate the domestic manufacturing of wearable devices, wearable devices, and electronic smart meters. Duty concessions are also being given to parts of the transformer of mobile phone chargers and camera lens of mobile camera module and certain other items. This will enable domestic manufacturing of high-growth items, the result of calibration is likely to be costlier electronic items.

To give a boost to the gems and jewelry sector, customs duty on cut and polished diamonds and gemstones is being reduced to 5 percent, she said. The Finance Minister has proposed to phase out the concessional rates in capital goods and project imports gradually and apply a moderate tariff of 7.5 percent. Certain exemptions for advanced machinery that are not manufactured within the country shall continue.

As much as 68 percent of the capital procurement budget has been earmarked for the domestic industry in 2022-23, up from 58 percent in 2021-22. Defense R&D has been opened up for industry, startups, and academia with 25 percent of the defense R&D budget earmarked for them.

“To establish a globally competitive business environment for certain domestic companies, a concessional tax regime of 15 percent tax was introduced by our Government for newly incorporated domestic manufacturing companies;’ the Finance Minister said. “I propose to extend the last date for commencement of manufacturing or production under section 1 ASVAB by one year i.e. from 31st March 2023, to 31st March 2024.” A major positive was that the Budget was not made with an eye on the forthcoming and subsequent state elections, whereas the dampener for the middle class was the absence of income tax relief.