Page 10 - Union Budget, 2022

Union Budget, 2022

ECONOMICs OF BUDGET, 2022

From an economic standpoint, there has been lot of announces and policy measures outside the Budget by this Government and the
pandemic also necessitated such a response. In this year’s Budget, the approach has been to reimagine India @ 100 “Azadi ka Amruth
Mahotsav” and it has laid out the blueprint for the “Amrut Kaal” of 25 years from the 75 Year of Independence to 100 Year of
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Independence, which stands on 3 pillars of – “Macro level economic growth and micro level welfare”, “Technology enabled growth
and climate action” and “Virtuous cycle of private – public – private investment”.
As spelt out in the budget speech, the imprints of previous budget in terms of continuity of policy measures is evident. The measures
continue to be more on the supply side and the Government is keen on the multiplier effect and the virtuous cycle of investment is
being pushed by the Government by increased spending on CAPEX through “PM Gati Shakti” which would run parallel to the
National Infrastructure Pipeline. PM Gati Shakti intends to transform the logistics landscape of India with multi modal approach.
Around 25,000 KMs and 2,000 KMs is expected to be added in the National Highway and Railway network respectively during FY
22-23 as part of this plan. The overall CAPEX of the Central Government is being increased from 5.54 lakh crore to 7.50 lakh crore
which accounts for sharp increase of 35.4% and when the grant in aids to States is included, the effective CAPEX jumps upto 10.68
lakh crore, which is 4.1% of the GDP.

As part of the larger Aatmanirbhar Bharat – Self-sustained India, the Government has been announcing various measures to support
domestic substitution of imports. Production-linked (PLI) schemes for various sectors and “Defence Indigenisation” policy are part
of this. The Government proposes to adopt similar approach in agricultural sector by encouraging oil seeds cultivation in India.
Further, with 2023 being announced as the “Year of Millets”, the Government proposes to encourage domestic consumption, support
post-harvest processing and branding of millets. The Government is expected to take this up on a large scale and encourage farmers
to move out of Paddy and wheat, towards millets. The Government has time and again made clear its willingness to adopt technology
to ensure economic development and welfare. Host of initiatives have been announced on the technology front in the Budget such
as the Digital Rupee, Digital University, National Digital Health Ecosystem, National Tele Mental Health Programme, etc.

On the micro level welfare initiatives, having achieved large scale success in Pradhan Mantri Ujjwala Yojana (focusing on deposit-
free LPG connections), Ujjwala 2.0 (specific relaxations for migrants), Pradhan Mantri Jan-Dhan Yojana (access to financial services
for all) and rural electrification, the Government started the drinking water initiative of Har Ghar Nal Se Jal Yojana last year and has
set ambitious target for the current year.
The Government continues its focus on ease of doing business and is keen on improving its pet project of IBC (Insolvency and
Bankruptcy Code). There have been many iterations in the past in IBC and it proposes few more amendments to improve its
effectiveness which is also welcome, along with the announcement to accelerate corporate exit whereby the winding up time is
expected to be reduced from 2 years to less than 6 months.

In a deviation from the usual norm of announcing big bang disinvestments’ targets, this time, the Government has a muted target of
Rs. 65,000 crores when compared with the previous year announcement of Rs. 2,10,000 crores. However, the same is to be
appreciated since the Government has decided to focus on the pending targets to be achieved rather than laying down new plans.

The revised estimate of fiscal deficit is expected to be at 6.9% of the GDP and for FY 22- 23 it is estimated to be at 6.4% which is in
line with the fiscal consolidation path proposed last year in which fiscal deficit of less than 4.5% was being targeted for FY 25- 26.

On the list of things to be tracked over the course of the year would be action on Circular Economy, replacement of SEZ (Special
Economic Zone), Ease of doing business 2.0 and battery swapping policy. Though the Budget seems muted without much of fanfare,
policy predictability and focus on fiscal consolidation would be the key take aways.

Sundara Rajan T K
Managing Partner

DVS Advisors India

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