- The majority of the citizens would have been glued to the television as the Union Finance Minister went about proposing the Annual Budget in the Parliament. Irrespective of the comprehending abilities to dissect the nuances of the fiscal nitty-gritty, people were largely interested in knowing what is in store for them vis-à-vis relief, sops, incentives, and opportunities. Coming close on the heels of welcome recovery being witnessed post-pandemic, the Budget was expected to offer an insight as to where the country is positioned in terms of growth in the ensuing year. The Budge doesn’t disappoint. Let us understand how the Budget pans out in simple terms.
PC: Racool_studio
- To begin with, the FM deserves to be applauded for not trading the usual path of long-winding speech interspersed with quotes from exalted luminaries. Swift and pragmatism defined FM’s fourth Budget in a short speech articulating three excellent strategies. First and as expected, Nirmala Sitharaman is taking a big bet on growth by massively pushing capital expenditure and is ready to risk high inflation. This measure was much needed keeping in line with the present-day situation. Undoubtedly, growth is the priority now, and most inflation will be via higher energy and commodity prices, over which the Union Government has little control.
- It needs to be seen if the RBI will scupper the growth party as it has frequently called for fiscal heavy lifting. Remember, as inflation rises, retail fuel prices will start rising again after the election hiatus. RBI may want to increase rates but that should be done softly. Sharp rate hikes will affect growth without bringing down cost-push inflation. Second, FM was also clear that public capex is needed to spur private investment, which is still low. To further encourage private investment, the Budget offers stability in the direct tax regime. Third, she acknowledged that economic recovery is uneven by extending credit guarantee for MSMEs and focusing, within that, on the badly hurt contact-intensive services, which is yet to recover from the shock.
PC: Our-team
- Commendably, the Budget math is realistic. Nominal GDP is expected to grow 11.1% in 2022-23 to Rs. 258 lakh crore. Consequently, gross tax revenue is expected to increase 9.6% over the ongoing year’s revised estimate to Rs. 27.5 lakh crore. Total expenditure is budgeted to increase by a modest 4.6% to Rs. 39.4 lakh crore. Now, how did the FM find the money for the huge hike in capex? Firstly, via an increase in tax revenue. Secondly, there’s a big switch from welfare spending to investment. Allocation towards food subsidy and MGNREGA together have been lowered by about Rs. 1.05 lakh crore. Further, spending on vaccines and Air India will fall in 2022-23, thereby freeing up resources that will be spent on roads and railways.
- Interestingly, 30% tax on gains from crypto assets acknowledges the inevitability of the digital assets getting bracketed into the taxation regime even though it is still not legalized but eventually it will be. Of course, the RBI is set to launch its digital currency in the next financial year indicating India is ready to move up the blockchain technology ladder. Notably, the Union Government seems to have lost enthusiasm for privatization perhaps fearing it can become an electoral liability. In conclusion, the Union Government should spend all the capex it has budged for to make this Budget a really good one.
