Explained: What the Economic Survey says
Putting the spotlight on the way forward after the pandemic, the Economic Survey of 2021-22 has analysed aspects such as inflation, global liquidity measures, and rising energy prices to detail the risks for the economy going ahead. It has also taken stock of growing revenues to indicate the availability of fiscal space, should the government see the need to provide additional support.
The Survey has noted that growth in 2022-23 will be supported by widespread vaccine coverage, gains from supply-side reforms and easing of regulations, robust export growth, and the availability of fiscal space to ramp up capital spending.
Economic Survey: Buoyant tax mop-up frees fiscal space for spending
The Economic Survey tabled in the Lok Sabha by Finance Minister Nirmala Sitharaman pointed out that buoyant tax revenues offered the government fiscal space to provide additional support to the economy and continue the push in favour of higher capital expenditure. Though output in various contact intensive services remained below pre-pandemic levels, it said the macroeconomic strength provided buffers against likely stresses such as withdrawal of stimulus by global central banks.
Why growth in FY23 is pegged at just 8-8.5%
The Economic Survey 2021-22 has projected a modest 8-8.5 per cent growth rate for the next financial year, 2022-23. This is significantly lower than the 9.2 per cent expansion projected by the NSO in its first advance estimates for 2021-22. It is also lower than the 9 per cent growth estimate by the IMF in its World Economic Outlook for the current year and the next.
Behind the conservative estimate for the next year are not just the many risks — global inflation to shortage of inputs — posed by Covid-19 the Survey points to, but also its assessment that the economic slowdown induced by the pandemic is not merely a demand problem.
The Centre has reduced its subsidy budget for food, fertiliser and fuel in the upcoming fiscal by 26.6 per cent, compared to the Revised Estimates for this fiscal. Experts have noted that the move signals a normalisation of subsidy levels after two fiscals, which saw subsidy bills soar as the government sought to dampen the impact of the pandemic by offering a free food programme and bore the brunt of higher international fertiliser prices. Karunjit Singh writes
In a move likely to boost investments in startups and make employee stock options (ESOPs) a more lucrative proposition to attract and retain top talent, Finance Minister Nirmala Sitharaman on Tuesday proposed to cap the surcharge on long-term capital gains (LTCG) from shares of unlisted companies at 15 percent in the Union Budget 2022-23. Soumyarendra Barik writes
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During her budget speech on Tuesday, union finance minister Nirmala Sitharaman touched briefly upon a scheme to boost infrastructure in the villages along India’s border with China. Prime Minister Narendra Modi later stressed that developing infrastructure in such villages are also necessary for the country’s security. Read full report by Krishn Kaushik
The Finance Minister tabled the much-awaited Union Budget on Tuesday. While the common expectation was there could likely be some tax breaks from personal taxation, the focus appeared to be more on providing stability to taxpayers and encouraging voluntary compliance. As expected, the Finance Minister did address the open issue of taxation of digital currency. Aarti Raote and Sudeep Kumar explain the few significant changes that individual taxpayers should be aware of.
Finance Minister Nirmala Sitharaman announced a new scheme in public-private partnership (PPP) mode for delivery of digital and hi-tech services to farmers and a new fund with blended capital to finance startups for agriculture and rural enterprise in the Union Budget 2022-23. Harikishan Sharma writes
Building on the Modi government’s push for organic, zero-budget natural farming, Finance Minister Nirmala Sitharaman on Tuesday said in her budget speech that the agriculture universities in the country will be encouraged to include these areas in their syllabus.
The Union government has started pushing the concept of zero-budget natural farming as an initiative that will work towards making the vocation of farming more sustainable as well as improving the income of the farmers by reducing costs of inputs, in addition to other areas such as better market access and improved product returns to the farmers. Read more
Presenting the Union Budget 2022, Finance Minister Nirmala Sitharaman announced the formation of a digital university to provide access to world-class education to Indian students. The budget this year also focused on digital learning citing the prolonged closure of schools impacting students’ academic performance. The minister also announced that the digital university will impart lessons in all regional languages creating a network of ‘hub and spoke’. The university will work with the other central universities in the country to provide the required digital infrastructure and training. Read More
From headphones, umbrellas, imitation jewellery, to cocoa beans, and cut and polished diamonds, prices of various commodities will see a rise or dip following Finance Minister Nirmala Sitharaman’s Budget on Tuesday. Click here to find out
Having closed the most high-profile disinvestment process of Air India, the government also decided to retire the airline’s debt that it transferred to the Special Purpose Vehicle (SPV). In the Union Budget 2022-23, the government allocated an additional Rs 51,971 crore towards the settlement of outstanding guaranteed liabilities of Air India and its other sundry commitments.
This amount has been accounted in the revised estimates of total expenditure in 2021-22. Pranav Mukul writes
The Ministry of Home Affairs (MHA) has been allocated in excess of Rs 1.85 lakh crore in the Union budget for 2022-23, which is over 11% higher than the allocation of Rs 1.66 lakh crore in the last budget for the current fiscal. In 2019-20, the budget had allocated Rs 1.67 lakh crore to the MHA.
However, capital expenditure in the 2022-23 budget for the MHA has increased by only 5% from Rs 15,924 crore in the last budget to Rs 16,753 crore this budget. Read more here
Along with a definitive push towards promoting the country’s domestic defence industry, earmarking over two-thirds of the capital outlay from domestic defence manufacturers, the capital outlay for the armed forces at Rs. 1.52 lakh crore has also seen a massive nearly 10 per cent jump compared to the Revised Estimates from last year, and nearly 13 per cent over what was initially earmarked in budgeted estimates.
When compared to the Rs. 1.35 lakh crore budgeted estimates from 2021-2022, which is what was initially allocated during the Budget, the jump in the capital outlay for the armed forces is even higher, to nearly 13 per cent. Krishn Kaushik writes
In her Budget presentation, Union Minister Nirmala Sitharaman announced a sharp jump of 35.4 per cent in capital expenditure to fund various infrastructure projects in 2022-23. The government will invest Rs 7.50 lakh crore as capital expenditure next year, a sharp jump from Rs 5.54 lakh crore in the current year. But, why the enhanced allocation? Aashish Aryan explains
The Emergency Credit Line Guarantee Scheme (ECLGS) will be extended to cover the next fiscal as well, with expanded guarantee cover of Rs 5 lakh crore, Finance Minister Nirmala Sitharaman said in her budget presentation. Why an extension? Aashish Aryan explains
The government is launching the Digital Rupee — a central bank digital currency (CBDC). The Reserve Bank of India will launch the CBDC from the upcoming financial year. This follows the government’s plans to launch the CBDC that will be backed by blockchain technology. What is CBDC, and what is the need for it? What does this change for citizens? Pranav Mukul explains
While presenting the Union Budget 2022, Finance Minister Nirmala Sitharaman said the government would introduce a Digital Rupee in the fiscal year 2022-23, and also impose a tax of 30 per cent on virtual assets. Pranav Mukul and George Mathew explain these two proposals, and how they will work
Tax returns can now be revised for omission and mistakes including declared income not reported. The changes can be made through a one-time window till two years from the end of the assessment year on payment of tax.
Surcharge on transfer of any long-term capital gains has been capped at 15 per cent.
Minimum Alternate Tax rate for cooperatives at 18.5 per cent has been reduced to bring it with parity of the rate for corporates. Also, the surcharge for cooperatives has been reduced to 7 per cent from 12 per cent for total income ranging between Rs 1-10 crore.
The Budget has also extended the timelines for benefits under the new corporate tax regime. The government had announced a 15 per cent corporate tax rate for newly incorporated manufacturing companies till March 31, 2023, which has now been extended till March 31, 2024. The period of incorporation for startups to avail tax benefits has also been extended by a year to March 31, 2023.
In a move that will ease exits from startups and Unicorns, the Finance Minister announced reduction of surcharge on unlisted shares from 28.5 per cent to 23 per cent.
Impact: This will likely facilitate investor exits and investment churn. ~ Anil Sasi
In a move that will ease exits from startups and Unicorns, the Finance Minister announced reduction of surcharge on unlisted shares from 28.5 per cent to 23 per cent.
Impact: This will likely facilitate investor exits and investment churn. ~ Anil Sasi
The Budget has proposed taxing virtual assets at 30%. Finance Minister Nirmala Sitharaman said that it cannot be mentioned as a replacement of any other income and 1% TDS to be charged further on payments made using digital assets to keep a track on transactions.
Impact: This move would formally bring virtual assets such as cryptocurrencies and non-fungible tokens under the tax net, thereby according it the recognition by the government. The government’s plans on banning private cryptocurrency still remain to be implemented. ~ Anil Sasi
Ending the ambiguity over the taxation of gains stemming from investments in cryptocurrency, Union Finance Minister Nirmala Sithraman on Tuesday, announced that gains from such investments will be levied at 30 per cent. Bitcoin, the most prominent cryptocurrency, was up in trading. However, losses on account of such investments will not be allowed to be set off. This will provide the much needed clarity to investors in various cryptocurrencies. Earlier, the government had also announced the introduction of a digital rupee based on the blockchain technology. ~ Ishan Bakshi
While presenting the Union Budget, Nirmala Sitharaman proposed that both Centre and states govt employees’ tax deduction limit should be increased from 10% to 14% to help the social security benefits of state govt employees and bring them at par with the Central govt employees.
She added, “Corporate surcharge to be reduced from 12% to 7%. I propose to provide that any income from transfer of any virtual digital asset shall be taxed at the rate of 30%. No deduction in respect of any expenditure or allowance shall be allowed while computing such income, except cost of acquisition.” Read more here
India will manufacture 400 new, energy-efficient Vande Bharat trains in the next three years, Finance Minister Nirmala Sitharaman has said. That apart, with an eye on farmers, the rail sector will also develop “One Station One Product”, which will leverage local produce carried on the railways, she said. Bringing out new products, Railways will also roll out postal railways for carriage of parcels, giving a thrust to a new business area. ~ Avishek G Dastidar
Despite a projected 9.2 per cent growth in GDP in FY22 to above pre-pandemic levels, the Indian economy continues to face a slew of structural challenges that existed prior to the pandemic and new challenges brought on by Covid-19. Inflation is the most important headwind. The Survey notes that supply chain disruptions and slow economic growth have contributed to an increase in inflation. The withdrawal of stimulus in developed economies in the upcoming fiscal is likely to affect capital flows into the country. Karunjit Singh writes
Considering the additional committed expenditure allocations of the government, over and above the last year's Budget numbers, there were concerns that the government would likely see a slippage on its fiscal deficit target. But, the Finance Minister has announced only a marginal slippage -- as against a budget target of 6.8 per cent of GDP in 20221-22, the fiscal deficit is estimated at 6.9 per cent. Next year, in line with the glide path of consolidation, the Centre has pegged to bring down its deficit to 6.4 per cent.
The government has announced that an independent system operator in the natural gas transmission sector will be set up for booking and coordination of common carrier capacity to ensure unbiased allocation of natural gas transportation capacity .
Impact: The announcement, which was also made in the previous Budget, is aimed at addressing concerns of bias in allocation of gas transportation capacity by players such as GAIL involved in the transportation of natural gas. ~ Anil Sasi
FM announced that the Ujjwala scheme, which is aimed at providing clean cooking fuel to poor households through LPG connections, would be extended to a further one crore households.
Impact: The Ujjwala scheme has already provided LPG connections to 8 crore households. Rising prices of LPG in line with international prices of fuel, coupled with a withdrawal of subsidies on LPG cylinders, could reduce the impact of LPG connections in the short term. ~ Anil Sasi
Budget has proposed to introduce Digital Rupee using blockchain and other tech to be issued by RBI starting 2022-23.
Impact: Introduction of central bank digital currency to boost digital economy, and lays down a solid plan of the government to have a public digital currency. ~ Anil Sasi
The Union Budget has raised its allocation for capital expenditure to Rs 7.5 lakh crore in 2022-23, up from Rs 5.5 lakh crore in 2021-22. Considering that private sector investments remain subdued, the government hopes that the continuing focus on ramping up public capital spending will help crowd in private sector investments. However, there is concern over the ability to spend. Data from CGA shows that in the ongoing financial year, the Centre's capital spending has not grown at the rate it was hoped. ~ Ishan Bakshi
The Parvat Mala announcement with 8 ropeway projects in 2022–23. This will ease transport linked congestion in hilly areas and push tourism.
Data centres and energy storage systems to be included in harmonised list of infrastructure sectors. This will include dense charging infra and grid scale systems.
Impact: This move will facilitate credit availability for digital infrastructure and clean energy storage.
The outlay for public capital expenditure has been stepped up sharply by 35.4% from Rs 5.54 lakh crore to Rs 7.50 lakh crore in 2022-23. This outlay will be 2.9% of the GDP.
Impact: The government believes public investment will be necessary to support private investment that will in turn create demand. Private investments are still lagging.
The Budget proposes to allocate additional Rs 19,500 crore for PLI for manufacturing high-efficiency solar modules with priority on fully integrating manufacturing of various components.
Impact: This is a step in direction of achieving 280 GW of installed solar capacity by 2030.
This doesn’t so far seem like a political budget, aimed at farmers ahead of Uttar Pradesh and Punjab elections. There’s no mention of any committee for making Minimum Support Price more effective. The said committee, that was announced by PM Narendra Modi on November 19, is yet to be set up. Nor is there any increase in PM-Kisan benefit amount from the current Rs 6,000/year. This would have paid off politically - and also economically - if accompanied by rationalisation of fertiliser subsidy and capping of grain procurement. ~ Harish Damodaran
The government is set to introduce a framework to allow consumers to choose from more than one power distribution company, and end monopolies in the sector.
Impact: The government is aiming to reform the sector often described as the weak link in India's power sector through competition. The Centre had earlier announced intentions to introduce an amendment to the Electricity Act to delicense the power distribution sector but had not introduced the Bill in earlier sessions after it faced opposition from some state governments. The provision will offer choice to consumers in the distribution sector, eventually aimed at giving consumers the choice of picking the utility of their choice among multiple service providers ~ Anil Sasi
The Finance Minister's 5 big infra push projects:
The Finance Minister has announced the auction of 5G spectrum in 2022. With this, India will join other countries around the world which have begun rolling of 5G services. However, there are several issues that would need to be considered, foremost amongst which is the price of spectrum. There have been repeated demands to reconsider the pricing of spectrum, lowering the base price. Questions have been raised whether private players have the financial muscle to place exorbitant bids. — Ishan Bakshi
A battery swapping policy will be brought out and interoperability standards will be formulated for the electric vehicles sector. Private sector will be encouraged to develop efficient solutions.
Impact: The battery swapping policy to mitigate concerns over space crunch for expanding EV infrastructure. Make EVs more viable and lower range anxiety for buyers
The PM Gati Shakti plan will be driven by roads, railways, airports, ports, mass transport, waterways and logistics infrastructure. PM Gati Shakti masterplan for expressways will be formulated in 2022-23 to facilitate faster movement of people and goods. The national highways network will be expanded by 25,000 km in 2022-23. Rs 20,000 crore will be invested through various sources in addition to public investment.
Impact: The expansion of highways network and building of new expressways is likely to help connect smaller towns around metro cities in a more efficient manner. This will help take off the load on resources and distribute it more evenly, help lower congestion around urban centres. — Anil Sasi writes
The Union Budget proposes to set up 75 digital banking units in 75 districts by scheduled commercial banks. There will also be a focus on using payment platforms that are economical and user-friendly.
Impact: This takes forward the NDA government's digital inclusion agenda. — Anil Sasi writes
The benchmark Sensex at the Bombay Stock Exchange was up 850 points or 1.5 per cent and trading at 58,870 ahead of the budget presentation by Finance Minister Nirmala Sitharaman. While the markets were up in line with the Asian markets, they also drew comfort from the fact that the Economic Survey showed that the government has enough fiscal space to push growth in the economy. Sandeep Singh reports
The government has allocated Rs 60,000 crore for Nal Se Jal scheme with an aim to cover 3.8 additional households with tap water.
Impact: capex push, and a concerted rural focus. — Anil Sasi writes
The Centre will roll out an open platform for national digital health ecosystem. This will use the unique health ID framework to provide universal healthcare. For mental health problems — worsened by the Covid-19 pandemic — a National Tele Mental Health Programme will be launched.
Emergency Credit Line Guarantee Scheme (ECLGS) to be extended till March 2023 and guarantee cover will be raised by Rs 50,000 crore to Rs 5 lakh crore. This scheme provided collateral free loans to stressed MSMEs. Impact: Extension to help services sector, especially the hospitality and contact intensive activities, hit by Covid-19.
Separately, the government will roll out a five-year programme to accelerate MSME performance. Bring in rating mechanism for MSMEs. — Anil Sasi writes
With the micro, small and medium enterprises continuing to struggle – a large number are still operating below their pre-pandemic levels – Finance Minister Nirmala Sitharaman has expanded the Emergency Credit Line Guarantee Scheme (ECLGS) to expand the credit availability to MSMEs in the badly-bruised hospitality sector. The credit guarantee cover has been expanded by Rs 50,000 crore, bringing the total ECLGS scheme till date to Rs 5 lakh crore.
This scheme has so far been extensively used by MSMEs since the onset of the pandemic to avail credit. This has helped them during this tumultuous period. An earlier report by economists from SBI had highlighted how the scheme had prevented lakhs of MSMEs from being downgraded to NPA (non-performing loan) category. — Ishan Bakshi writes
The Budget focuses on promoting zero budget natural farming and discouraging so-called chemical-based agriculture. While nice-sounding, whether these will be adopted by farmers on the ground remains to be seen. Low yields and no premium realisations on organic produce will be a deterrent for farmers.
Also, we will need to see whether the focus on natural farming is going to be a prelude to rationalisation of subsidies on urea, DAP and other chemical fertilisers — Harish Damodaran writes
Metro rail systems across the country to be standardised as per Indian “condition and needs”, in addition to being built with an innovative way of financing. Separately, 400 new generation Vande Bharat trains with better efficiency will be brought in over the next three years.
Impact: Currently, two metro rail systems operate in the country based on gauge and with multiple rolling stock vendors. Standardisation would help in lowering costs and exports. — Anil Sasi writes
The Budget for 2022-23 will aim to steer the economy for the next 25 years, Finance Minister Nirmala Sitharaman has said during her Budget Speech. For this, she’s laid down PM Gati Shakti, Inclusive Development, Climate Action and Energy Transition, as among the four priority areas.
Finance Minister Nirmala Sitharaman will rise shortly to present the Union Budget. And, as she does, we are breaking it down for you with a real-time explanation and analysis. For real-time updates on the Union Budget, follow our live blog. For news on how the markets are reacting to the Budget, click here.
How strong is India's economic recovery and what is the outlook for the year ahead? Why should the government avoid printing money to boost GDP? What kind of government expenditure leads to higher inflation? What kind of expenditure boosts GDP? Professor N R Bhanumurthy answers these questions, and more, in a conversation with Udit Misra. Watch:
After decades of low government expenditure on health, the Covid pandemic created a societal consensus on the need to strengthen our health system. While increased investment in infrastructure and digital health is needed and will be of high value for strengthening our health system, that capacity will be a carriage without wheels if we do not develop a multi-layered, multi-skilled health workforce. We need to increase the numbers and improve the skills of all categories of healthcare providers, writes K Srinath Reddy in an opinion column.
All eyes by the salaried class are on the announcements regarding personal taxation. Last year, Sitharaman had announced the scrapping of income tax for senior citizens under certain conditions, new rules for removal of double taxation for NRIs, and a reduction in the time period of tax assessments among other measures. She had also increased tax audit limit from Rs 5 crore to Rs 10 crore.
What are the expectations on direct and indirect taxes this year? We explain
Ahead of the Budget presentation, the markets are in the green. BSE Sensex is 700 points higher at 58,758, while the broader Nifty is nearly 200 points higher at 17,535. You can follow LIVE UPDATES on the markets here!
Did you know the customary halwa ceremony was dropped this year due to Covid? This ceremony marks the commencement of the printing process of the Budget. The tradition, which goes back several years, involves preparing the ‘halwa’ sweet dish in a big ‘kadhai’ (large frying pot) and serving it to the entire staff in the ministry. The significance of the sweet dish is that after it is served, a large number of officials and support staff, who are directly associated with the Budget making and printing process, are required to stay in the ministry and remain cut off from their families until the presentation of the Budget by the minister in the Lok Sabha.
And here are the first pictures on the Budget document. Finance Minister Nirmala Sitharaman and her team have left the Finance Ministry to present the Union Budget in Parliament. As you can see, a 'Made in India' tag is on a red cover, inside which there is a tablet, replacing the traditional 'Bahi Khata' (briefcase) which used to store the Budget document.
A continued push on capital expenditure and roll out of infra projects under the National Infrastructure Pipeline (NIP) will be central to the Union Budget 2022-23 as the Central government looks to hold and build on the recovery in the economy. Projects in roads and railways sectors and Nal se Jal scheme are expected to receive funding boost as the government targets to increase capex spending by around 30 per cent next year, government officials said.
As a key step to boost private sector capex in infra sector, the government is expected to remove the guideline of seeking bank guarantees for infra projects and possibly replacing them with surety bonds. This has been one of the key demands industry chambers. Read our exclusive report here
The Budget is likely to have a populist ring to it, interspersed with a string of announcements, entailing road, railways and healthcare projects, focussed on a handful of poll-bound states, alongside a greater degree of flexibility to states in market borrowings and capex spending. Coming just ahead of Assembly elections in key states, the Budget is likely to mark a departure from last year’s reformist theme, instead, sticking to the implementation of previous announcements — most of which are hanging fire.
Official sources indicated the discussions in the run-up to the Budget overwhelmingly favoured incentivising the new personal income-tax regime rather than any major overhaul in the slabs of the older system. The new income-tax regime hasn’t picked up pace the way it was expected to at the time of the introduction two years ago. Sunny Verma and Aanchal Magazine report
The Budget is being presented at a time when millions of India’s youth are out on the streets protesting against persistently high levels of unemployment in the country. So, what can the Budget do to address the job crisis? Labour economists suggest it is time for India to adopt an employment-centric growth strategy instead of just fetishising GDP data. Read Udit Misra's column ExplainSpeaking
The Economic Survey, an economic report card for the current year, pointed out that buoyant tax revenues offered the government fiscal space to provide additional support to the economy and continue the push in favour of higher capital expenditure. Though output in various contact intensive services remained below pre-pandemic levels, it said the macroeconomic strength provided buffers against likely stresses such as withdrawal of stimulus by global central banks.
A sharp rise in tax collections and a boost to non-tax revenues following RBI’s surplus transfer have led to an increase in the revenue pool. This would enable the government to meet its fiscal deficit target of 6.8 per cent of Gross Domestic Product in 2021-22, the Survey said. Read Sunny Verma's report