India crosses the important milestone of completing 75 years of Independence this year — a watershed moment for the country which makes us reflect on our momentous economic journey so far. It is also an occasion to take steps to fast forward our dream of a developed India which is prosperous, inclusive, equitable, technologically advanced and can take on the world on equal terms. Hence, it was keenly anticipated that the policies and prescriptions announced in the Union Budget would be aligned to our future vision of high, sustained growth in the medium term as much as address the immediate challenges that are confronting the economy.
The Budget has successfully delivered on the nation’s expectations and scripted a blueprint for a progressive economy which would serve as a template for the future. Resting on seven key pillars — namely, physical infrastructure, financial capital, inclusive development, reinvigorating human capital, innovation and R&D and digital economy, sustainability and climate action and ease of doing business, the budgetary announcements offer a detailed roadmap to revive demand and nurture growth in the economy in the medium term even while meeting the aspirations of the different segments of society.
The Budget has adopted just the right approach for catalysing growth with social inclusion. It has provisions which cover almost all segments of society. Finance minister Nirmala Sitharaman has taken pathbreaking measures towards developing human capital by providing a fillip to health, education and skills. She has also made bold announcements on infrastructure and affordable housing, provided an impetus to domestic industry, addressed the concerns of SMEs, attended to the travails of the contact-intensive sectors such as hospitality and tourism, promoted start-ups, and supported futuristic technologies, among others. These are all versatile moves. In doing so, the finance minister has deftly managed the daunting task of reviving growth and investment cycle while addressing expectations caused by social and demographic changes.
The government has continued with the move to significantly upscale capital expenditure in infrastructure development. A futuristic Budget, as far as capital spending on areas such as infrastructure is concerned, the government’s determination to move ahead with the execution of its vision to create infrastructure assets is exemplary and would spur the virtuous growth cycle and create jobs.
CII, along with Indian industry in general, strongly welcomes the tremendous increase in public capital expenditure by 35 per cent to Rs 7.5 lakh crores and the effective capital expenditure by the government, including support to the state governments at Rs 10.68 lakh crores, is a major boost for the economy. The accent on affordable housing, the “nal se jal” scheme and expanding the scope of the Gatishakti scheme are the other key measures which bear testimony to the government’s commitment to bridge gaps in infrastructure.
The Budget has listed a clutch of initiatives to incentivise investment in manufacturing. The announcement on the Ease of Doing Business 2.0 is a pathbreaking initiative to attract investments. Besides, the repealing of 1,486 Union laws will promote trust-based governance. Alongside, the digitisation of manual processes, reduction in regulatory compliances as well as the integration of Central and state-level compliances will go a long way in enhancing the ease of doing business and reducing the cost of doing business.
The setting up of an international arbitration centre at GIFT city to speed up dispute resolution is an encouraging development as well. The proposed necessary amendments in the Insolvency and Bankruptcy Code (IBC) structure to promote cross-border insolvency resolution is a good move too, as it will help to resolve the many cross-border IBC cases that are stuck due to various legal hurdles. The production linked incentive (PLI) schemes being extended to design in manufacturing and solar power equipment manufacturing will help expanding our capacities as well as create jobs.
The Budget has also provided an impetus to “Atma Nirbhar Bharat” by schemes supporting domestic industry. These include a 68 per cent of capital buy in defence under Make in India, the phased manufacturing plan for solar cells and solar panels, extending the concessional tax regime of 15 per cent tax for newly incorporated domestic manufacturing companies under Section 115BAB by one year, and others.
The move to incorporate 75 digital bank units of scheduled banks in 75 different districts will encourage the usage of digital payments in various sections of the country and would be beneficial for fintech companies.
The Budget also incentivised start-ups which are instrumental in wealth creation and building entrepreneurship by promoting start-ups to facilitate “Drone Shakti” through varied applications and for Drone-As-A-Service (DrAAS), defence R&D, and extending the tax incentive for eligible start-ups by another year, among others.
Another landmark announcement in the Budget is the introduction of the Central Bank Digital Currency, the “digital rupee”, using blockchain and other technologies, to be issued by the Reserve Bank of India from 2022-23. This will reduce dependence on cash and reduce settlement risk and be distinct from decentralised crypto currencies which lack the status of legal tender.
The social sector has been the priority in the Budget to ensure protection of lives and livelihoods. In this direction, MSMEs have been the worst affected due to the Covid-19 pandemic. The Budget has extended the Emergency Credit Guarantee Linked Scheme (ECLGS) till March 2023 with an allocation of Rs 5 lakh crores. This was CII’s suggestion in its pre-Budget memorandum. An additional Rs 2 lakh crores have been allocated for micro and small enterprises to meet their financing needs, which will go a long way to support the revival of this sector that is pivotal for local level jobs as well as livelihoods.
Over the last two years, the pandemic has challenged the healthcare ecosystem of even the most advanced economies. Hence, the rise in allocations for health and education is extremely welcome.
At the same time, a well calibrated and judicious fiscal management policy has been announced, which would be geared towards maintaining the growth impetus while at the same time safeguarding macro-economic stability and containing inflation. The finance minister has broadly adhered to the fiscal deficit target for the current year and rightly charted a fiscal glide path of reverting to the path of fiscal prudence by announcing the fiscal deficit target of 6.4 per cent for FY23 to consolidate the recovery process now underway.
The Budget has many positive features, the hallmark being the accent on clarity and transparency to take the Indian economy to higher echelons of growth with social welfare.
The article first appeared in The Asian Age on 2nd February 2022.