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Union Budget FY23: Short on words, long on results as Indian economy regains pace

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Virendra Pandit

 

New Delhi: Finance Minister Nirmala Sitharaman’s fourth consecutive Union Budget 2022-23, presented in the Lok Sabha on Tuesday, was the shortest at just a 90-minute-long speech, but its impact will be felt in the longer term. Its focus was to keep gains and speed up the pace of the recovery of the Indian economy post-pandemic, create millions of jobs in infrastructure, boost the MSME sector, and spur exports growth, particularly in the defense sector.

The next financial year’s expansionary, growth-oriented Budget seeks to increase the government’s capital expenditure by 35.4 percent to Rs.7.5 lakh crore as against the Budget estimate of Rs. 5.54 lakh crore in 2021-22. They estimated the effective capital expenditure in FY23 at Rs.10.5 lakh crore.

In another key move, even in the current fiscal, the government’s Capex spend has been revised to over Rs. 6 lakh crore.

The FM also highlighted that the government is keen to nurture growth in the economy through public investments and help “crowd in” private investments, which are showing signs of a pickup in the current year.

Sitharaman focused on boosting economic growth over fiscal prudence and overshot the fiscal deficit at the revised level in 2021-22 to 6.9 percent, as against the previously budgeted 6.8 percent. For FY23, they have pegged the fiscal deficit target at 6.4 percent. She noted she was aware of the medium-term fiscal deficit target of 4.5 percent for 2025-26, announced in the last year’s Budget.

This stance on fiscal deficit and promised an increase in Capex cheered the capital markets, with the benchmark indices shooting up by 878 points (Sensex) and 237 points (Nifty) until the disinvestment numbers unfolded

On disinvestment receipts, which worried the market observers, the Centre has scaled down the revised estimates to Rs. 78,000 crore for the current fiscal as against Rs. 1.75 lakh crore at the Budget estimate level.

The Budget announcement came in the backdrop of the third pandemic wave’s impact amid rising inflation and increased unemployment and ahead of Assembly elections in five states, including Uttar Pradesh and Punjab, starting this month.

In 2022-23, the government will go in for borrowing of Rs. 14.95 lakh crore, up from Rs. 12 lakh crore estimated for 2021-22.

To help the MSMEs, the backbone of the Indian economy, and to cope with pandemic losses, the FM announced the extension of the Emergency Credit Line Guarantee Scheme (ECLGS) by one year until March 31, 2023. The guarantee cover has also been expanded by Rs. 50,000 crores to take the overall cover under the scheme to Rs. 5 lakh crore.

Sitharaman announced that the Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) will be revamped with a required infusion of funds.

Besides the continuation of its policy to encourage public investments, the Budget has kept the tax slabs unchanged. The slew of measures announced in the latest Budget includes steps to encourage the start-ups’ ecosystem, usage of electric vehicles, and 5G spectrum auction in 2022-23.

On digital currency and virtual assets, the FM announced that the Reserve Bank of India (RBI) will this year issue a “digital rupee” as the Central Bank Digital Currency (CBDC). She also unveiled a specific taxation regime for transferring any virtual asset at 30 percent.

To spur exports, she said that a new Special Economic Zone (SEZ) law will be enacted and customs administration of such zones will be improved through technology and IT adoption.

The government will undertake ‘Ease of Doing Biz 2.0’ and take steps to speed up the pace of exits for businesses, Sitharaman said.

Also, the Insolvency and Bankruptcy Code (IBC) will be amended to enhance the efficiency of resolutions, and a comprehensive framework for cross-border insolvency will be introduced.

The Budget laid the blueprint from India@75 to India@100 to mark the Indian economy’s transition from the one at its 75 years of Independence in 2024 to 100 years in 2047.

 

Other key highlights of the Budget