A REALISTIC PARADIGM SHIFT

A REALISTIC PARADIGM SHIFT

Ever since the very inception of budget in 1860s, it has shown a transformation from briefcase to bahi khata, then to tablet for now.

The budget’22 depicts these transformations with a more realistic route.

This budget came at a crucial juncture for the public and policy makers alike for the following reasons: upcoming elections in five states; looming omicron threat; nascent economic recovery; key numbers like fiscal deficit, tax collection, and spending outlook.

Focus areas of Budget were-PM Gati Shakti; Inclusive Development; Productivity Enhancement; Sunrise Opportunities; Energy Transition; Climate Action; Financing of investments.

Budget reiterates focus on public investment to modernize infrastructure over the medium term, leveraging tech platform of Gati Shakti via a multi-modal approach.

Standardization of Metro rail systems would help in lowering costs and exports. Budget proposes Rs 19,500 crore for PLI for manufacturing high-efficiency solar modules which is a step in direction of achieving 280 GW of installed solar capacity by 2030.

How the extension of ECLGS will help medium, small firms Extension of Emergency Credit Line Scheme till 2023 up to is welcome step but not enough at all.

However 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.

This scheme had prevented lakhs of MSMEs from being downgraded to NPA (non-performing loan) category. Separately, the government will roll out a fiveyear programme to accelerate MSME performance bring in rating mechanism for MSMEs.

Under ECLGS, which is for helping companies tide over liquidity crunch resulting from Covid-19 curbs, banks provide additional loans to existing borrowers without asking for extra collateral.

To encourage banks, these loans are fully guaranteed by the government against credit losses.

This scheme will be key to ensure that MSMEs impacted by intermittent lockdowns in states get funding to stay afloat. Sanctions and disbursements under the facility are relatively faster since lenders have the Central government guarantee in case of default against these loans.

Companies from hospitality, travel and tourism as well as leisure and sporting sectors are expected to benefit from the relaxation in the scheme.

Hotels, restaurants, canteens, caterers, marriage halls, tour operators, as well as amusement parks and theatres can avail the facility.

Accounts that are classified as non-performing assets or where over dues have crossed 60 days (SMA-II) are not eligible.

Why enhanced capex allocation The government has announced a sharp jump of 35.4 per cent in capital expenditure to fund various infrastructure projects in 2022-23..

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.

The targeted focus on capital expenditure, with its resulting multiplier effects, will be vital in sustaining the economic growth.

Tax on crypto work Taxing virtual assets at 30% would formally bring virtual assets such as cryptocurrencies and non-fungible tokens under the tax net, thereby according it the recognition by the government.

Other Areas The Parvat Mala announcement with 8 ropeway projects in 2022–23 will ease transport linked congestion in hilly areas and push tourism.

Reduction of surcharge on unlisted shares from 28.5% to 23% will likely facilitate investor exits and investment churn Introduction of central bank digital currency to boost digital economy lays down a solid plan of the government to have a public digital currency.

With a clear focus on education and announcement of dedicated TV channels, EdTech and content development will see higher demand. Eregistrations and E-administration under several schemes and regulations will definitely ease and speed governance.

However, its implementation would be the key towards ease of doing business 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.

THE VIEWS EXPRESSED BY THE AUTHOR ARE PERSONAL