As the Indian economy carves a path for itself that moves away from the pandemic-induced slump, the value of the Union Budget 2022-2023 outlined on February 1, 2022, gains credence. This budget is pertinent as it makes clear the foundation for economic growth via public investment. The 2022-2023 budget has given a considerable amount of attention to developing and boosting domestic manufacturing and hopes to create several new jobs to offset the unemployment triggered by the pandemic over the past two years.
Continue reading to understand different areas of budget that are worth noting.
Deficit and Expenditure
In terms of the proposed deficit and expenditure, the union budget outlined a fiscal deficit of 4.5 per cent of the gross domestic product (or GDP) anticipated by 2025-2026 whereas it outlined a fiscal deficit worth 6.4 per cent of the GDP in 2022-2023. It also revised 2021-2022’s fiscal deficit to 6.9 per cent of the GDP. The total expenditure anticipated for 2022-2023 is marked at INR 39.45 trillion.
Other facts worth noting here are the following.
- A 4 per cent fiscal deficit to the GDP will be permitted to states over the course of FY23
- States will also be able to access 50 year interest-free loans in addition to the normal borrowing they are entitled to
- 2022-2023 will also see states gain access to a scheme for financial assistance via capital investment outlay. INR 1 trillion has been allocated to the same.
The 2022-2023 budget proposed the following suggestion as far as taxation is concerned.
- The import duty tethered to certain chemicals is expected to reduce in value
- There exist certain customs duty exemptions on steel scrap, and these will continue to be in place for another year as far as small and medium sized business are concerned
- The customs duty applicable to high steel bars, flat products and stainless steel is to be removed
- An additional duty of INR 2 per liter will be applicable to unblended fuel October 2022 onwards
The following factors are pertinent.
- Small and medium sized businesses can continue to enjoy the emergency credit line guarantee scheme as it has been extended up to March 2023
- Climate action along with a transition to more energy efficient sources is expected to be a priority for the government
- The Life Insurance Corporation is expected to launch its public issuance shortly
- Provisions have been made for the initiatives launched in the previous budget such that they are adequately allocated for in the current budget
- New legislation is set to replace the Special Economic Zones Act
- The resolution process will be processed with greater speed as the bankruptcy code is set to be amended
- As opposed to 2 years being the time frame needed for companies to wind up, this budget proposes it be reduced to 6 months
- A cap of 15 per cent is to be applied to all long term capital gain surcharges
- The Government is set to launch a digital rupee with the aid of blockchain technology which will be available in 2022-2023
- Virtual digital assets will now be taxable and the basis for this will be outlined in a new scheme
- Losses incurred via the sale of digital assets can’t be offset against alternative sources of income
- Tax at the rate of 30 per cent will be applicable to income drawn from virtual digital assets
- Defense imports are anticipated to reduce as per details outlined in the 2022-2023 budget.
In terms of infrastructure, the following factors are pertinent.
- 2022 will witness 5G spectrum auctions
- A production linked scheme will feature design-oriented manufacturing for 5G
- The government will begin awarding contracts to those who wish to lay optical fiber in rural parts of the country, and these are hoped to be completed by 2025
- INR 480 billion has been allocated to the development of affordable housing in 2022-2023
- INR 195 billion has been reserved for funding production-linked incentives that will be directed towards the manufacture of solar equipment
- The finance minister proposed a domestic scheme to be introduced to reduce India’s dependence on oilseed imports in the 2022-2023 budget.
- Agricultural startups are to be financed with blended capital which will be raised via a co-investment model
- Small farmers will benefit from the railway infrastructure developed in 2022-2023.
- The budget proposed the manufacture of 400 energy efficient trains over the course of the next three years
- The national highways network will grow by 25,000 kilometers in 2022-2023 and is anticipated to cost INR 200 billion
- A battery swapping policy will also be launched shortly
While the aforementioned proposed initiatives outlined in the 2022-2023 budget are promising, the income tax slabs remain unchanged which is a setback for salaried individuals. All in all though, the budget encourages development, greater reliance on domestic goods rather than imported goods and recognizes the importance of making changes that are in line with environmental issues such that climate change can be tackled effectively.
Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.