Year Of The Tiger Union Budget 2022-2023

The Finance Minister (FM), Nirmala Sitharaman framed this budget as a blueprint for the next 25 years, from the Republic of India’s 75^th year, to its 100^th. It was her shortest budget speech and she left out a lot of the detail in order to paint a futuristic picture like no budget before presented by any Indian government. It was seen and received as an investment and growth-oriented budget with no populist overtones.

The shibboleths of social upliftment and never-mind-how-I-will-pay-for-it give-aways, was missing. The fiscal discipline was maintained alongside a determination to promote the kind of growth a country headed to the No. 3 spot in the global economy must emphasise. This budget will gladden the hearts of international lending and rating agencies, provided the implementation lives up to the promise.

The Nehruvian order is predictably baffled, as there are none of the usual markers on welfarism, no mention of MNREGA (in fact a cut in MNREGA allocations), no ‘common man’ carrots, no freebies, though there is a focus on mental health for perhaps the first time, not even a new disinvestment target.

This, even as the morning papers announced the acquisition of a loss-making government steel  company that makes  ‘long products’ such as rods, rails, bars, used in the construction sector. The company , Neelachal was acquired by the Tata Group for Rs. 12,000 crores, with 2,500 acres of land to expand into. LIC is likely to shed some of its heft by selling shares to institutional and retail buyers in the stock market shortly. The storied Ashoka Hotel in New Delhi, a stone’s throw from where the prime minister presently lives, has also been put on the block, post the Air India sale.

The fiscal deficit is looking good, though ‘imported inflation’ from high oil prices  could be disruptive in future. This despite the travails of the pandemic, and the new budget target for 2022-2023 is 6.9 % of GDP.  But will India raise interest rates and possibly queer the pitch? It seems unlikely.

For the bigger $5 trillion dollar target for the economy as a whole by 2025, the aatmanirbhar manufacturing sector has to grow, the FM said, in double-digits. When you want big growth you don’t cut the money supply.

The FM may be pointing at defence manufacturing as a substantial part of it. Some 68% of the defence capital expenditure budget will go to domestic procurements.  This should mean substantially better bangs for our military equipment buying buck. Also, it will set up a lucrative export business as the recent sale of BrahMos missiles to the Philippines has already demonstrated. There will be no middle-men commission agents siphoning off millions of dollars.  The government is also unwilling to be held hostage to the tardiness and inefficiency of sarkari defence manufacturers. L&T already has orders running into thousands of crores on the back of their efficiency.

A full 25% of the R&D budget  of the defence ministry will go to private companies and defence oriented start-ups, to diversify away from the government owned defence manufacturing establishment, without abandoning it.

Infrastructure financing too is expecting a boost over the previous year. The budget will distribute some 7.5 lakh crore to these sectors, up from 5.4 lakh crores in 2021-22. This increase is just shy of 3% of GDP. There will be 400 new Vande Bharat trains over the next three years. Sitharaman listed roads, railways, airports, ports, mass transport, waterways, logistics infrastructure.

There was no fresh mention of the high-end semiconductor JV manufacturing industry though it is known several Indian companies plus the government are in talks with Taiwanese companies. But 5G is all set to take off with its multiple spin-off technology and economic benefits.

The union budget has a vastly digital and technological feel to it. Drones in agriculture to spray nutrients and fertilizer, a fresh boost to SEZs to revive interest in it for Information Technology initiatives, merged with Customs Duty reform. There will be optical fibre countrywide, 5G roll-out, spectrum allocation, e-passports, a digital rupee using blockchain technology that will leach out some of the millions of paper notes in circulation.  This is a brand new Indian idea, though China does have its digital currency already.

Green Bonds will finance environment friendly moves. Blended fuel (ethanol blend from sugar/molasses), and flexi-fuel enabled vehicles are coming up, with an additional tax per litre on those which must continue with unblended diesel, petrol, aviation fuel.

There is a new emphasis on solar power to take more load off thermal energy, and agri-forestry enhancements.

The government has bitten the bullet with a pathbreaking 30% tax on profits from ‘virtual digital assets’, that is  cryptocurrency - with no set-off for losses.

There are useful duty concessions on electronic industry parts and gems and jewellery for the precious, high-value end, rather than costume jewellery.

No concessions to speak of in direct and corporate taxes. This is a bold departure on the eve of five important state assembly elections. The government is signalling a fast-forward future and an attitude shift too.

The stock market backed the FM’s 9.2 % GDP growth projection and the futuristic feel to the budget with a near 1,000 point rise in the Sensex and 200 points on the Nifty. Other sectoral indices were all handsomely in the green. However, Post-budget speech, the indexes began to  wobble and fluctuate before rising up again as the Opposition expressed its disappointment with no sops at all.

GST is now totally IT enabled, working better than ever before, and as an aside the FM announced a collection of 1.41 lakh crore in January 2022, the highest ever so far.

The Chinese New Year, a lunar calendar event and massive cultural celebration , coincided this time with our union budget day. It is the Year of the Water Tiger. Like Indians, China considers the Tiger (The Royal Bengal Tiger), a symbol of strength, exorcising of evils, and bravery. It makes for an interesting motif, even though there is no mention of it in the excitement of scores of economic commentators and politicians on TV and the digital media this day. We will wait till tomorrow to see what print has to say.

 

(1,033 words)

February 1^st, 2022

For: Firstpost

Gautam Mukherjee