In the Union Budget for 2022-23, the Finance Minister chose growth over inflation pushing the budget size to Rs. 39,449 billion which is 4.6% bigger than the previous year’s revised estimate.
What did the budget say?
The nominal GDP growth rate for 2022-23 is assumed at 11.1%.
As the real GDP growth rate for 2022-23 is estimated at 8-8.5% by the Economic Survey 2021-22, the implicit rate of inflation works out to 3.1-2.6%.
The RBI has to manage the massive market borrowing programme envisaged in the Budget - Rs 14.95 trillion (gross) in FY 22.
As a proportion of GDP at current prices, the Budget size stands at 15.3% compared with 16.2%in the previous year.
How was public expenditure promoted in the budget?
The Budget aims to strengthen the aggregate demand through public expenditure, and within it, through capital expenditure.
While revenue expenditure has gone up by less than 1%, capital expenditure has increased by nearly 25%.
This is in addition to the Rs. 1 trillion grant given to States to increase capital expenditure.
Significance- It will have a multiplier effect on income augmentation, employment generation, demand rejuvenation and credit demand.
This will also crowd in private investment.
Capital formation, both public and private, will provide a stepping stone for growth in both the short and long-term.
What about the digital focus given in the budget?
Digital budget- The Budget is a digital budget which starts from establishing a digital university to digital connectivity in the entire socioeconomic fabric.
Digital rupee- The decision that the central bank would be introducing a digital version of the rupee during FY 22-23 is welcome.
It is also confirmed that blockchain based distributed ledger technology will be deployed by the RBI to roll out the new age currency.
Use of blockchain in a distributed environment is heavily network dependent and may require a separate payment network and may lead to the RBI maintaining customer accounts.
Tax on virtual digital assets- The tax on virtual digital assets will enable the government to earn revenue while empowering income tax authorities to break new ground in reopening of closed cases.
It also allows taxpayers to file revised tax returns within 2 years having income from digital assets.
What is the government’s action on subsidies?
The expenditure programme shows significant slide in subsidies over the FY 22 revised estimates. This includes
fertilisers by 25%
food by 28%
petroleum by 11 %
What areas remain untouched by the budget 2022-23?
Personal income tax- The Budget contains no proposal on the personal income tax front, especially for the salaried class.
It should have revised the standard deduction or the tax slabs at least to neutralise the impact of inflation in the recent years.
Insurance sector- The under-penetration of life and health insurance in the country and the people’s need to increasingly go for health insurance cover, especially in the post-pandemic period is evident.
The Budget should have addressed the issue on priority basis and preferably through tax rebates.
Banking sector- There is no ground-breaking announcements for the banking sector too.
The good thing is that the Budget doesn’t propose any recapitalisation of public sector banks as it would have invited moral hazard risk.
