Summary of Union Budget 2022-23
India’s economic growth in the current year is estimated to be 9.2 per cent, highest among all large economies. The overall, sharp rebound and recovery of the economy from the adverse effects of the pandemic is reflective of our country’s strong resilience. This was stated by Union Minister for Finance and Corporate Affairs while presenting the Union Budget in Parliament.
GS III- Indian Economy
Dimensions of this Article:
- Budget at a glance
- Productivity Linked Incentive Schemes
- PM GatiShakti
- Agriculture and Food Processing
- Accelerating growth of MSME
- Prime Minister’s Development Initiative for NorthEast, PM-DevINE
- Productivity Enhancement and Investment
- Transition to Carbon neutral economy
- Central Bank Digital Currency
- Financing of Investment
- Trends in Deficit
- Tax Proposals
- Gems and Jewellery sector
Budget at a glance:
- The Finance Minister said, India is celebrating Azadi ka Amrit Mahotsav and it has entered into Amrit Kaal, the 25-year-long leadup to India@100, the government aims to attain the vision of Prime Minister outlined in his Independence Day address and they are:
- Complementing the macro-economic level growth focus with a micro-economic level all-inclusive welfare focus,
- Promoting digital economy & fintech, technology enabled development, energy transition, and climate action, and
- Relying on virtuous cycle starting from private investment with public capital investment helping to crowd-in private investment.
- Since 2014, the government’s focus has been on empowerment of citizens, especially the poor and the marginalized and measures have been taken to provided housing, electricity, cooking gas, and access to water.
- The government also have programmes for ensuring financial inclusion and direct benefit transfers and a commitment to strengthen the abilities of poor to tap all opportunities.
Focus Areas of Budget 2022
- PM Gati Shakti
- Inclusive Development
- Productivity Enhancement and Investment
- Financing of Investment
Productivity Linked Incentive Schemes:
The Finance Minister informed that the Productivity Linked Incentive in 14 sectors for achieving the vision of AtmaNirbhar Bharat has received excellent response, with potential to create 60 lakh new jobs, and an additional production of Rs 30 lakh crore during next 5 years.
Dwelling on the issue of implementation of the new Public Sector Enterprise policy,
- the strategic transfer of ownership of Air India has been completed,
- the strategic partner for NINL (Neelanchal Ispat Nigam Limited) has been selected,
- the public issue of the LIC is expected shortly and others too are in the process for 2022-23.
- It is a transformative approach for economic growth and sustainable development.
- The approach is driven by seven engines, namely, Roads, Railways, Airports, Ports, Mass Transport, Waterways, and Logistics Infrastructure. All seven engines will pull forward the economy in unison.
- These engines are supported by the complementary roles of Energy Transmission, IT Communication, Bulk Water & Sewerage, and Social Infrastructure.
- Finally, the approach is powered by Clean Energy and Sabka Prayas – the efforts of the Central Government, the state governments, and the private sector together – leading to huge job and entrepreneurial opportunities for all, especially the youth.
- Similarly, PM GatiShakti Master Plan for Expressways will be formulated in 2022-23 to facilitate faster movement of people and goods.
- The National Highways network will be expanded by 25,000 km in 2022-23 and Rs 20,000 crore will be mobilized through innovative ways of financing to complement the public resources.
- She added that contracts for implementation of Multimodal Logistics Parks at four locations through PPP mode will be awarded in 2022-23.
- In Railways,‘One Station-One Product’ concept will be popularized to help local businesses & supply chains. Moreover, as a part of Atmanirbhar Bharat, 2,000 km of network will be brought under Kavach, the indigenous world-class technology for safety and capacity augmentation in 2022-23.
- Four hundred new-generation Vande Bharat Trains with better energy efficiency and passenger riding experience will be developed and manufactured
- One hundred PM GatiShakti Cargo Terminals for multimodal logistics facilities will be set up during the next three years.
Agriculture and Food Processing
- Chemical-free Natural Farming will be promoted throughout the country, with a focus on farmers’ lands in 5-km wide corridors along river Ganga, at the first stage.
- Use of ‘Kisan Drones’ will be promoted for crop assessment, digitization of land records, spraying of insecticides, and nutrients.
- To reduce dependence on import of oilseeds, a rationalised and comprehensive scheme to increase domestic production of oilseeds will be implemented.
- As 2023 has been announced as the International Year of Millets, the government announced full support for post-harvest value addition, enhancing domestic consumption, and for branding millet products nationally and internationally.
- Implementation of the Ken-Betwa Link Project, at an estimated cost of Rs 44,605 crore will be taken up aimed at providing irrigation benefits to 9.08 lakh hectare of farmers’ lands, drinking water supply for 62 lakh people, 103 MW of Hydro, and 27 MW of solar power.
- Allocations of Rs 4,300 crore in RE 2021-22 and Rs 1,400 crore in 2022-23 have been made for this project.
- Draft DPRs of five river links, namely Damanganga-Pinjal, Par-TapiNarmada, Godavari-Krishna, Krishna-Pennar and Pennar-Cauvery have been finalized and once a consensus is reached among the beneficiary states, the Centre will provide support for implementation.
Accelerating growth of MSME
- The Emergency Credit Line Guarantee Scheme (ECLGS) has provided much-needed additional credit to more than 130 lakh MSMEs to help them mitigate the adverse impact of the pandemic.
- The hospitality and related services, especially those by micro and small enterprises, are yet to regain their pre-pandemic level of business and after considering these aspects, the ECLGS will be extended up to March 2023.
- Its guarantee cover will be expanded by Rs 50,000 crore to total cover of Rs 5 lakh crore, with the additional amount being earmarked exclusively for the hospitality and related enterprises.
- Similarly, Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) scheme will be revamped with required infusion of funds.
- This will facilitate additional credit of Rs 2 lakh crore for Micro and Small Enterprises and expand employment opportunities.
- The Raising and Accelerating MSME Performance (RAMP) programme with outlay of Rs 6,000 crore over 5 years will be rolled out to make the MSME sector more resilient, competitive and efficient.
- Udyam, e-Shram, NCS and ASEEM portals will be interlinked and their scope will be widened.
- Dwelling on the subject of Skill development and Quality Education, Startups will be promoted to facilitate ‘Drone Shakti’ through varied applications and for Drone-As-A-Service (DrAAS).
- In select ITIs, in all states, the required courses for skilling will be started.
- In vocational courses, to promote crucial critical thinking skills, to give space for creativity, 750 virtual labs in science and mathematics, and 75 skilling e-labs for simulated learning environment, will be set-up in 2022-23.
- To impart supplementary teaching and to build a resilient mechanism for education delivery,‘one class-one TV channel’ programme of PM eVIDYA will be expanded from 12 to 200 TV channels and this will enable all states to provide supplementary education in regional languages for classes 1-12.
- A Digital University will be established to provide access to students across the country for world-class quality universal education with personalised learning experience at their doorsteps.
- This will be made available in different Indian languages and ICT formats.
- The University will be built on a networked hub-spoke model, with the hub building cutting edge ICT expertise. The best public universities and institutions in the country will collaborate as a network of hub-spokes.
- Under Ayushman Bharat Digital Mission, an open platform for the National Digital Health Ecosystem will be rolled out and it will consist of digital registries of health providers and health facilities, unique health identity, consent framework, and universal access to health facilities.
- ‘National Tele Mental Health Programme’ will be launched for better access to quality mental health counselling and care services.
- This will include a network of 23 tele-mental health centres of excellence, with NIMHANS being the nodal centre and International Institute of Information Technology-Bangalore (IIITB) providing technology support.
Prime Minister’s Development Initiative for NorthEast, PM-DevINE
- PM-DevINE will be implemented through the North-Eastern Council.
- An initial allocation of Rs. 1,500 crore will be made for the new scheme.
- It will fund infrastructure, in the spirit of PM GatiShakti, and social development projects based on felt needs of the North-East.
- However, it will not be a substitute for existing central or state Schemes.
- While the central ministries may also pose their candidate projects, priority will be given to those posed by the states.
- This will enable livelihood activities for youth and women
- This will also fill the gaps in various sectors.
Productivity Enhancement and Investment
- In 2022, 100 per cent of 1.5 lakh post offices will come on the core banking system enabling financial inclusion and access to accounts through 11 net banking, mobile banking, ATMs, and also provide online transfer of funds between post office accounts and bank accounts.
- This will be helpful, especially for farmers and senior citizens in rural areas, enabling interoperability and financial inclusion.
- To mark 75 years of independence, the government has proposed to set up 75 Digital Banking Units (DBUs) in 75 districts of the country by Scheduled Commercial Banks to ensure that the benefits of digital banking reach every nook and corner of the country in a consumer-friendly manner.
- The issuance of e-Passports using embedded chip and futuristic technology will be rolled out in 2022-23 to enhance convenience for the citizens in their overseas travel.
- The Finance Minister announced that for developing India specific knowledge in urban planning and design, and to deliver certified training in these areas, up to five existing academic institutions in different regions will be designated as centres of excellence. These centres will be provided endowment funds of Rs 250 crore each.
- The animation, visual effects, gaming, and comic (AVGC) sector offers immense potential to employ youth and therefore an AVGC promotion task force with all stakeholders will be set-up to recommend ways to realize this and build domestic capacity for serving our markets and the global demand.
- Telecommunication in general, and 5G technology in particular, can enable growth and offer job opportunities. The required spectrum auctions will be conducted in 2022 to facilitate rollout of 5G mobile services within 2022- 23 by private telecom providers.
- A scheme for design-led manufacturing will be launched to build a strong ecosystem for 5G as part of the Production Linked Incentive Scheme.
- The Government reiterates committed to reducing imports and promoting AtmaNirbharta in equipment for the Armed Forces.
- 68 per cent of the capital procurement budget will be earmarked for domestic industry in 2022-23, up from 58 per cent in 2021-22.
- Defence R&D will be opened up for industry, startups and academia with 25 per cent of defence R&D budget earmarked.
- Referring to Sunrise Opportunities, Artificial Intelligence, Geospatial Systems and Drones, Semiconductor and its eco-system, Space Economy, Genomics and Pharmaceuticals, Green Energy, and Clean Mobility Systems have immense potential to assist sustainable development at scale and modernize the country.
- They provide employment opportunities for youth, and make Indian industry more efficient and competitive.
- To facilitate domestic manufacturing for the ambitious goal of 280 GW of installed solar capacity by 2030, an additional allocation of RS 19,500 crore for Production Linked Incentive for manufacture of high efficiency modules, with priority to fully integrated manufacturing units from polysilicon to solar PV modules, will be made.
Transition to Carbon neutral economy:
- The Public investment must continue to take the lead and pump-prime the private investment and demand in 2022-23
- The outlay for capital expenditure in the Union Budget is once again being stepped up sharply by 35.4 per cent from Rs 5.54 lakh crore in the current year to Rs 7.50 lakh crore in 2022-23.
- This has increased to more than 2.2 times the expenditure of 2019-20 and this outlay in 2022-23 will be 2.9 per cent of GDP.
- With this investment taken together with the provision made for creation of capital assets through Grants-in-Aid to States, the ‘Effective Capital Expenditure’ of the Central Government is estimated at Rs 10.68 lakh crore in 2022-23, which will be about 4.1 per cent of GDP.
- As a part of the government’s overall market borrowings in 2022-23, sovereign Green Bonds will be issued for mobilizing resources for green infrastructure.
- The proceeds will be deployed in public sector projects which help in reducing the carbon intensity of the economy.
Central Bank Digital Currency
- The Government proposed to introduce Digital Rupee, using blockchain and other technologies, to be issued by the Reserve Bank of India starting 2022-23 for more efficient and cheaper currency management system.
Financing of Investment:
- Reflecting the true spirit of cooperative federalism, the Central Government enhanced the outlay for the ‘Scheme for Financial Assistance to States for Capital Investment’ from Rs 10,000 crore in the Budget Estimates to Rs 15,000 crore in the Revised Estimates for the current year.
- Moreover, for 2022-23, the allocation is Rs 1 lakh crore to assist the states in catalysing overall investments in the economy.
- These fifty-year interest free loans are over and above the normal borrowings allowed to the states.
- This allocation will be used for PM GatiShakti related and other productive capital investment of the states.
- In accordance with the recommendations of the 15th Finance Commission, the states will be allowed a fiscal deficit of 4 per cent of GSDP of which 0.5 per cent will be tied to power sector reforms, for which the conditions have already been communicated in 2021-22.
Trends in Deficit:
- The revised Fiscal Deficit in the current year is estimated at 6.9 per cent of GDP as against 6.8 per cent projected in the Budget Estimates.
- The Fiscal Deficit in 2022-23 is estimated at 6.4 per cent of GDP, which is consistent with the broad path of fiscal consolidation announced by her last year to reach a fiscal deficit level below 4.5 per cent by 2025-26.
- The Union Budget 2022-23, while continuing with the declared policy of stable and predictable tax regime, intends to bring more reforms that will take ahead the vision to establish a trustworthy tax regime.
- The proposals relating to taxes and duties will further simplify the tax system, promote voluntary compliance by taxpayers, and reduce litigation.
On the Direct Tax side,
- The budget allows taxpayers to file updated income tax return within 2 years for correcting errors.
- It also provides tax relief to persons with disability.
- The budget also reduces Alternate minimum tax rate and surcharge for cooperatives.
- As an incentive for startups, period of incorporation of eligible startups has been extended by one more year.
- The budget proposes to increase tax deduction limit on employer’s contribution to NPS account of state government employees to bring parity with central government employees.
- Newly incorporated manufacturing entities will be incentivized under concessional tax regime.
- Income from transfer of virtual assets will be taxed at 30%.
- The budget proposes better litigation management to avoid repetitive appeals.
On the Indirect tax side,
- The Customs administration in Special Economic Zones will be fully IT driven.
- It provides for phasing out of concessional rates in capital goods and project imports gradually and apply a moderate tariff of 7.5%.
- The budget underlines review of customs exemptions and tariff simplification, with more than 350 exemptions proposed to be gradually phased out.
- It proposes that customs duty rates will be calibrated to provide a graded structure to facilitate domestic electronics manufacturing.
- Rationalization of exemptions on implements and tools for agri sector manufactured in India will be undertaken.
- Customs duty exemption to steel scrap will be extended.
- Unblended fuel will attract additional differential excise duty.
- In the field of electronics, Customs duty rates are being calibrated to provide a graded rate structure to facilitate domestic manufacturing of wearable devices, hearable devices and electronic smart meters.
- Duty concessions are also being given to parts of transformer of mobile phone chargers and camera lens of mobile camera module and certain other items.
Gems and Jewellery sector:
- To give a boost to the Gems and Jewellery sector, Customs duty on cut and polished diamonds and gemstones is being reduced to 5 per cent.
- To facilitate export of jewellery through e-commerce, a simplified regulatory framework shall be implemented by June this year.
- To disincentivise import of undervalued imitation jewellery, the customs duty on imitation jewellery is being prescribed in a manner that a duty of at least Rs 400 per Kg is paid on its import.
- Customs duty on certain critical chemicals namely methanol, acetic acid and heavy feed stocks for petroleum refining are being reduced, while duty is being raised on sodium cyanide for which adequate domestic capacity exists.
- Duty on umbrellas is being raised to 20 per cent.
- Exemption to parts of umbrellas is being withdrawn.
- Exemption is also being rationalised on implements and tools for agri-sector which are manufactured in India.
- Customs duty exemption given to steel scrap last year is being extended for another year.
- Certain Anti- dumping and CVD on stainless steel and coated steel flat products, bars of alloy steel and high-speed steel are being revoked.
- To incentivise exports, exemptions are being provided on items such as embellishment, trimming, fasteners, buttons, zipper, lining material, specified leather, furniture fittings and packaging boxes that may be needed by bonafide exporters of handicrafts, textiles and leather garments, leather footwear and other goods.
- Duty is being reduced on certain inputs required for shrimp aquaculture so as to promote its exports.
- Blending of fuel is a priority of this Government. To encourage the efforts for blending of fuel, unblended fuel shall attract an additional differential excise duty of Rs 2/ litre from the 1st day of October 2022.
-Source: The Hindu, PIB