While the markets gyrated as they started appreciating the implications of the Budget, the general feeling about this Budget is that it is completely relevant to the new India. An agile, confident, resilient, ‘atmanirbhar’ Bharat!
Key takeaways -
India will have a CBDC next year.
India recognises that NFTs and digital coins are assets and will tax them on sale appropriately. (The largest number of digital asset holders are in India. Their number exceeds the ROW number)
Digitisation will scale from rural to urban areas. A seamless, portalised, platform driven interaction will rapidly emerge.
Portalisation will be G-C, B-B and B-C.
Platforms will deliver digital services in the critical areas of health, education and all government services to Indian citizens. New tax return, reduced litigation, an opportunity to correct errors and a rationalisation of surcharge and disallowance of cess from taxable income all point to simplicity, clarity and ease of voluntary compliance.
Tax buoyancy will sustain as rates have remained unchanged. n Customs duties will continue to be an important and rationalised source of protection to Indian industry.
GST will be streamlined and enforcement through the digital backbone will lead to more formalisation of the economy and therefore higher revenues. (The FM gave the all-time high collection number for January 22 interrupting her Budget speech!)
A brand new, highly efficient and digital India can emerge if the external factors identified in the economic survey do not cripple the execution to this Budget.
We can look forward to growth and inclusive welfare, tech-enabled development, energy transition, climate action and a virtuous cycle of private investment being crowded in by public capex.
The elephants in the room are:
Inflation: Oil prices are way above our tolerance limits at $92 a barrel, shipping costs are making imports expensive, the constrained supply of semiconductors is causing rising consternation in the automobile sector, and the broken relationship with China is causing risks in the supply chain that are hard to mitigate. The Budget seeks to keep us on a path of fiscal rectitude: 6.4 per cent in ’22-’23 and < 4.5 per cent in ’25-’26. The glide path is visible! Our macros are also supportive of a balance between consumption and supply, as PLI schemes have been enhanced in scope. Extension of commencement dates for availing tax reductions are also a welcome supply side initiative.
Infrastructure: Here the Budget has exceeded all expectations. If all goes per plan, the Centre and states will outlay over Rs 10 lakh crore in capex and crowd in private investment, using PPPs.
The domestic green bonds, digital payments, clarity in land titles, the five-river linking plans and many other targeted interventions will change the entire thinking about infrastructure. 25,000km of highways, 400 new-generation Vande Bharat trains, multimodaltransport connectivity, and ropeways will all modernise infrastructure.
Agriculture: Drones, organic farming, post-harvest value addition, branding, fruit trees propagation, procurement support, hydro and solar power and land reforms will ignite the growth stuck at below 4 per cent today.
A really interesting word picture emerged as a corridor of trees along the Ganga was placed before us! Wasteland development, FPO support, and an outlay of over Rs 3 lakh crore in rural India augur well for purchasing power being enhanced. Consumption will follow.
The outlay on rural infrastructure for education, healthcare and availability of tap water for almost every family are likely to transform life in our rural areas.
Education and Health: Bringing back the lost two years of pandemic driven education loss is a most heart-warming initiative. That this is being done with a content-led, digital mode is truly inspired. Skill development is being given a digital, doorstep delivery focus. This is crucial as technology overwhelms all old occupations. The freedom to establish global university affiliates in GIFT city and the revamping of age-old syllabi are amazing initiatives. Telehealth, mental health, and Missions Shakti, Vatsala and Saksham Anganwadi are all massively creative initiatives. Post-pandemic, these interventions are the most citizen-centred actions. Universal basic services are likely to become available for the first time in India!
Financing the budget: Contained in the 35 per cent borrowing and other liabilities is a large trove of asset monetisation. These long-term instruments, when commingled with the proposed green bonds, will reduce the need for bank support to GSec issues.
In fact, the lendable resources of banks to private businesses will rise. This stock will also be fuelled by lower credit costs and a deep international interest in India.
As borrowings get calibrated, as is happening right now, the sequestered resource pool will become visible. With an eminently achievable disinvestment target of Rs 65,000 crore, the crowding in effect will be heightened. Also, there is a likelihood of savings rising as some ‘bad apples’ get divested and larger pools of dividends accrue.
In fact, this has created room for the MSME sector to receive larger debt support. The linking of all MSME portals will make significant resources available to this sector. Our take is that the panic in the fixed income market is a bit premature! From a geopolitical standpoint, we are keeping our markets open, our policies clear and easy to adopt, our ports and goods movements resilient and our responses agile.
Tackling the largest vaccination programme in the world, tackling the most citizen aspirational issues and providing for them through targeted IT and capex innovation are all a sign of a government on the move. Kudos to the FM for making India future-ready.
(The writer is a corporate leader based in Mumbai and is chairman, Shailesh Haribhakti Associates, and writes regularly on the Indian economy and public policy)
