To aid the recovery of an economy severely hit by the Covid-19 pandemic, the central Budget 2022-23 proposes a host of measures with four priority areas namely inclusive development, productivity enhancement, energy transition, and climate action. The budget appears to be impactful with a few misses. On the positive side, The GDP growth in 2021-22 is expected at 9.2%.
On the fiscal side, the buoyant GST revenues that stand at Rs.1, 38,394 in January 2022, indicate a sharp rebound of economic activity in the country. This positive development will certainly provide sufficient fiscal room for the central government to continue with an expansionary mode of public expenditure. The increase in outlay for capital expenditure to the tune of 35.4% which is 2.95% of the GDP is a welcome move.
Also, the scheme for financial assistance worth 1 lakh crore for capital investments under PM Gati Shakti, PM Gram Sadak Yojana, and various digital schemes is laudable. A sizable allocation of Rs. 60,000 crores to provide tap water connection to 3.8 crore households, the decision to bring 100% of 1.5 lakh Post Offices across the country on the core banking system, and the proposal to set up 75 banking units to encourage digital banking and FinTech in 75 districts will further strengthen the idea of inclusive growth, in a significant manner.
Further, the budget offers constructing 80 lakh houses for the identified beneficiaries of PM Awaz Yojana which received an outlay of Rs 48,000 crore rupees. On the employment front, the proposal of a digital ecosystem for skilling and livelihood which aims at the skill, reskill and upskill development of citizens via online training will help to enhance the productivity of the workforce in the country.
For infrastructure and manufacturing, several encouraging announcements have been made by the finance minister which includes, the expansion of the national highway network by 25,000 km during the financial year 2022-23, the formulation of PM Gati Shakti masterplan for expressways, 100 Gati Shakti terminals in the next three years and focuses on public investments to modernize infrastructure over the medium term. Also, the proposal to launch a blockchain-based digital Rupee and the introduction of a 30% tax on income from virtual digital assets will help the government to find alternative sources of revenue.
On the flip side, the budget disappointed the ‘middle class’ by not providing any significant change in the personal income tax slabs. A considerable reduction in personal income tax would have injected more disposable income in the hands ‘salaried class’ and further boosted the consumption demand in the economy substantially. An easy monetary policy coupled with enhanced consumption would certainly have positive spillover effects on the investment demand and employment.
Also, it is disappointing that the budget estimate for the Mahatma Gandhi National Rural Employment Guarantee Act stands only at 73000 crore rupees, which is 35% lower than the revised estimates of the previous year which stood at Rs 1.11 lakh crore. In a country like India, wherein inequality and rural poverty remains a sad reality, flagship programmes such as MGNREGA and Pradhan Mantri Awaz Yojana (PMJY) should not be considered as mere poverty alleviation programmes rather these schemes must be provided adequate fund allocation so that it can act as anti-dots against the rural poverty and economic slowdown.
(The author is an Assistant Professor at Sarla Anil Modi School of Economics, NMIMS)
