Union budget 2022-23

Context: On February 1, 2022, the Union Finance Minister Nirmala Sitaraman presented the Union budget 2022-23 with an aims to lay the path for reforms over the next 25 years.

• The budget focuses on macro economic growth, energy transition, promoting digital economy, climate action, tech enabled development, crowding in private investment. 

Background

• Budget is a annual financial statement of the estimated receipts & expenditure of the government in respect of every financial year.
• Constitution of India under Article-112 has a provision for budget.
• Department of Economic Affairs, Ministry of Finance is the nodal body responsible for preparing the Budget.

Key Points

• This year, the Budget was paperless for the second time in a row, as the finance ministry had earlier notified. 
• The Union Budget 2022-23 would also be available on the Mobile App after the process of Union Budget presentation. 
• Ahead of reaching the Parliament, the finance minister posed with her tab containing the budget documents.

Key Highlights

• India's economic growth estimated at 9.2% to be the highest among all large economies.
• 60 lakh new jobs to be created under the productivity linked incentive scheme in 14 sectors. PLI Schemes have the potential to create an additional production of Rs 30 lakh crore.
• Metro rail systems across the country to be standardised as per Indian "condition and needs", in addition to being built with an innovative way of financing. 
• Separately, 400 new generation Vande Bharat trains with better efficiency will be brought in over the next three years. a The Budget focuses on promoting zero budget natural farming and discouraging so-called chemical-based agriculture.
• Entering Amrit Kaal, the 25 year long lead up to India @100, the budget provides impetus for growth along four priorities
• PM Gati Shakti; Inclusive Development; Financing of investments; Productivity Enhancement & Investment, Sunrise opportunities, Energy Transition, and Climate Action  among the four priority areas. 

For Infrastructure
The Finance Minister's 5 big infra push projects: 

• Highway expansion by 25,000 km
• Rs 60,000 crore on Nal se Jal scheme 
• Five river link projects across various states namely Damanganga-Pinjal; Par-Tapi-Narmada; Godavari-Krishna; Krishna-Pennar and Pennar-Cauvery
• 48,000 crore on PM housing scheme
• North East infrastructure development

Expansion of Emergency Credit Line Guarantee Scheme (ECLGS)

• Finance Minister Nirmala Sitharaman has expanded the Emergency Credit Line Guarantee Scheme (ECLGS) to expand the credit availability to MSMEs in the hospitality sector.
• The credit guarantee cover has been expanded by Rs 50,000 crore, bringing the total ECLGS scheme till date to Rs 5 lakh crore.

Digital Health Programme 

• The Centre will roll out an open platform for the national digital health ecosystem.
• This will use the unique health ID framework to provide universal healthcare. For mental health problems - worsened by the Covid-19 pandemic – a National Tele Mental Health Programme will be launched. 
• Nal Se Jal scheme: The government has allocated Rs 60,000 crore for Nal Se Jal scheme with an aim to cover 3.8 additional households with tap water. 

In Banking sector

• The Union Budget proposes to set up 75 digital banking units in 75 districts by scheduled commercial banks.
• There will also be a focus on using payment platforms that are economical and user-friendly.
• Budget has proposed to introduce Digital Rupee using blockchain and other tech to be issued by RBI starting 2022-23. 

PM Gati Shakti plan 

• The PM Gati Shakti plan will be driven by roads, railways, airports, ports, mass transport, waterways and logistics infrastructure. 
• PM Gati Shakti masterplan 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.
• Rs 20,000 crore will be invested through various sources in addition to public investment.

Reforming Special Economic zones (SEZ) 

• Govt. proposed to replace the existing law governing special economic zones (SEZs) with a new legislation to enable States to become partners in ‘Development of Enterprise and Service Hubs’.
• It will boost exports, enhance competitiveness and remove anomalies in a sector that has been overlooked since the withdrawal of direct tax benefits, said officials at manufacturing firms and export promotion council.

Battery swapping policy 

• A battery swapping policy will be brought out and interoperability standards will be formulated for the electric vehicles sector. Private sector will be encouraged to develop efficient solutions.

Over 5G

• The Finance Minister has announced the auction of 5G spectrum in 2022.
• With this, India will join other countries around the world which have begun rolling of 5G services.

Discom Sector

• The government is set to introduce a framework to allow consumers to choose from more than one power distribution company, and end monopolies in the sector.
• The Budget proposes to allocate additional Rs 19,500 crore for PLI for manufacturing high efficiency solar modules with priority on fully integrating manufacturing of various components. 

Parvat Mala 

• The Parvat Mala announcement with 8 ropeway projects in 2022-23. This will ease transport linked congestion in hilly areas and push tourism. 

MAKE IN INDIA PUSH FOR DEFENCE

• 68% of defence procurement capital to be set for domestic industry
• 25% of defence R&D budget earmarked for private industry, startups and academia
• Pvt industry will be encouraged to take up the design and development of military platforms
• Def Equipment in collaboration with DRDO and other organizations through SPV model

In Energy

• FM announced that the Ujjwala scheme, which is aimed at providing clean cooking fuel to poor households through LPG connections, would be extended to a further one crore households.
• The government has announced that an independent system operator in the natural gas transmission sector will be set up for booking and coordination of common carrier capacity to ensure unbiased allocation of natural gas transportation capacity. 

Fiscal Deficit

• The Finance Minister has announced only a marginal slippage - as against a budget target of 6.8% of GDP in 20221-22, the fiscal deficit is estimated at 6.9%. 
• Next year, in line with the glide path of consolidation, the Centre has pegged to bring down its deficit to 6.4%.

In Railways

• India will manufacture 400 new, energy-efficient Vande Bharat trains in the next three years, 
• That apart, with an eye on farmers, the rail sector will also develop “One Station One Product", which will leverage local produce carried on the railways.
• Bringing out new products, Railways will also roll out postal railways for carriage of parcels, giving a thrust to a new business area.

Tax System

• Both Centre and states govt employees' tax deduction limit should be increased from 10% to 14% to help the social security benefits of state govt employees and bring them at par with the Central govt employees. 
• Surcharge on transfer of any long-term capital gains has been capped at 15%. 
• Minimum Alternate Tax rate for cooperatives at 18.5% has been reduced to bring it with parity of the rate for corporates. Also, the surcharge for cooperatives has been reduced to 7% from 12% for total income ranging between Rs 1-10 crore.

The outlay for public capital expenditure has been stepped up sharply by 35.4% from Rs 5.54 lakh crore to Rs 7.50 lakh crore in 2022-23. This outlay will be 2.9% of the GDP.

In Crypto

• Ending the ambiguity over the taxation of gains stemming from investments in cryptocurrency, gains from such investments will be levied at 30%. 
• However, losses on account of such investments will not be allowed to be set off.
• However, Taxing income doesn't give private cryptos legitimacy.

For Education

• Building Smart India With Quality Skills
• Digital University with Universal Education
• Launch of DESH-Stack E-Portal: A Digital Ecosystem for Skilling and Livelihood
• High Quality E-Content through Digital Teachers
• 'One Class One TV Channel Programme Expanded from 12 to 200 TV Channels
• Startups to Facilitate Drone Shakti for Drone-As-A-Service
• 750 Virtual Labs in Science & Mathematics
• 75 Skilling E-Labs for Simulated Learning Environment

What are the changes related to income tax in this Budget?

• There were no major changes in income tax slabs in the Budget 2022. 
• Tax returns can now be revised for omission and mistakes including declared income not reported.
• However, the government did allow a two-year window for taxpayers to correct their filings for a particular assessment year.

Key IMPACTS
For metro standardization:

• Currently, two metro rail systems operate in the country based on gauge and with multiple rolling stock vendors.
• Standardization would help in lowering costs and exports 

Expansion of ECLGS

• An earlier report by economists from SBI had highlighted how the scheme had prevented lakhs of MSMEs from being downgraded to NPA (non-performing loan) category.

For Nal se Jal Scheme

• Capex push, and a concerted rural focus. 

For Digital currency

• This takes forward the government's digital inclusion agenda. 

For PM Gati Shakti and other infra programmes

• The expansion of highways network and building of new expressways is likely to help connect smaller towns around metro cities in a more efficient manner.
• This will help take off the load on resources and distribute it more evenly, help lower congestion around urban centres. 

For Battery Swapping policy

• The battery swapping policy to mitigate concerns over space crunch for expanding EV infrastructure. 
• Make EVs more viable and lower range anxiety for buyers

Choice over power distribution companies

• The government is aiming to reform the sector often described as the weak link in India's power sector through competition. 
• The Centre had earlier announced intentions to introduce an amendment to the Electricity Act to delicense the power distribution sector but had not introduced the Bill in earlier sessions after it faced opposition from some state governments.
• The provision will offer choice to consumers in the distribution sector, eventually aimed at giving consumers the choice of picking the utility of their choice among multiple service providers. 

Expansion of PLI Scheme

• This is a step in direction of achieving 280 GW of installed solar capacity by 2030.

Increase in capital expenditure

• The government believes public investment will be necessary to support private investment that will in turn create demand. Private investments are still lagging.

Parvat Mala

• This will ease transport linked congestion in hilly areas and push tourism.

Digital Currency

• Introduction of central bank digital currency to boost digital economy, and lays down a solid plan of the government to have a public digital currency. 
• Much needed clarity to investors in various cryptocurrencies. 
• Earlier, the government had also announced the introduction of a digital rupee based on the blockchain technology.

For Natural Gas

• Aimed at addressing concerns of bias in allocation of gas transportation capacity by players such as GAIL involved in the transportation of natural gas.

Key Challenges

• Number of centrally sponsored schemes cut by half
• Overall allocation for agriculture has risen marginally but schemes for crop insurance, MSP have seen a dip in funds this budget
• No discussion over MSP
• No mention of MGNREGA, Defence Sector
• The allocation of money to agricultural education and research has been reduced 

Zero Budget Natural farming

• While nice-sounding, whether these will be adopted by farmers on the ground remains to be seen. 
• Lowyields and no premium realisations on organic produce will be a deterrent for farmers.
• Also, we will need to see whether the focus on natural farming is going to be a prelude to rationalisation of subsidies on urea, DAP and other chemical fertilisers.

Over 5G

• There are several issues that would need to be considered, foremost amongst which is the price of spectrum. 
• There have been repeated demands to reconsider the pricing of spectrum, lowering the base price. 
• Questions have been raised whether private players have the financial muscle to place exorbitant bids.