After some initial confusion about the timing of the Budget, Finance Minister Nirmala Sitharaman presented the Budget at the usual time, 11 am. In her shortest Budget Speech of 1 hour 31 minutes, the FM proposed a roadmap for robust economic growth in the next twenty-five years, referred to as Amrit Kaal by her.
Her vision was based on three goals: complementing headline growth with welfare measures, promoting a digital economy with climate change concerns in mind and garnering adequate public and private investment for various initiatives. The Budget does not have many distinguishing features – the FM herself said that the current Budget was building upon last year’s Budget’s initiatives.
Budget 2022 lays emphasis on infrastructure development, providing Rs 7.50 lakh crore for infrastructure as against last year’s provision of Rs 5.54 lakh crore. Capital expenditure would be further boosted by Rs.1 lakh crore which the States would be allowed to raise for capital expenditure through 50-year bonds. The Centre would raise additional resources for funding green infrastructure through Green Bonds.
The FM’s declared strategy is to provide employment by developing infrastructure, but this strategy may not yield results in the short-term, because infrastructure projects take time to become operational while the problem of unemployment is immediate. The FM also pinned hope on Productivity Linked Incentive for creating 60 lakh new jobs, and an additional production of Rs 30 lakh crore during the next five years.
There is a marked digital push in the Budget. The FM proposed issue of e-passports containing biometric data, in a small electronic chip, by next year. All post offices would have core banking solutions by the end of 2022. The Government would launch the Digital Ecosystem for Skilling and Livelihood (DESHStack e- portal) to empower citizens to skill, reskill or upskill through on-line training.
Similarly, the National Digital Health Ecosystem will be rolled out under Ayushman Bharat Digital mission which will incorporate digital registries of health providers and health facilities, unique health identity etc. Digital payments will be promoted and Digital Banking Units would be launched in 75 districts. Optical fibre would be laid in all villages by 2025 and villagers would have the same access to e-services, communication facilities, and digital resources as city dwellers.
The Budget also proposes interlinking of Udyam, e-Shram, National Career Service (NCS) and Atmanirbhar Skilled Employee-Employer Mapping (ASEEM) portals. The FM said that the proposed interlinking would make them more useful: “They will now perform as portals with live, organic databases, providing G2C, B2C and B2B services. These services will relate to credit facilitation, skilling, and recruitment with an aim to further formalise the economy and enhance entrepreneurial opportunities for all.”
After declaring crypto currency almost illegal, the FM has stated that the Reserve Bank of India would issue its own crypto currency ~ the Digital Rupee. The Budget proposes taxation of profits on sale of digital assets ~ mainly crypto currency and NonFungible Tokens (NFT) ~ at 30 per cent. This step was widely anticipated and much required because currently there is no mechanism to tax crypto currency profits.
Taxation rates and substantive taxation provisions have been left largely untouched. Tax benefits to startups and manufacturing companies has been extended by one year. A new concept of updation of Income-tax returns has been introduced. Due to extensive data mining by the Income-tax Department, it comes to know certain items of income, like interest on bank deposits or profit on sale of shares that a taxpayer may have omitted to mention in his Return of Income. There was a lengthy procedure to tax such income, but the Budget proposes that the taxpayer may file a return showing such income, paying the tax due and some additional tax, within three years from the end of the relevant financial year. The additional tax would be 25 per cent of the tax and interest payable if the Return is filed within two years of the end of the Financial Year, and 50 per cent, if filed thereafter.
Despite few substantive changes, the explanatory Memorandum to the Finance Act explaining the Direct and Indirect Tax provisions runs into 199 pages. Most of the amendments to the Income-tax Act have been made to get over the challenges to the Faceless Assessment Scheme pending before various Courts and to buttress the new assessment regime for search and seizure cases. Budget Expenditure for FY 2022-23 has been pegged at Rs 39.44 lakh crore against the Revised Estimate of Rs 37.70 lakh crore for FY 2021-22.
Tax revenues were buoyant in FY 2021- 22; against Budget Estimate of Rs.15.45 lakh crore, Revised Estimates show collection of Rs.17.65 crore. Consequently, Fiscal Deficit that was budgeted at 6.8 per cent for FY 2021-22, has been restricted to 6.9 per cent, which is commendable in this pandemic-hit year. The Government plans to reduce subsidies on food, fertiliser and petroleum to Rs 3.18 lakh crore in the coming year, down from the Revised Estimate of Rs 4.33 lakh crore, a drop of 26.6 per cent.
Another creditable step is to reduce the allocation for Central Sector Schemes from Rs 11.95 lakh crore to Rs.11.81 lakh crore, though allocation for Centrally Sponsored Schemes has increased. As pointed out repeatedly in these columns, the output of such Schemes should be rigorously monitored and the suboptimal ones should be axed. Some new initiatives have been proposed for education and agriculture.
The FM announced that the government will promote chemical-free natural farming throughout the country, with a focus on farmers’ land in 5 km wide corridors along the Ganga, in the first stage. This initiative is in continuation of the Zero Budget Natural Farming, first proposed in Budget 2020. Kisan Drones would be used for crop assessment, digitisation of land records, and spraying of insecticides. Public-private partnerships would be promoted for the delivery of digital and high-tech services to farmers across the country.
The Government will also establish a fund with blended capital raised under the co-investment model through NABARD to finance agricultural start-ups and rural enterprises. However, the allocation for agriculture has increased only marginally ~ from Rs.1.48 lakh crore to Rs 1.51 lakh crore ~ raising doubts about the sufficiency of funds for the new initiatives.
Lamenting the pandemic induced closure of schools that had made children in Government Schools, particularly in village areas, lose almost 2 years of schooling, the FM proposed to expand PM eVIDYA ‘one classone TV channel’ programme from 12 to 200 TV channels, that would enable all States to provide supplementary education in regional languages to students of first to twelfth classes. The FM also proposed 750 virtual labs in science and mathematics, and 75 skilling e-labs for simulated learning environment and development of high-quality e-content in all spoken languages for delivery via internet, mobile phones, TV and radio through Digital Teachers. Taking the initiative further the FM proposed establishment of a Digital University to provide access to world-class quality universal education to students across the country.
Basically sound, the Budget sometimes banks on hype. The FM has estimated GDP growth of the current year at 9.2 per cent which exceeds all estimates, including those of the Economic Survey. In her Budget Speech the FM stated that the PM Gati Shakti National Master Plan for multimodal connectivity, launched by the PM in October 2021, was her first priority. To recapitulate, PM Gati Shakti is a project to provide seamless connectivity for movement of people, goods and connectivity.
On its completion in 2024-25, Gati Shakti would have a network of 2 lakh kilometres of national highways, trains handling cargo of 1,600 million tonnes, doubling gas pipeline network to 35,000 km, and having 220 airports, airstrips and aerodromes. This ambitious project would subsume the National Infrastructure Pipeline of Rs 110 lakh crore. However, only Rs 20,000 crores have been allocated for building of highways and Rs 20,000 crore are to be raised by ‘innovative means,’ which raises doubts about the implementation of Gati Shakti in the coming year.
It would have been better if the Budget had focussed more on issues affecting the common man. For example, inflation and unemployment are not mentioned at all in the FM’s Budget speech. Co-operative Societies have got some relief from tax in the Budget but individuals and partnership firms continue to be taxed at double the rates of manufacturing companies. Expectations of the middle class regarding lower petrol prices, increased standard deduction, increased 80C limit etc. have all been belied. In conclusion, probably, the FM could have framed a kinder and more people-friendly Budget, for a nation ravaged by the Coronavirus pandemic.
(The writer is a retired Principal Chief Commissioner of Income-Tax)