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Budget Analysis| Infra focused budget

Continuing focus on the infrastructure development, honorable Finance Minister Nirmala Sitharaman today presented a growth oriented budget with major focus on infrastructure. Major highlight of the budget was the massive allocation of around Rs. 7.5lakh crore for capex spending, which is 35.4% higher on yearly basis. With private investment missing or in initial stage of recovery, this government’s action will crowd-in and in some way stabilize private investment. Another key highlight was the extension of tax incentive by one more year for the newly incorporated manufacturing ( on a concessional tax regime of 15% tax rate).

However, based on our expectations there were certain shortcoming like absence of consumption stimulus (by way of rationalization of personal tax regime). Relatively lower or same allocations towards Mahatma Gandhi National Rural Employment Guarantee (MGNREG) program and the Pradhan Mantri Kisan Samman Nidhi (PM-Kisan). Revised fiscal deficit for FY22 is estimated at 6.9% (v/s 6.8 budgeted), while it is estimated at 6.4% for FY23.

Key announcements of the budget:

• PM GatiShakti Master Plan for Expressways to be formulated in FY23 for facilitating faster movement of people and goods. The national highways network to be expanded by 25,000 kms in FY23. Also 100 PM GatiShakti Cargo Terminals for multimodal logistics facilities will be developed during the next three years.

• To ease the pain of the micro & small enterprises and of the hospitality & related services, the government has extended the Emergency Credit Line Guarantee Scheme by up to Mar. 2023, while its guarantee cover too is expanded by Rs. 50,000cr to a total cover of Rs. 5lakh crore.

• Credit Guarantee Trust for Micro & Small Enterprises scheme to be revamped with required infusion of funds to facilitate additional credit of Rs. 2lakh crore for Micro & Small Enterprises.

• Allocation towards Har Ghar, Nal Se Jal scheme was Rs. 60,000cr with an aim to cover 3.8cr household in FY23.

• Rs. 48,000cr has been allotted for the PM Awas Yojana (both rural and urban).

• To boost EV ecosystem, a battery swapping policy will be brought and an inter-operability standards will be formulated. The private sector will be encouraged to develop sustainable and innovative business models for ‘Battery or Energy as a Service’.

• 5G spectrum auctions will be conducted in 2022 to facilitate rollout of 5G mobile services in FY23 by the private telecom providers.

• With focus on reducing imports and promoting AtmaNirbharta in equipments for the armed forces, the government is targeting 68% of the capital procurement from the domestic players in FY23, up from 58% in FY22.

• An additional allocation of Rs. 19,500cr for the PLI for manufacture of high efficiency modules, with priority to fully integrated manufacturing units from polysilicon to solar PV modules.

• The outlay for capital expenditure is up sharply by 35.4% from Rs. 5.54lakh crore in FY22 to Rs. 7.50lakh crore in FY23.

• To give a boost to digital economy, the government is likely to come up with Central Bank Digital Currency.

• To boost the true spirit of cooperative federalism, the central government has hiked the allocation towards the ‘Scheme for Financial Assistance to States for Capital Investment’ from Rs. 15,000cr in FY22RE to Rs. 1lakh crore for FY23.

• Allocation to the transport projects at Rs. 3.5lakh crore in FY23 as compared to Rs. 3.25lakh crore in FY22RE.

• Any income from the transfer of any virtual digital asset shall be taxed at the rate of 30%. Surcharge on long-term capital gains has been capped at 15%.

• Fertilizer and food subsidy at Rs. 1.05lakh crore and Rs. 2.06lakh crore, respectively, in FY23 as compared to Rs. 1.4lakh crore and Rs. 2.86lakh crore in FY22RE.

• Disinvestment target for FY23 is set at Rs. 65,000cr as compared to Rs. 78,000cr in FY22RE.

• Overall the budget size has increased from Rs. 37.7lakh crore (FY22RE) to Rs. 39.4lakh crore in FY23. Gross budget borrowing is estimated at Rs. 14.95lakh crore.

• The revised fiscal deficit in the current year is estimated at 6.9% of the GDP as against 6.8% projected. Moreover, FY23 fiscal deficit is estimated at 6.4% of GDP.

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