Finance Minister Nirmala Sitharaman presented the Union Budget 2022 on February 1st, laying the foundation for steering the economy over the next 25 years. The Budget is based on 4 pillars – PM Gatishakti for economic growth and sustainable development; inclusive development; productivity enhancement and investments; financing of investments.
The outlay for public capital expenditure has been increased by 35.4 per cent to INR 7.50 lakh crore in 2022-23 from INR 5.54 lakh crore in 2021-2022. The outlay will be 2.9 per cent of the GDP.
MANUFACTURING
The Budget announced several measures to boost domestic manufacturing.
Additional INR 19,500 crore for PLI for manufacturing high-efficiency solar modules will be allocated to realize full integration of manufacturing of various components. This will boost the domestic module manufacturing industry and contribute towards reaching the goal of 280 GW of installed solar capacity by 2030. The design-led manufacturing in 5G will be launched as a PLI Scheme in the upcoming fiscal year to build a strong ecosystem for the next generation technology.
To promote electronics manufacturing across wearables, hearables and specific mobile phone components, the concessions in customs duty for certain consumer electronic devices was announced. This will also improve the cost effectiveness of companies within the telecom sector, which have been facing a supply chain and component shortage.
68% of the capital procurement budget of the defence sector has been earmarked for the domestic industry. This will boost domestic defence manufacturing and reduce dependence on imports.
INFRASTRUCTURE
The Finance Minister laid downs the blueprint for PM GatiShakti’s crucial role in pulling the economy forward.
The Budget announced the formulation of the PM Gati Shakti Masterplan for expressways in 2022-23. It also mentioned that the national highways network will be expanded by 25,000 km on which INR 20,000 crore will be spent. The expansion of highways and building of new expressway are expected to facilitate faster movement of people and goods and to improve connectivity for smaller towns around metro cities.
Development of 100 PM GatiShakti Cargo Terminals for multimodal logistics facilities over the next 3 years was also announced. Additionally, 4 Multimodal Logistics Park through PPP will be awarded in 2022-23. This is expected to boost new warehousing and logistics facilities across India.
The Budget also announced that the projects in the National Infrastructure Pipeline, pertaining to roads, railways, airports, ports, mass transport, waterways, and logistics infrastructure will be aligned with the PM Gati Shakti Framework.
Around 60 km of ropeway projects will also be undertaken in 2022-23 to facilitate movement under the Parvat Mala project to ease transport linked congestion in hilly areas and push tourism.
FINANCING
The leading role of public investments in stimulating private investment levels and creating demand in the coming financial year was one of the central themes of this year’s Budget.
To further enable states in enhancing their capital investment for creating productive assets and generating remunerative employment, the outlay of the ‘Scheme for Financial Assistance to States for Capital Investment’ has been increased from INR 10,000 crore in BE 2021-22 to INR 15,000 crore in RE 2021-22. The Hon’ble FM proposed to allocate INR 1 lakh crore to assist the States in catalysing overall investments in the economy for 2022-23. These fifty-year interest free loans are over and above the normal borrowings allowed to the states.
To attract investors to the domestic green bond market and to create a long-term financing avenue for private sector players, the Budget mentioned the issuance of 'green bonds' to fund green infrastructure projects, the proceeds of which will be used for public sector projects.
To encourage the growth of deep-tech, digital economy, agri-tech, pharma and climate action, described as sunrise sectors, the Budget announced promotion of thematic funds for blended finance with the government share limited to 20 per cent and managed by private fund managers.
Moreover, to scale up investments in the Venture Capital and Private Equity domain, an expert committee will be set up to examine regulatory and other frictions that impede investments and suggest appropriate measures to address the same.
EASE OF DOING BUSINESS
Promoting the idea of ‘trust-based governance’, the Budget announced the launch of the next phase of Ease of Doing Business EODB 2.0. The new phase will include active involvement of the states, digitisation of manual processes, integration of central and state level systems through IT bridges, IT based management of land records, establishment of C-PACE to facilitate voluntary winding up of companies and standardization and removal of overlapping compliances.
This article is co-authored by Chitra Negi Jain and Arushi Tandon.
