This is the second Budget in the midst of a pandemic that warranted careful manoeuvring between growth, inflation and expenditure. Finance Minister Nirmala Sitharaman has done a fine job by laying a long-term blueprint for the ‘Amrit Kal’ and has announced various short-term measures that will maintain the growth momentum or K-shaped recovery of the economy.
The continuity of spending on programmes like “Har Ghar Jal Mission” is positive as that single programme will be among the biggest achievements of this government at the time of the next general election. The focus on the use of IT delivery mechanisms to promote transparency and ease of living while reducing leakages across the government system will hopefully allow for better use of scarce resources. A reform that will hopefully receive more attention in the coming budgets is measures to reduce the extremely high level of food stocks that we are holding (4X buffer stock requirements). This approximately Rs 2 lakh crore in dead capital along with accelerated PSU disinvestment can possibly cover a large portion of the projected spending on capex needs.
During the pandemic, the government has done the heavy lifting on consumption as well as on the expenditure side. This trend continues with capital expenditure registering an increase of 35 per cent on yearly basis. This will provide much-required impetus to maintain the current growth rate of 8 per cent and above. This sharp recovery makes India the fastest growing country in the world among advanced economies as well as among the emerging markets. Both direct and indirect tax buoyancy has given enough fiscal space for the government to undertake infrastructure expansion rapidly. This should also help in addressing the employment issue that is plaguing the youth of this country. Also, it is reassuring to see the government embracing new technologies and identifying the star industries of the future.
Budget 2022 has taken a forward leap to establish trust-based governance, be it payments to MSMEs or simplification of Income Tax procedures for individuals. The proposed paperless, end-to-end online e-bill system will benefit the MSME sector. Besides, the Budget has a significant focus on digitisation and process simplification. For instance, e-passport, digital rupee, using blockchain technology for efficient use of land resources by the adoption or linkage with National Generic Document Registration System (NGDRS) with the ‘One-Nation One-Registration Software’ for a uniform process for registration and ‘anywhere registration’ of deeds and documents will facilitate ease of doing business.
According to the Periodic Labour Force Survey (PLFS), the female workforce participation has come down from 37 per cent to 16.1 per cent. This is a worrying statistic for our young country trying to reap the benefits of demographic dividends. If this fact is ignored, we might have to pay a heavy price for this in the coming future. In fact, we are already witnessing a rise in underage marriage of girl children in rural areas.
Another concerning issue is that the Budget has missed the hospitality and tourism sector. This is a sector that has borne the brunt of the pandemic. In a post-COVID world, tourism can be one of the driving forces for the economy and much more can be done to re-energise this sector, which is currently in ICU. The financial health of most states continues to be a matter of great concern and at some point there will have to be a national consensus on belt tightening to reduce wasteful expenditure and leakages across the system.
Nonetheless, increased capex, tax stability and no populist announcements have been important features of the Union Budget 2022. Indeed, it was not an easy task to carefully draft the Budget amidst the current situation – the Budget and the Economic Survey have almost completely ignored the international situation that may severely jeopardise our growth prospects in the coming months. Those international headwinds will need careful monitoring to ensure that they don’t disturb what promises to be a strong growth year ahead.
Overall, the Budget is very reassuring as frequent changes for a country of our size are not needed. The key as always will be execution.
Sudhir Mehta is Chairman and Managing Director, Pinnacle Industries Limited; President, Mahratta Chamber of Commerce, Industries and Agriculture-MCCIA. The views expressed in the article are those of the author and do not represent the stand of this publication.
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