MUMBAI: Finance minister Nirmala Sitharaman today announced the proposals of the annual Union Budget 2022 and in a precarious situation where the economy is struggling with the impact of the Covid-19 third wave and marred by steep inflation, while she had focused on growth inducement but has avoided passing any benefits to individual taxpayers. 

In her fourth successive Budget speech, the FM announced that for the financial year 2022-2023 the government will significantly hike public expenditure by 35% from Rs 5.54 lakh crore in the current year to Rs 7.50 lakh crore. She said in her speech that it is an increase by more than 2.2 times the expenditure of 2019-20 and this outlay in 2022-23 will be 2.9 per cent of GDP. 

According to the FM with this investment outlay taken together with the provision made for the creation of capital assets through grants-in-aid to states, the effective capital expenditure of the central government is pegged at Rs 10.68 lakh crore for the year 2022-23, which will be about 4.1 per cent of GDP.

While the biggest takeaway from the budget is definitely capital spending with a focus on long term growth impetus it also hiked the fiscal deficit. The FM pegged the fiscal deficit at 6.4% for FY23, while the fiscal deficit for FY22 will settle at 6.9% of the GDP, higher than what most economists were expecting.

According to Dhiraj Relli, MD & CEO, HDFC Securities, while the budget is growth-inducing and does the heavy lifting by sharply increasing capital expenditure, the FY23 fiscal deficit has come in higher than expectations. "Let’s hope the interest rates and inflation do not remain high for long,” he said.

Among the five big infrastructure projects, the government has proposed expanding highways in the country by 25,000 kilometres, allocating Rs 60,000 crore to the 'Nal se Jal scheme' five river link projects across various states, an additional Rs 48,000 crore in the PM housing scheme, and boosting infrastructure development in the North East.

While the budget was big on investments and impetus for economic expansion, it was a big disappointment for the taxpayers as the FM made no reference to any change in India’s income tax slabs, nor did she tinker with any limits in income tax deductions like under section 80C, which would leave some cash in the hands of taxpayers. A little liquidity in the hands of individual taxpayers had the potential to fuel consumption and thereby support growth. 

On the taxation front, the FM has however introduced a far-reaching change as taxpayers shall now have an opportunity to correct any error/omission by filing an updated return within 2 years from the relevant assessment year.

While there is no relief to the taxpayers, on the other hand, the government brought virtual currencies like cryptocurrency and non-fungible tokens under the tax net by proposing taxing virtual assets at 30% and 1% TDS to be charged further on payments made using digital assets.

Although this by no means is a formal recognition of private cryptocurrency however this move would mean that it has not yet announced banning private cryptocurrency. The FM has however announced that the government is launching the Digital Rupee — a central bank digital currency (CBDC). 

The Reserve Bank of India will launch the CBDC from the upcoming fiscal year which will be considered a legal tender similar to a fiat currency issued in paper and is interchangeable with any other fiat currency.

On disinvestment, the FM said that the government has scaled down the revised estimate to Rs 78,000 crore for the current fiscal as against Rs 1.75 lakh crore at the Budget estimate level, while for 2022-23, the disinvestment receipts have been pegged at Rs 65,000 crore. 

The corporate world has largely welcomed the proposals of budget, Sanjiv Mehta, President of FICCI said that the FM has presented a forward-looking and growth-oriented budget that strengthens the drivers of long-term development. 

Anil Agarwal chairman, Vedanta Group said that the budget is growth-oriented and forward-looking and sets the stage for rapid progress post-pandemic. While Harsh Goenka, Chairman of diversified RPG Enterprises tweeted, "With today’s budget focussed on capex, digital and welfare - I can clearly imagine the future." 

According to Kiran Mazumdar-Shaw, Chairperson of Biocon Ltd, a very responsible and balanced budget delivered by the FM is setting the course for a strong and sustainable digital led economy and she added that the government must be commended on averting the temptation to announce populist measures.