Futuristic Budget 2022-23

Definitely, this budget is not a popular budget and no way can be called as an election budget. It is a budget for Futuristic growth. — Anil Javalekar

Budgets are becoming more and more thought provoking and loosing its glamor in the process. Earlier, budgets were waited for days to come expecting tax and tariff reliefs and announcements of popular welfare and direct benefit schemes. The urban middleclass additionally expected some rail travel concessions and reduction in prices of their favorite consumer goods. Industrialists waited for incentives for more profits and cheap financial facilities apart from low excise duties for their products. Farmers also waited for loan waivers and additional concessional loans and increased subsidies on agriculture inputs. All this has now gone and this budget for 2022-23, talked nothing of sort, not even mentioned anything in the budget speech, forget giving some relief somewhere to some. The budget, however, can be termed as futuristic as it talks more about future and strategizing for better. This budget, therefore, needs to be analyzed for its strategies for future and not for its popular announcements.  

The vision

The good part of this government is that it is remembering its promises made in election manifestoes and doing something to fulfil it. The Finance minster, therefore, in this budget, tried to define her party’s ‘vision’ and promised to achieve certain of its goals during the Amrit Kaal period of next 25 years. The certain goals defined were, Complementing the macro-economic level growth focus with a micro-economic level all-inclusive welfare focus, promoting digital economy & fintech, technology enabled development, energy transition, and climate action, and relying on virtuous cycle starting from private investment with public capital investment helping to crowd-in private investment.

Economy is back on rail

Good news is that Indian economy survived the crisis forced by pandemic and now on recovery track. Indian economy is expected to witness real GDP expansion of 9.2 per cent in 2021-22 after contracting in 2020-21. Agriculture and allied sectors have been the least impacted by the pandemic and the sector is expected to grow by 3.9 per cent in 2021-22 after growing 3.6 per cent in the previous year. The industry (including mining and construction) will rise by 11.8 per cent in 2021-22 after contracting by 7 per cent in 2020- 21. The Services sector has been the hardest hit by the pandemic, especially segments that involve human contact and now estimated to grow by 8.2 per cent this financial year following last year’s 8.4 per cent contraction. Exports of both goods and services have been good in 2021-22 and imports are also recovering. India’s balance of payments remained in surplus throughout the last two years helping to accumulate foreign exchange reserves (they stood at US$ 634 billion on 31st December 2021). This is equivalent to 13.2 months of merchandise imports and is higher than the country’s external debt.

One solution-GatiShakti and its seven Engines

This Budget seeks to lay the foundation and give a blueprint to steer the economy over the next 25 years and seems to give one solution for all the problems of economy.  The solution is ‘GatiShakti and its seven engines’.  The PM ‘GatiShakti as described by FM is a transformative approach for economic growth and sustainable development and is driven by seven engines, namely, Roads, Railways, Airports, Ports, Mass Transport, Waterways, and Logistics Infrastructure. All the seven engines are expected to pull forward the economy in unison. These engines are supported by the complementary roles of Energy Transmission, IT Communication, Bulk Water & Sewerage, and Social Infrastructure. This GatiShakti approach is expected to solve most problems of economy and create huge job and entrepreneurial opportunities for all, especially the youth.

GatiShakti approach

The GatiShakti Master Plan will be focusing on planning, financing, including through innovative ways, use of technology, and speedier implementation and will help raise productivity and accelerate economic growth and development. For this, the Expressways will be formulated in 2022-23 to facilitate faster movement of people and goods; the data exchange among all mode operators will be brought on Unified Logistics Interface Platform (ULIP) so to provide for efficient movement of goods through different modes, reducing logistics cost and time, assisting just-in-time inventory management, and in eliminating tedious documentation; Contracts for implementation of Multimodal Logistics Parks will be awarded; Cargo Terminals for multimodal logistics facilities will be developed and National Ropeways Development Programme will be taken up on PPP mode.

Financing “GatiShakti and seven engines’  

It is understandable that if all the seven engines of ‘GatiShakti’ move forward, all the sector of the economy will be benefited whether it is agriculture, industry or services. The point was to check the source of financing the forward movement of seven engines. The FM talked  of some innovative ways to finance this. FM, however, agreed that the virtuous cycle of investment requires public investment to crowd-in private investment. And for this, the outlay for capital expenditure in the Union Budget has been stepped up sharply by 35.4 per cent from Rs 5.54 lakh crore in the current year to Rs 7.50 lakh crore in 2022-23. The resources to be raised were mainly through market borrowings. Green bonds for green infrastructure, thematic funds for blended finance with the government share limited to 20 per cent, private capital at a significant scale, enhancement of ‘Scheme for Financial Assistance to States for Capital Investment’ are expected to help. The fifty-year interest free loans, over and above the normal borrowings have also been allowed to the state for the purpose.

Budget for futuristic growth

Definitely, this budget is not a popular budget and no way can be called as an election budget. It is a budget for Futuristic growth. The budget defined the goal of Inclusive Development along with Productivity Enhancement & Investment, Sunrise Opportunities, Energy Transition, and Climate Action and desired that PM GatiShakti and its seven engines will help achieve it in the coming 25 years. The financing of these investments has also been given importance. The budget proposed to fuel ‘GatiShakti’ engines to speed-up and help Indian economy achieve its goal of inclusive development. Thus, the budget is for futuristic growth and not limited to one year though plan to initiate certain programmes towards in the current year. This apart, all the ongoing programmes and schemes will continue to be there in the current year and budget 2022-23 provided for the same with marginal changes.

Need More resources  

Economic development basically needs resources, financial or otherwise, and budget is the instrument that help to raise those resources. The budget has not attempted much towards this end and relied on market borrowing worth 12 lakh cr. The tragic part is that the Government is becoming more and more a welfare state and spending more on welfare schemes and consuming more resources for its own expenses. The revenue deficit has remained a major concern. Inflation may pose a serious challenge in coming years if fiscal deficit continues to be at high level. True, the budget maintained its popularity by not raising taxes. It is, therefore, to be seen how much “Gatishakti’ will help achieve the growth goals of all sectors of economy and how many of its seven engines get a good start and take speed sufficient to catch up with the desired goals of promised vision.

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