India’s Finance Minister Nirmala Sitharaman tabled the Union Budget for the fiscal year 2022-23 in the parliament yesterday. So far, the budget has received mixed responses being applauded by a few but frowned upon by others.
What do industry experts have to say?
Mr. Piyush Somani – Managing Director and Chairman ESDS Software Solution Ltd commented: The FY-22 union budget gives massive boost for the data center sector, as Data Center sector has been given infrastructure status. We believe that this will help data center operators get long term debt at a much lower cost. Ambiguity around data center operations would also ease out. This allows the data center operators to buy power from multiple power discoms eventually helping in avoiding monopolies, high tariffs and dependencies. We believe that these decisions will amplify the growth of data localization and the data center industry overall. The Budget rightly focuses on amplifying the digital currency with correct measures and initiatives. Overall, the budget brings hopes for Data Center sector and Digital rupee.
Ms. Heena Sehrawat, CEO, Geetanjali Miracle Makers, commented, “The budget has some promising measures to promote overall economic growth while boosting business activities across the sectors. The government has given due emphasis on the infrastructure development of the country by boosting the Gati Shakti mission and some key sectors such as healthcare, education, and others. These factors will stimulate the growth of both the segments- commercial and residential- of the real estate sector. While the economic activities will push the demand in the commercial segment, the government’s inclination towards propelling the affordable housing segment by a proposal to identify 80 lakh households for the scheme will prove beneficial for the sector.”
Mr Niraj Johri, Founder, Casa Decor, commented, “This growth-boosting budget comes with myriad elements to propel economic growth as well as sector-specific growth. With a special emphasis on infrastructure development, the government has proposed the identification of 80 lakh families for affordable housing. These measures will pave the way for the growth of allied sectors, including home décor. Besides, the proposed expansion of digital space will help the décor sector in reaching out and serving the consumers residing in remote areas.”
Talking about the logistics supply chain, Mr Sanjay Bhatia, CEO and Co-founder of Freightwalla said, “Supply chain logistics being one of the focal points in the budget hints towards the government’s plan to boost the shipping and logistics industry. As anticipated, it encompassed multiple anchor points to initiate the Gati Shakti master plan, which would bring about a shift in India’s logistics landscape. The program is a step in the right direction to strengthen our country’s supply chain ecosystem by integrating many logistics nodes and ensuring seamless multimodal connectivity and efficiency. Additionally, 100 cargo terminals will ease the burden on the existing ones. Besides, the development of multimodal logistics parks will reduce logistics costs, thus improving distribution, storage and freight aggregation.”
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What did the Budget 2022 offer for various sectors?
Fostering Financial Inclusion, Taxation, and Investment
- The budget for 2022-23 brought no changes in personal income tax slabs and tax rates. However, now taxpayers may file an updated ITR. In the case of state government employees; if the employer’s contribution is up to 14%, a tax deduction is permissible.
- All the post offices will be onboarded on the core banking system to foster financial inclusion and digital transactions. Due to the incorporation, those who have an account with post offices can make use of net banking and online transactions, both intra-bank and inter-bank channels.
- The government set the surcharge on long-term capital gains (LTCG) at 15%. At present, the surcharge on LTCG is levied only on listed shares and mutual fund units. The capping of LTCG surcharge will attract more investments in startups and MSMEs. It is also expected to make employee stock options an appealing proposition for India’s top talented youth.
- The budget 2022-23 decreased the surcharge levied on unlisted shares from 28.5% to 23%. The surcharge reduction will clear the way for investor exit and investment churn.
- To further rationalize the tax regime, the budget has expanded the filing window of updated returns to 2 years, attracting no litigation charges. However, an extra fee will need to be paid by the taxpayers. The tax window extension is a laudatory move as it will motivate genuine taxpayers to pay taxes.
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A huge Infrastructural Push
This year’s budget has a major focus on infrastructure projects marking a jump of 35.4% in infrastructural expenditure. This is because capital expenditure in the infrastructure sector has a multiplier effect on employment generation and poverty eradication. Keeping the need for new jobs at the moment, the government proposed 5 major infrastructure projects, including:
- Expanding highways by 25,000 kilometers and formulation of National Master Plan on Expressways in 2022-23 for roadways development.
- Allocation of Rs 60,000 crore to the Nal se Jal scheme for assured availability of clean drinking water in the household premises
- Allocation of Rs 60,000 crore to the Nal se Jal scheme for assured availability of clean drinking water in the household premises
- 6 River linking projects under Sagarmala Pariyojna, most important of which is the linking project of Ken and the Betwa at for Rs 44,000 crore
- An additional amount of Rs 48,000 crore to the PM housing scheme
- Promoting infrastructure development in North-East India
Besides these 5 major announcements, the budget also talked about the 5G spectrum auction to happen in 2022. Besides, the government will launch a fresh Parvat Mala project for the construction of a 60 km ropeway, for mountainous terrains. The budget speech allocated Rs 20,000 crore for PM Gati Shakti National Master Plan to improve coordination in implementing infrastructural schemes. The additional allocated capital will be used for constructing 100 Gati Shakti cargo terminals over the course of the upcoming 3 years.
Budget 2022-23 Announcements for Agriculture Sector
The budget came just months after the PM revoked the three farm reform laws after long-held protests. The finance minister allocated Rs 2.37 lakh for the procurement of wheat and paddy under the MSP scheme. This 2.37 lakh will benefit around 1.6 crore farmers across the country, especially in North India. Moreover, the National Bank for Agriculture and Rural Development (NABARD) will provide funds for startups in the agriculture sector, cottage industries, and rural enterprises. The budget 2022-23 also proposed a new scheme in the public-private partnership model for delivering digital and technical services to farmers. An extra focus on organic and natural farming was seen as the budget envisioned adding organic and zero-budget farming in the curriculum of agriculture courses.
Crypto and Digital Currency
This year’s budget marked India’s entry into the digital currency world with the launching of the Digital Rupee. It will be RBI digital currency (CBDC) backed by blockchain that will be launched from the upcoming financial year. Continuing with an aversive attitude towards cryptocurrency, the budget imposed a 30% tax on virtual assets. The tax levy on virtual assets will bring cryptocurrency and other non-fungible tokens under the tax regime.
Budget 2022-23 on MSMEs and Startups
The budget this year brought a 26% increased allocation for the MSME sector. Along with an increased budgetary allocation, the following are the highlights in budget 2022-23 for MSMEs:
- The budget extended both coverage and guarantee cover under Emergency Credit Line Guarantee Scheme (ECLGS). The ECLGS will be valid till March 2023 with an expanded guarantee cover of Rs 5 lakh crore. The budget proposed to align the National Skill Qualification framework with the dynamic global markets and industry requirements.
- The budget launched a new e-portal namely DESH-stack e-portal to foster a digital ecosystem for skilling, training, and livelihood promotion. The government will launch Ease of Business 2.0, integrating active involvement of states, entrepreneurial collaborations, digitization, and interventions. Moreover, the new index will also integrate the union and state-level systems with the help of IT bridges and eliminate overlapping compliances.
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In addition, the budget pushed the India’s domestic defense industry by a 10% increased funds for the defense sector. The budget also announced placing 75 digital banking units in 75 districts across the country. The government also proposed the addition of 400 Vande Bharat trains in Railways and a national programme for mental health. The funds under the Prime Minister Employment Generation Programme also saw a huge jump of around 29%.
The Pain Points of the Budget 2022-23
A TDS of 1% on the purchasing virtual digital asset and gradual increase in basic custom duty are the key pain points in budget. Moreover, the budget announced a TDS of 10% on the benefits over Rs 20,000 earned in a business or profession. Amid the Covid-19 pandemic, the budget tried to mark a balance between damage control and long-term growth projections. PMGatiShakti, EODB 2.0, Sunrise Opportunities, investment financing, and focus on energy transition marks the right vision of India. The budget provided a blueprint of our long-term vision of inclusive and sustainable development.