Union Budget 2022 to be presented today; spending boost, elections likely focus
Budget 2022: This will be Union finance minister Nirmala Sitharaman fourth Budget. The last two budgets have been under the shadow of Covid-19, and she is expected to chart a path to normalcy in her speech this year.
Union finance minister Nirmala Sitharaman is set to present the annual Budget in Parliament on Tuesday, the second day of the Budget session. The keenly watched event is seen pivotal to sustaining India’s recovery from pandemic-induced disruptions. The Union Budget 2022 comes at a time when India has successfully inoculated more than 70 per cent of of population against the coronavirus disease (Covid-19), a feat lauded by President Ram Nath Kovind in his address to both the Houses of Parliament on the first day of the Budget session on Monday.
The previous budgets presented by Sitharaman have had distinct backdrops. While in 2019 (months after the Bharatiya Janata Party won a thumping electoral mandate), she offered a slew of reforms, the next one in the midst of the coronavirus disease (Covid-19) pandemic shrank the scope of possibilities.
The third one too was presented in the shadow of the pandemic.
Also Read | 4 numbers to watch out for in the Budget
The Union Cabinet will meet at 10.10am to approve the Budget which will be presented by the finance minister in Parliament at 11am.
Sitharaman’s fourth Budget
The finance minister will present her fourth straight Budget this year, and is expected to chart the path to normalcy. She is expected to channel more spending toward policies that create jobs, boost manufacturing and also benefit the poor.
Other key numbers to watch for in the Budget include projected increase in tax collections, dividend from the central bank and state-run companies, any changes in import levies as part of the government’s plan to boost manufacturing, and allocation toward subsidies, particularly for fertilizer makers.
What has the Economic Survey said?
The Economic Survey, tabled in Parliament on Monday, projected that India’s economy is projected to expand by 8-8.5% in 2022-23. It further said that the economy is estimated to have become bigger than its pre-pandemic size.
The growth projection in the survey was more conservative than those made by other agencies, chief economic advisor V Anantha Nageswaran said at a media briefing. The International Monetary Fund on January 25 predicted that the Indian economy will expand by 9% in 2022-23.
India’s gross domestic product in 2021-22 is estimated to be 1.3% higher than what it was in 2019-20, principal economic advisor Sanjeev Sanyal said.
More importantly, the Economic Survey expressed confidence that the government has adequate fiscal headroom to provide support to economic activity, steering clear of the actual fiscal trajectory for the next financial year starting in April, which is the budget’s prerogative.
The election angle
The Union Budget will be presented days before the start of assembly elections in five states, including the most populous, Uttar Pradesh, which could spur Sitharaman to promise higher rural spending and subsidies on food and fertiliser, economists and officials said.
"The fiscal position appears much healthier than expected ahead of the (budget) announcement," Shilan Shah, an economist at Capital Economics, Singapore, said in a note to news agency Reuters.
The political challenges that the BJP is facing is expected to reflect in Sitharaman’s Budget. The BJP needs to make sure that the economy, and more importantly those at the bottom of the pyramid see an improvement in their fortunes over the next year.
While there are expectations that the Budget will offer some relief on issues such as urban unemployment and the crisis in the informal sector, there is another aspect it will have to keep in mind, namely the erosion of nominal benefits being offered currently because of inflation. For example, the real value of PM-KISAN transfers, which were started in the interim Budget of 2019-20, has fallen by 15.5% in the quarter ending December 2021.
Budget likely to focus on…
Analysts say that the finance minister will have to strike a fine balance while keeping up the momentum of the country's promising but fledgling economic recovery and tax collections, but at the same time look at bringing in measures to spur demand, create jobs and tackle inflation as the country deals with the ongoing third wave of the Covid-19 pandemic.
She is expected to provide a boost to infrastructure spending, with a higher allocation likely towards roads, railways and waters.
Ease of tax compliance, simplification and digitisation as well as ease of doing business are the other areas which Sitharaman is likely to focus on.
To boost domestic manufacturing, the budget presentation may also touch upon the government's Production Linked Incentive Scheme (PLI) applicable for the telecom, pharmaceuticals, steel, textiles, food processing, white goods, IT hardware and solar sectors.
It is unclear if Sitharaman will tinker with income tax rates but there is an expectation that the exemption limit of ₹2.5 lakh will be raised.