In the series Sansad TV Perspective, we bring you an analysis of the discussion featured on the insightful programme ‘Perspective’ on Sansad TV, on various important topics affecting India and also the world. This analysis will help you immensely for the IAS exam, especially the mains exam, where a well-rounded understanding of topics is a prerequisite for writing answers that fetch good marks.
In this article, we feature the discussion on the topic: Decoding Budget 2022-23
Anchor – Vishal Dahiya
Guest – Dr. T. V. Somanathan, Secretary, Department of Expenditure, Ministry of    Finance
Context
The episode features Dr. T. V. Somanathan with whom the various aspects of the Union Budget 2022-23 are discussed.
Key Aspects of the Budget 2022-23
- The Union Budget 2022-23 was presented by the Finance Minister on 1st February 2022.
- The Budget has a significant focus on infrastructure which includes a big push in highways expansion, railways, river linking, PM housing scheme, Nal se Jal scheme and infrastructure projects in North-Eastern states.
- With a view to stepping up public investment, the government has increased capital expenditure by 35.4% to 7.5 lakh crores (2.9% of GDP).
Image source: Sansad TV
Image source: Sansad TV
Capital Expenditure in Budget 2022-23
- There is a rise of 4% in CapEx (capital expenditure) in the budget 2022-23.
- The rationale behind the steep increase in CapEx is said to be a part of the strategy to rejuvenate economic growth and create gainful jobs or employment in the country.
- Both economic theories and empirical studies specific to India suggest that CapEx has a high multiplier effect.
- Studies by the National Institute of Public Finance and Policy (2013) and the Reserve Bank of India indicate that the multiplier effect of CapEx is more than 2.
- e. 1 Rupee of CapEx has a GDP effect of more than 2 Rupees.
- In an economic situation that is recovering from the pandemic shock, CapEx is said to be a major initiative to restore growth quickly.
- The funds for the CapEx is expected to come from two sources:
- It is expected that the tax revenue will increase by 10% next year.
- Enhanced borrowing from about 15.1 lakh crores to 16.6 lakh crores.
Read more about Capital Expenditure in Budget 2022-23.
Expectations on Private Investments
- Private investment is not as high as it is expected to be.
- The reasons for low private investment are:
- The economic crisis in 2012-13.
- Twin balance sheet syndrome triggered by a high share of Non-Performing Assets (NPAs).
- Low profitability for the companies due to the fall of demand in the economy.
- Measures to increase investment:
- Pump priming by the government in terms of enhancing expenditure on capital will revive the growth that will bring in private investment and in turn create employment and jobs.
- It is expected that the current strategy of increasing CapEx in the budget will play a role of a catalyst in reviving the private investments.
Key Areas of Focus
Infrastructure
- Infrastructure is another key focus area in the budget after the capital expenditure.
- Various sectors of infrastructure that are in focus include national highways, railways, telecommunications, domestic defence procurement and river linking projects.
- There is also an increase in the allocation for the construction of border roads and border villages.
- A sum of Rs. 1 lakh crore has been earmarked that would be lent to State Governments as interest-free 50-year loans that the states incur on CapEx.
Education
- In India, the problems with education are more in terms of quality rather than financial.
- The budget aims to solve the non-financial problems by increasing the number of television channels that include every regional language and every class from 1 to 12; this is expected to provide a remedy for people who do not have access to smartphones, laptops or other digital devices.
- The education budget has also seen a substantial increase in the budget.
Health
- There is a significant increase in the health budget estimates compared to previous years from approximately 73000 crores to 86000 crores.
- The revised estimates for FY 2021-22 are more than 73000 crores because of a special covid emergency response program.
Agriculture
- The sector that is considered as the bedrock of the Indian economy grew at 3.6% during the pandemic while other sectors took a hit.
- The budget talks about chemical-free natural farming, crop diversification, use of technology in the sector and encouraging startups in the sector.
- The budget mentions the funding for the PM Kisan Program that deals with direct income transfer for farmers.
- There is a substantial increase of 27% in the allocation for PM Gram Sadak Yojana, from 15000 crores to 19000 crores.
- This helps in bringing agri-produce to market, reduces transaction costs to farmers and provides employment opportunities in rural areas.
- The river interlinking projects are also expected to help the agri sector.
Cooperative Societies
- The new Ministry of Cooperatives saw an allocation of Rs.900 crores.
- This is expected to bring direct benefits to the agri sector and the rural economy.
Urban Development and Planning
- The primary requirement for more sustainable and livable cities is planning rather than funds.
- Urban planning includes good public transport, clean environment, sanitation, sustainable water and sewage systems.
- The government has announced to set up a High-Level Committee to give recommendations on urban planning and development.
- The existing academic institutions will be designated as centres of excellence to develop India-specific knowledge in urban planning and design.
- The Budget also proposes to modernise building bye-laws and town planning schemes.
Taxation in Budget 2022-23
- The approach in the budget has been to bring stability in taxation, tax rates, and tax laws.
- A few changes have been made to sort certain anomalies such as,
- Higher tax rates on cooperatives than corporate companies.
- A kind of capital gain had a different tax rate compared to others.
- There are measures introduced to improve the coverage of taxation and prevent tax evasion.
- A provision has been introduced to provide clarity on the taxation of virtual digital assets or cryptocurrencies.
Read more about Taxation on virtual digital assets.
Key Challenges
- The major challenge is achieving the targeted growth by simultaneously balancing the fiscal deficit.
- The challenges of handling the pandemic and further spread of infection that has disrupted the economy for two consecutive years.
- International developments in relation to the price of crude oil, prices of important commodities that influence the subsidies of fertilizers and the effect of monetary policies in the U.S. and Europe that influence the preferences of foreign investors.
- High fiscal deficit and debt levels.
Read more summaries of Perspective in the link.
Perspective: Decoding Budget 2022-23:- Download PDF Here
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