Dr Debesh Roy, Chairman, InsPIRE
The Union Budget 2022-23 is refreshingly growth oriented, futuristic and at the same time it aims to promote all-inclusive welfare. India’s economic growth which was already on a decelerating mode from 7.2% in 2017-18 to 6.1% in 2018-19 and further down to 4% in 2019-20, due to structural issues, and loss of momentum in economic reforms, fell sharply to -7.3% in 2020-21, as a result of the pandemic (Figure 1). However, the year 2021-22 is poised to reverse the trend to touch 9.2%, and India is set to regain its status as the fastest growing large economy.
There are, however, looming headwinds like retail inflation breaching RBI’s upper tolerance limit of 6% (6.01% in January 2022) on account of rising food prices, international crude oil prices, with the Brent crude oil price hovering around $96 per barrel, and inching towards $100 per barrel, due to strong demand and supply disruptions as a result of the Ukraine crisis. The imminent speeding up of hikes in the Fed rate, and the consequent flight of capital from emerging market economies like India, could depreciate the Indian rupee further and could worsen the inflationary situation. Further, loss of lives and livelihoods, and consequently slow growth in consumption demand, along with weak growth in contact intensive sectors due to the pandemic, could prove to be a drag on the economy, if they persist for some more time.
Investment in Infrastructure for Turbo-charging the Indian Economy
The Budget has done well to focus on the achievement of high, sustainable and inclusive growth. It has proposed a significantly higher allocation of 35.4% to capital expenditure to INR 7.5 trillion compared to INR 5.54 trillion in the previous year’s Budget, which is a continuance of strong growth in capital expenditure during 2020-21(actual) and 2021-22 (budget estimate) (Figure 2).
The basic philosophy behind the Budget is to spend more in the core sector and accelerate growth. A massive release of funds for infrastructure projects will stimulate a large number of core sector suppliers such as steel and cement, which will create more jobs and increase economic demand and boosting growth in the economy. Investments in infrastructure is said to have a multiplier effect of four times of the money spent. As asserted by the Union Finance Minister Ms. Nirmala Sitharaman: “ Even if private investment is taking a while to come into this whole scene, the government will have to spend and pull the economy forward and gradually as we do this, we expect the private investment to come out in full force.”
The present Budget has carried forward the focus on investment in infrastructure for boosting economic growth, along with a focus on health and wellbeing of the people in the Union Budget 2021-22. The pillars on which the previous Budget rested were: health and wellbeing; physical and financial capital and infrastructure; inclusive development for an aspirational India; reinvigorating human capital; innovation and R&D; and minimum government and maximum governance. The Budget 2022-23 carries forward the pillars of the previous Budget, but adopts certain goals for the next quarter century – the Amrit Kaal – setting a blueprint for the vision of India@100, viz. 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.
The four priorities for achieving the vision for India@100 articulated in the Budget are: PM Gati Shakti; Inclusive Development; Productivity Enhancement & Investment, Sunrise Opportunities, Energy Transition, and Climate Action; and Financing of Investments. PM Gati Shakti is driven by seven engines, viz. roads, railways, airports, ports, mass Transport, waterways, and logistics infrastructure. The aim is to bring about seamless multimodal movement of goods and people, which would lead to overall improvement of efficiency in the economy and ease of living. The PM Gati Shakti National Master Plan aims to bring about world class modern infrastructure and logistics synergy. This would lead to improvement in productivity and acceleration in economic growth and development on a sustainable basis.
Ecologically sustainable connectivity in hilly areas, through National Ropeways Development Programme, proposed to be taken up on PPP mode, would not only provide a convenient mode of transport, but would also promote tourism. The programme will also cover congested urban areas.
The Prime Minister’s Development Initiative for North- East (PM-DevINE), a new scheme for the development of the North Eastern States, with an initial allocation of INR15 billion, will fund infrastructure, in the spirit of PM Gati Shakti, and social development projects based on felt needs of the region The scheme will enable livelihood activities for youth and women,
The strengthening of health infrastructure, speedy implementation of the vaccination programme, and the nation-wide resilient response to the current wave of the pandemic, have been at the top of GoI’s agenda, for dealing with the present pandemic scenario, and making the country future ready to effectively address and manage pandemic situations.
Inclusive Growth and Welfare
Apart from the massive investment proposed for infrastructure, the Budget also prioritizes inclusive welfare and growth, while giving a short shrift to politically convenient sops and subsidies. Some of the prominent announcements for attaining inclusive growth are as follows:
Modernizing the agriculture sector
Delivery of digital and hi-tech services to farmers with involvement of public sector research and extension institutions along with private agri-tech players and stakeholders of agri-value chain, a scheme in PPP mode; promoting ‘Kisan Drones’ for crop assessment, digitization of land records, spraying of insecticides, and nutrients; promoting zero-budget and organic farming, modern-day agriculture, value addition and management; raising fund with blended capital, under the co-investment model, facilitated through NABARD, to finance startups for agriculture & rural enterprise, which will support FPOs, machinery for farmers on rental basis at farm level, and technology including IT-based support; implementing the Ken-Betwa Link Project, at an estimated cost of INR 446.05 billion, aimed at providing irrigation benefits to 0.91 million hectare of farmers’ lands, drinking water supply for 6.2 million people, 103 MW of Hydro, and 27 MW of solar power; support to concerned states for implementing the linking of five rivers, viz. Damanganga-Pinjal, Par-Tapi-Narmada, Godavari-Krishna, Krishna-Pennar and Pennar-Cauvery; a comprehensive package for promoting food processing with participation of state governments, which would facilitate farmers to adopt suitable varieties of fruits and vegetables, and to use appropriate production and harvesting techniques.
Revamping the MSME Sector
Interlinking Udyam, e-Shram, NCS and ASEEM portals, to provide services related to credit facilitation, skilling, and recruitment with an aim to further formalise the economy and enhance entrepreneurial opportunities for all; extending Emergency Credit Line Guarantee Scheme (ECLGS) up to March 2023 and expanding its guarantee cover by INR 500 billion to total cover of INR 5 trillion, with the additional amount being earmarked exclusively for the hospitality and related enterprises; revamping the Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) scheme to facilitate additional credit of INR 2 trillion for Micro and Small Enterprises and expand employment opportunities; and rolling out the Raising and Accelerating MSME Performance (RAMP) programme with outlay of INR 60 billion over 5 years to help the MSME sector become more resilient, competitive and efficient.
Creating a Strong Digital Ecosystem
Aligning the National Skill Qualification Framework (NSQF) with dynamic industry needs; launching Digital Ecosystem for Skilling and Livelihood – the DESH-Stack e-portal; promoting startups to facilitate ‘Drone Shakti’ through varied applications and for Drone-As-A-Service (DrAAS); Establishing Digital University to provide access to students across the country for world-class quality universal education with personalised learning experience at their doorsteps; rolling out an open platform, for the National Digital Health Ecosystem; and launching a ‘National Tele Mental Health Programme’ to improve the access to quality mental health counselling and care services.
Women Empowerment and Child Development
Mission Shakti, Mission Vatsalya, Saksham Anganwadi and Poshan 2.0 were launched recently to provide integrated benefits to women and children. The new generation The Budget has proposed to upgrade 0.2 million anganwadis to Saksham Anganwadis, with improved infrastructure.
Housing and Drinking Water for All
Universal coverage of low-cost housing and access of every household to tapped drinking water, aim at ease of living for all. Therefore, under the PM Awas Yojana, 8 million houses are expected to be completed during 2022-23. Currently, 87 million households have access to drinking water under Har Ghar, Nal Se Jal. The scheme aims to cover 38 million households in 2022-23.
Addressing Rural-Urban Divide
Aspirational Districts Programme
Under the Aspirational Districts Programme improvement in the quality of life of citizens in the most backward districts of the country has been observed, 95% of those 112 districts having made significant progress in key sectors such as health, nutrition, financial inclusion and basic infrastructure, surpassing the state average values. However, some blocks in those districts, continue to lag. Therefore, in 2022-23, the programme will focus on such blocks in those districts, under the Aspirational Blocks Programme.
Vibrant Villages Programme
A new Vibrant Villages Programme will be implemented in villages on the northern border, with sparse population, limited connectivity and infrastructure. The activities under the programme will include construction of village infrastructure, housing, tourist centres, road connectivity, provisioning of decentralized renewable energy, direct to home access for Doordarshan and educational channels, and support for livelihood generation. Existing schemes will be converged with this programme.
Digital Financial Inclusion
Post Offices under core banking system
100% of 1.5 lakh post offices will come on the core banking system enabling financial inclusion and access to accounts through net banking, mobile banking, ATMs, and also provide online transfer of funds between post office accounts and bank accounts.
Digital Banking Units
75 Digital Banking Units (DBUs) are proposed to be set up in 75 districts of the country by Scheduled Commercial Banks.
Financial support for digital payment
Financial support for digital payment ecosystem announced in the previous Budget will continue in 2022-23.
Major sectors of the Indian economy need to become globally competitive, if India is to grow rapidly and sustainably over the next quarter of a century to transform itself into a global economic powerhouse. Some of the major announcements in this regard are as under:
Ease of Doing Business 2.0 & Ease of Living
The next phase of EODB and Ease of Living would aim to improve productive efficiency of capital and human resources, with the government following the idea of ‘trust-based governance’. Active involvement of the states, digitization of manual processes and interventions, integration of the central and state-level systems through IT bridges, a single point access for all citizen-centric services, and a standardization and removal of overlapping compliances, are expected.
Energy Transition, Climate Action and Circular Economy
The Hon’ble Prime Minister of India, at the COP26 summit in Glasgow had said, “what is needed today is mindful and deliberate utilization, instead of mindless and destructive consumption.” The low carbon development strategy indicates the government’s strong commitment towards sustainable development. The Budget has announced the following short-term and long-term actions:
Additional allocation for PLI
An additional allocation of INR195 billion for PLI for manufacture of high efficiency modules, in order to facilitate domestic manufacturing for achieving the ambitious goal of 280 GW of installed solar capacity by 2030.
Transition to circular economy
The transition to circular economy is expected to help in productivity enhancement as well as creating large opportunities for new businesses and jobs. While the action plans for ten sectors such as electronic waste, end-of-life vehicles, used oil waste, and toxic & hazardous industrial waste are ready, the Budget identifies policy focus on addressing important cross cutting issues of infrastructure, reverse logistics, technology upgradation and integration with informal sector.
Transition to carbon neutral economy
While five to seven per cent biomass pellets will be co-fired in thermal power plants resulting in CO2 savings of 38 MMT annually, it will also provide extra income to farmers and create job opportunities, while helping avoid stubble burning in agriculture fields.
India @100 will have nearly half its population living in urban areas. The government plans to nurture the megacities and their hinterlands to become current centres of economic growth and also to facilitate tier 2 and 3 cities to take on the mantle in the future to realise the country’s economic potential, including livelihood opportunities for the demographic dividend. States would be involved as partners in the process of urban planning and development, with financial support from the Central Government. The government also plans to promote a shift to use of public transport in urban areas, which will be complemented by clean tech and governance solutions, special mobility zones with zero fossil-fuel policy, and EV vehicles.
The Budget highlights the importance of telecommunication in general, and 5G technology in particular, as an enabler of growth and creation of employment opportunities. Spectrum auctions will, therefore, be conducted in 2022 to facilitate rollout of 5G mobile services within 2022-23 by private telecom providers. Further, a scheme for design-led manufacturing will be launched to build a strong ecosystem for 5G as part of the PLI Scheme.
India needs to develop into an export-led economy if it is to grow into a $40 trillion economy by India@100. The Budget has announced that the Special Economic Zones Act will be replaced with a new legislation that will enable the states to become partners in ‘Development of Enterprise and Service Hubs’. This will cover all large existing and new industrial enclaves to optimally utilize available infrastructure and enhance competitiveness of exports.
Development of Sunrise Sectors
The Budget underscores the immense potential of Artificial Intelligence, Geospatial Systems and Drones, Semiconductor and its eco-system, Space Economy, Genomics and Pharmaceuticals, Green Energy, and Clean Mobility Systems, in achieving sustainable development at scale, modernizing the country, and also in creating employment opportunities for the youth, while making Indian industry more efficient and competitive.
Mission $40 trillion by India@100
The Union Budget 2022-23 is futuristic and has presented a blueprint to transform India into a leading global economic power by the year 2047. India’s nominal GDP in 2021-22 is estimated at INR 232.1 trillion, which is just over $3.1trillion, well short of $5 trillion by 2024-25.
Can India become a $40 trillion economy by India@100?
While the target may seem humongous, the basic ingredients for achieving the vision have been presented in the Budget, with a focus on investment in infrastructure and other capital investments, raising overall productivity in major sectors of the economy, export promotion, development of sunrise sectors, modernizing the agriculture and food processing sectors, comprehensive development of the North Eastern Region and aspirational blocks, and climate action for sustainable and inclusive development.