The Union Budget 2022

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 The budget of a nation determines the direction in which the nation will grow. A budget has the power to build a nation. Among the several categories of the budget that are changed, what are the positive aspects? And what are the declining aspects? What are those questions that a common middle-class Indian citizen has in his mind? What benefits does the general public stand to receive from this?

Let’s discuss the above points: -



Opportunities:

INFRASTRUCTURE

·         The outlay for capital expenditure has been increased by 35.4% from Rs 5.54 lakh crore in FY22E to Rs 7.50 lakh crore for FY23E. National highway network to be expanded by 25,000 km during FY22-23E and Rs 20,000 crore will be mobilized to promote the same.

·       The center has come up with a new program called “New Vibrant Villages Programme” which will promote infrastructure in the border states. Border villages with a sparse population, limited connectivity, and infrastructure often get left out from the development gains. This will help in building the gap and will also open up new avenues for many companies involved in the infrastructure sector in these regions.

·          Under Har Ghar and Nal se Jal's mission, an allocation of Rs. 60,000 crore has been made to cover 3.8 crore households in 2022-23. Companies involved in the utility sector will be benefitted as these companies receive exposure to the water segment.

 

POWER

·       To facilitate domestic manufacturing for the ambitious goal of 280 GW of installed solar capacity by 2030, an additional allocation of Rs. 19,500 crore for Production Linked Incentive(PLI) for the manufacture of high-efficiency modules, with priority to fully integrated manufacturing units from polysilicon to solar PV modules, will be made. Import duty bar has been raised from 20% to 25% in solar cells and raised from 20% to 40% for solar modules. The Budget 2022-23E also provides for the issue of green bonds for mobilizing resources for setting up green infrastructure projects in the public sector. Will promote the domestic market in solar manufacturing and reduce import footprints, thereby, creating a level of fair play for the local manufacturers. Companies involved in the manufacture of solar cells and modules will benefit

·         Basic Customs Duty (BCD)exemption on import of capital goods imported for power transmission, electricity generators, renovation/modernization of power generation plants is withdrawn. This will benefit the power sector in India.

·        5-7% biomass pellets will be co-fired in thermal power plants resulting in CO2 savings of 38 Mega Metric Tones annually. This will provide increased income to farmers and employment to locals and help avoid stubble burning in agriculture fields.


IT/EMERGING TECHNOLOGY

·         The government proposed to introduce Digital Rupee, using blockchain and other technologies to be issued by the Reserve Bank of India starting 2022-23. Adoption of blockchain among Indian banks to improve efficiency and ensure transparency will be positive for listed IT Companies like Infosys, TCS, Tech Mahindra, and Zensar Tech.

·          Contracts for laying optical fiber in villages to be awarded under the BharatNet project under PPP in 2022-23. Laying optical fiber in villages to bring rural access to e-services, communication facilities, and digital resources on par with urban areas is positive for telecom infrastructure enablers like Tejas, Sterlite Technologies and HFCL

 

Obstacles:

·        There was a high expectation for a GST rate cut on insurance products from the current 18% to 5% for making such products more affordable to common people. Insurance companies were seeking a separate deduction limit of Rs.1 lakh for insurance premium payment under Section 80 C of the Income Tax Act. However, there has been no announcement regarding any such relief for the sector and thus, insurance services still remain expensive for the common people.

·         No provision to allow weighted deduction on R&D spending by pharma companies. Healthcare companies will be disappointed.

·        An anti-dumping duty is a protectionist tariff that a domestic government imposes on foreign imports that it believes are priced below fair market value. The Anti-dumping duty on imports from different countries of bars and rods of alloy steel, high-speed steel, Al or zinc-coated flat-rolled steel products, and hot-rolled or cold-rolled stainless steel flat products is revoked permanently. This results in increased competition for the domestic steel industry

·        Concessional Basic Custom Duty (BCD) rate to be withdrawn for items like Refinery Process Units, All types of Hydrogen Generation, Recovery and Purification Plants, All types of Process Subsystems, All types of Effluent Solids/Liquids/Gaseous Processing, etc. This could negatively impact refining companies putting up new projects based on imported capital goods.

·        Reduction of customs duty on a range of textile yarn/fabric/scrap and other items. This will be marginally negative for most domestic textile manufacturers.

·         Basic Customs Duty is imposed on import of capital goods for use in man-made or synthetic fiber or yarn industry, Machinery for the garment sector, Machinery for the manufacture of technical textiles, Woolen machinery items, Machinery for the manufacture of non-woven textiles, Machinery for the manufacture of denim fabrics. This move will discourage companies who are willing to put up new plants with imported capital goods.

·        Govt. has reduced allocations for MNREGA by 26% to Rs 73,000 Cr and for food and fertilizer subsidies by another 27%. With rural demand already weakening, this is likely to further the dent in rural consumption in the near term.

 

 

How are the issues of unemployment and inflation addressed in the budget?

According to experts, even though India is projected to achieve high economic growth, inflation and unemployment remain economic challenges for the government. To address these issues, the government has chosen to focus on increasing infrastructure which will lead to job creation in the short term and help the economy in the long term.

Inflation in India is hovering at 5.5% however there has been no relief to the common man. The government has decided to not rely on socialist principles instead it has decided to continue on its grand plan of Make in India. To revive the manufacturing sector in India requires decades of continuous fiscal stimuli and cannot be built over a few years.

The new schemes discussed above are promising to elevate the quality of life and deliver modernization to the marginalized sections of our country. The increase in energy consumption and commitment to the preservation of the environment has led to investment in renewable energy which is part of the power sector in India.

 


Blog credits: Riddhijit Basu SY electrical, Ishita Humnabadkar FY civil


References:

https://www.india.gov.in/spotlight/union-budget-fy-2022-2023

https://bit.ly/3JzKKE3



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