Union Budget 2022-23: Govt banks on growth through capex push
New Delhi: Amid an ebbing third wave of Covid-19 pandemic, the Union Budget 2022-23 presented by the Finance Minister Nirmala Sitharaman today has sought to focus primarily on economic recovery on the back of government spending, which in due course of time is expected to crowd in private investment.
Sitharaman expects a nominal GDP growth rate of 11.1 percent in 2022-23. Assuming a real GDP growth rate of 8-8.5 percent as estimated by the Economic Survey for 2021-22, this means the average inflation for the next year has been factored in at 2.6 percent to 3.1 percent.
This is a break from the government’s big thrust on reforms — asset monetization and privatisation of state-owned banks and insurance companies — which Prime Minister Narendra Modi sought to push through during the pandemic period. In a way, Finance Minister Nirmala Sitharaman has continued with the NDA government’s economic philosophy of fiscal rectitude. Despite an unprecedented economic distress which hurt the poor the hardest, the Budget persisted with the government interventions on the supply side.
For ordinary income tax payers, there were no real takeaways other than some easing of compliances and a new I-T return system. And for the bottom of the pyramid that bore the brunt of income and job losses during the pandemic, the Budget did not offer any major support.
For 2022-23, Sitharaman has sharply hiked the capital expenditure budget by 24.47 percent to Rs 7.5 lakh crore (compared with RE for 2021-22 at Rs 6,02,711 crore), which is almost 2.9 percent of the GDP. Together with grants in aid for creation of capital assets, the effective capital expenditure for the next year is budgeted at Rs 10.67 lakh crore, 27 percent more than the RE of 2021-22 at Rs 8.40 lakh crore.
Besides increasing the state borrowing limit to 4 percent of the GSDP, Sitharaman also proposed a new instrument – 50-year interest free loans – of up to Rs 1 lakh crore for states to make capital investments. This, she said, is over and above their normal borrowing limits. In 2021-22, the outlay of Rs 10,000 crore under the ‘Scheme for Financial Assistance to States for Capital Investment’ was increased to Rs 15,000 crore following requests by the states, she said.
This is Keynesian economics at play – at a time when the private sector is reluctant or averse to invest, the government is weighing in, and borrowing more to spend more. Over the course of next 12 months, such government spending is expected to crowd in private sector investment and help create jobs.
In providing this capital spending boost, Sitharaman has managed to reduce the fiscal deficit target for the next year by 0.5 percent of the GDP to 6.4 percent of the GDP compared with the fiscal deficit of 6.9 percent of the GDP in the revised estimate for 2021-22. Buoyant revenues during the current year helped the government retain its fiscal deficit target of 6.8 percent of GDP set in the beginning of the year.
The Budget also provided clarity on key new economy sectors – for cryptocurrencies, it said income from transfer of digital assets would be taxed at 30 percent and further proposed a 1 percent TDS on transfer of payment; it announced a battery swapping policy that would enthuse the EV (electric vehicles) segment; and provided a roadmap for 5G rollout that would boost the technology and start-up ecosystem.
Sitharaman also extended the ECLGS (Emergency Credit Line Guarantee Scheme), a facility to provide collateral-free loans to small and medium enterprises, by another year and enhanced the credit line by Rs 50,000 crore to Rs 5 lakh crore. Unlike big companies which could borrow easily, MSMEs banked on this scheme during the pandemic, when the national lockdown and subsequent demand collapse, almost wiped them out of business.
Further, she also let companies start production by March 31, 2024 (the deadline was March 2023) to avail of the concessional 15 percent corporate tax regime. This, she said, was an effort to establish a globally competitive business environment for certain companies. (Agencies)
Govt subsidies to fall 39% to Rs 4.33 lakh cr in FY22; Rs 3.18 lakh cr pegged for FY23
The government’s subsidies on food, fertilisers and petroleum are estimated to decline by 39 percent to Rs 4,33,108 crore this fiscal and fall further by 27 percent to nearly Rs 3.18 lakh crore in 2022-23.
In its revised budget (RE) estimate for the 2021-22 fiscal, the government has pegged total subsidies to be at Rs 4,33,108 crore against the actual budget estimate of Rs 7,07,707 crore in the previous financial year.
Out of which, the food subsidy is estimated to decline to Rs 2,86,469 crore in the current fiscal from Rs 5,41,330 crore in 2020-21, while petroleum subsidy is estimated to fall to Rs 6,517 crore from Rs 38,455 crore in the said period.
However, fertiliser subsidy is estimated to increase to Rs 1,40,122 crore during the ongoing fiscal from Rs 1,27,922 crore in the previous fiscal, according to the Budget document.
During the current fiscal, the Centre has hiked subsidy of non-urea fertilisers several times due to a sharp rise in global prices. The move was aimed to ensure that farmers continue to get Di-ammonium phosphate (DAP) and other nutrients under the Nutrient based subsidy (NBS) policy at a reasonable rate.
For the next fiscal, the government said total subsidies are estimated to further decline to Rs 3,17,866 crore from Rs 4,33,108 crore in the current fiscal.
Out of which, fertiliser subsidy is estimated to decline by 25 percent to Rs 1,05,222 crore during 2022-23 from Rs 1,40,122 crore this fiscal, while food subsidy is estimated to fall by 28 percent to Rs 2,06,831 crore against Rs 2,86,469 crore in the said period.
Petroleum subsidies are estimated to decline by 11 percent to Rs 5,813 crore during 2022-23 from Rs 6,517 crore in the current fiscal.
Food subsidy is provided to meet the difference between the economic cost of food grains procured by the government and their sales realisation at the PDS rate called central issue price (CIP) under the National Food Security Act (NFSA) and other welfare schemes.
The government’s food subsidy bill has increased substantially since the outbreak of the COVID pandemic.
In March 2020, the Centre had launched the scheme to provide free foodgrains to over 80 crore beneficiaries covered under the National Food Security Act (NFSA) as part of its effort to reduce the hardships of people during the coronavirus pandemic.
The additional foodgrains of 5 kilograms per person per month is over and above the normal quota provided under the NFSA at a highly subsidised rate of Rs 2-3 per kg.
Initially, in 2020-21, the PMGKAY scheme was announced only for a period of three months of April, May and June 2020 (Phase-I).
Later, the government extended the scheme from July to November 2020 (Phase-II).
With the COVID crisis continuing in 2021-22, the Centre in April 2021 had re-introduced the scheme for a period of two months of May and June 2021 (Phase-III) and extended it for another five months from July to November 2021 (Phase-IV). The scheme was again extended from December 2021 to March 2022 (Phase-V).
Similarly, the Centre provides fertiliser subsidies to manufacturers.
The government fixes the MRP of urea being sold in the market. The difference between the selling price and production cost is provided as a subsidy. A nutrient-based subsidy is also being provided on non-urea fertilisers like DAP and MOP.
In petroleum, subsidies are provided on LPG and kerosene. (PTI)
Taxpayers can update their ITRs correcting discrepancy/omission within 2 years: FM
Finance Minister Nirmala Sitharaman on Tuesday gave a one-time window to taxpayers to correct any discrepancy or omissions in their ITRs within two years of filing, subject to payment of taxes.
In her 2022-23 Budget speech, the Minister said this is an “affirmative step in the direction of voluntary tax compliance”.
Currently, if the IT department finds out that some income has been missed out by the assessee, it goes through a lengthy process of adjudication, and the new proposal would repose trust in the taxpayer.
“To provide an opportunity to correct such errors, I am proposing a new provision permitting taxpayers to file an Updated Return on payment of additional tax. This updated return can be filed within two years from the end of the relevant assessment year,” Sitharaman said.
The Minister said that the I-T Department has established a robust framework of reporting of taxpayers’ transactions and some taxpayers may realize that they have committed omissions or mistakes in correctly estimating their income for tax payment.
“Instead, with this proposal now, there will be a trust reposed in the taxpayers that will enable the assessee herself to declare the income that she may have missed out earlier while filing her return,” she said.
Besides, rationalising the surcharge regime, Sitharaman said, she proposes to cap the surcharge on long-term capital gains arising on transfer of any type of assets at 15 percent. This step will give a boost to the startup community, she said.
Currently, the long-term capital gains on listed equity shares, units etc are liable to maximum surcharge of 15 percent, while other long-term capital gains are subjected to a graded surcharge, which goes up to 37 percent.
Nangia Andersen India Chairman Rakesh Nangia said this is going to greatly improve the investor sentiment, fuelling investment in the capital market, resulting in economic growth. (PTI)
Union Budget allocates Rs 35,581 cr to J&K
The Union Territory of Jammu and Kashmir was on Tuesday allocated Rs 35,581.44 crore in the Budget 2022-23 as part of the central government’s assistance, grants and loans.
The erstwhile state of Jammu and Kashmir was bifurcated on August 05, 2019 into two UTs – Jammu and Kashmir and Ladakh — following the abrogation of Article 370. Both the UTs are currently under central rule.
While Jammu and Kashmir has been given Rs 35,581.44 crore for 2022-23, compared to Rs 34,704.46 crore in 2021-22, Ladakh has been given Rs 5,958, the same as in the current fiscal.
The bulk of the funds – Rs 33,923 crore – in the budget for Jammu and Kashmir is under central assistance.
A sum of Rs 273 crore has been allocated as grants towards rehabilitation of Dal-Nageen lake and Rs 279 crore has been given as grants towards contribution to UT Disaster Response Fund.
The budget allocated Rs 500 crore as support for capital expenditure of UT, Rs 476.44 crore has been given as grants towards equity for Ratle 800 MW hydroelectric project and Rs 130 crore has been given as grants towards equity contribution for 624 MW Kiru hydroelectric project.
Among other UTs, Andaman and Nicobar Islands got Rs 5,703.65 crore compared to Rs 5,923.64 crore in 2021-22.
Lakshadweep has been allocated Rs 1,394.75 crore. The figure was Rs 1,296.26 crore in the current fiscal.
Chandigarh has been allocated Rs 4,846.79 crore compared to Rs 4,428.25 given in 2021-22.
Dadra and Nagar Haveli and Daman and Diu have been given Rs 2,374.10 crore. It was Rs 2,312.80 crore in the current fiscal.
The budget has also earmarked Rs 1,168 crore as transfers to Delhi, a UT.
A sum of Rs 1,729.79 crore has also been shown as transfer to Puducherry. (PTI)