8 min read.Updated: 02 Feb 2022, 02:32 AM ISTGoutam Das
Part of the budget seems to be set in the next normal, envisioning an India with futuristic tech, space economy, genomics and clean mobility
Finance minister Nirmala Sitharaman mentioned ‘AtmaNirbhar’ six times during her speech, clearly emphasizing the importance the government pays to the philosophy of self-reliance. It has perhaps gained more currency in the context of the pandemic and the subsequent supply-chain disruptions. One area spelt out is defence—the minister said that the government is committed to reducing imports and promoting AtmaNirbharta in equipment for the armed forces. About 68% of the capital procurement budget will be earmarked for domestic industry in 2022-23, up from 58% in 2021-22.
Everything green is in vogue. A battery swapping policy was announced with the hope that the private sector would come up with innovative business models such as ‘battery or energy as a service’. The government’s thinking: it would improve efficiency in the electric vehicle eco-system.
These two words, possibly, enthused the industry and analysts the most. Its importance cannot be overstated—higher capital investment creates employment and could help speed up India’s recovery from pandemic lows. The outlay for capital expenditure in the Union Budget has jumped 35.4% to ₹ 7.5 trillion in 2022-23.
Well, the details are sketchy at the moment, but here’s what we know. The digital rupee is essentially the central bank’s digital currency (CBDC)—the Reserve Bank of India will issue it starting 2022-23. The finance minister said that “digital currency will lead to a more efficient and cheaper currency management system".
There is a range of exemptions to boost exports targeted at handicrafts, textiles and the leather garment industries. Duty will also be reduced on certain inputs required for shrimp aquaculture. The Special Economic Zones Act, meanwhile, will be replaced with a new legislation.
Farm and farmers, expectedly, got a fair bit of attention. A “comprehensive package’ around food processing is in the works while policies to promote agro forestry and private forestry has been promised. Financial support may be provided to farmers belonging to scheduled castes and scheduled tribes, who want to take up agro-forestry.
GatiShakti is a digital platform that brings many ministries together. The idea is to better plan and execute infrastructure connectivity projects. The budget particularly mentions a ‘GatiShakti Master Plan for Expressways’ that will be formulated in 2022-23 to facilitate faster movement of people and goods. The national highways network is seen expanding by 25,000 km during the year.
Housing for All
The difficulty of doing business is palpable in India’s real estate market. Talk to any developer, and they would complain of the months it takes for approvals. This, in turn, pushes up construction expenses and the cost to the end customer. The finance minister now says that the central government will work with the state governments to reduce the time required for all land and construction related approvals. Also, next year, about 80 lakh houses will be completed under the PM AwasYojana, in both rural and urban areas.
All governments want to be seen as ‘inclusive’. This budget stresses on inclusive welfare, a theme that brings together everything from clean drinking water and affordable housing to digital banking by post offices and digital payments.
Post the budget speech, many analysts struggled to understand the implication it holds for employment—India’s jobs crisis is nothing new but the pandemic only made things worse. The government stated that the Emergency Credit Line Guarantee Scheme (ECLGS) has provided “much-needed additional credit to more than 130 lakh MSMEs". That may have saved many jobs in the segment. Further, the thrust on Make-In-India and import substitution implies that manufacturing jobs may be created, going ahead.
Farming is going hi-tech. Yes, this is also the playground for many startups trying out new business models. The budget visualises the use of ‘Kisan Drones’ for crop assessment, digitization of land records, spraying of insecticides, and nutrients.
The government appears keen on better and more efficient use of land resources. States, the finance minister said, will be encouraged to adopt Unique Land Parcel Identification Number to facilitate IT-based management of records. Second, the adoption of the National Generic Document Registration System (NGDRS) will be promoted. To provide, ‘one nation one software’ for registration of documents and properties, the NGDRS was developed under the Digital India Land Records Modernisation Programme, a central sector scheme.
Policymakers believe that increases in public investment will create a multiplier effect or far higher gains in total output, aiding India’s economic recovery. The budget stated that government backed funds—such as the National Investment and Infrastructure Fund and the SIDBI Fund of Funds— have provided scale capital creating a multiplier effect.
The budget did not neglect the mention of natural farming, an idea mooted by the Prime Minister last year. That’s a practice based on new-age soil microbiology—one that avoids replenishing the soil by chemical nutrients. Small and marginal farmers who spend a lot on chemical inputs are expected to benefit. By severely slashing cultivation costs, natural farming can ensure higher net income for farmers. The government can also keep fertilizer subsidies in check. The scientific establishment, meanwhile, remains unconvinced.
Optical fibres are the key to transmit data at high speeds, the hardware at the heart of Digital India. The government wants to connect all villages to the same e-services that are accessed by urban India . Thereby, contracts for laying optical fibre, even in remote areas, will be awarded under the Bharatnet project in 2022-23. The completion of these projects is expected by 2025.
The Production Linked Incentive scheme has been the fulcrum of India’s Make-In-India policy. Announced for 14 sectors, the scheme can potentially create 60 lakh new jobs, and an additional production of ₹30 lakh crore in the next five years. The finance minister today said a new scheme for design-led manufacturing will be launched to build a strong ecosystem for 5G.
A reading of the budget speech underlines a yearning for quality, across different schemes or proposals. For instance, the ‘Universalization of Quality Education’. “High-quality e-content in all spoken languages will be developed for delivery via internet, mobile phones, TV and radio through Digital Teachers," the finance minister stated. The government also wants to improve the “quality of life of citizens" in the most backward districts of the country through its Aspirational Districts Programme.
For several budgets now, customs duties have been rationalized. More than 350 exemption entries will now be gradually phased out—these include exemption on certain agricultural produce, chemicals, fabrics, medical devices and drugs and medicines for which sufficient domestic capacity exists, the budget stated. Surcharges are also being rationalized. Consortiums bid for large projects and the members of these consortiums are mostly companies. Tax authorities can treat the consortiums as an ‘Association of Persons’ (AOPs). The income of these AOPs suffer a graded surcharge upto 37%, which is more than the surcharge on individual companies. The finance minister has therefore proposed to cap the surcharge on AOPs at 15%.
Startup founders, investors and high networth individuals cheered the finance minister’s proposals around new thematic funds, a cap on the long-term capital gains (LTCG) surcharge, and extension of tax benefits to registered startups for another year. The budget, however, makes no mention of allowing the direct overseas listing for startups, which has been an industry demand for over two years.
Tech, tech, tech
The Economic Survey was sort of a prelude. It underlined how tech and data savvy policymakers are. The budget now pointed to how India’s Customs administration is using tech. “Faceless Customs has been fully established. During covid-19 pandemic, Customs formations have done exceptional frontline work against all odds displaying agility and purpose," the finance minister said.
Policymakers would perhaps want more people to quit the less productive farming sector and move to manufacturing or services. Many of these services jobs are in urban centres. Herein lies a problem—out cities are not equipped to handle the kind of migration India may see over the next decade. The budget, rightly, talks of “nurturing the megacities". A high-level committee of reputed urban planners, urban economists and institutions will be formed to make recommendations on urban sector policies, capacity building, planning, implementation and governance. The minister further stated that for urban capacity building, support will be provided to the states.
Focus on urban centres doesn’t mean that rural areas are completely neglected. Certainly not the border villages. Such villages on the northern border will be covered under a new Vibrant Villages Programme, the finance minister said. What will the programme cover? 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. Additional funding and monitoring the progress of the programme has been promised.
“Recognizing the importance of Nari Shakti as the harbinger of our bright future and for women-led development during the AmritKaal, our government has comprehensively revamped the schemes of the ministry of women and child development," the finance minister said. The government had launched three schemes—Mission Shakti, Mission Vatsalya, SakshamAnganwadi and Poshan 2.0—with an aim to benefit both women and children. SakshamAnganwadis are the new generation anganwadis that have better infrastructure and audio-visual aids. They are powered by clean energy and provide improved environment for early child development, the minister informed. Two lakh anganwadis will be upgraded under the scheme.
Part of the budget is set in the next normal. It talks of an India where futuristic tech, artificial intelligence, geospatial systems, drones, semiconductors, space economy, genomics, green energy, and clean mobility systems will play a role in the country’s sustainable development. They will also provide employment opportunities while making industries more efficient.
Given India’s demographic tilt, the youth got a fair bit of attention in the budget. A few announcements appear targeted towards livelihood generation for the youth. For instance, the Prime Minister’s Development Initiative for North-East, PM-DevINE, which will be implemented through the North-Eastern Council. It will fund infrastructure and social development projects. The focus on reimagining urban centres is also motivated by the needs of the young who are expected to migrate to large cities seeking work.
Zero fossil-fuel policy
We need more details around what it means in the Indian context but the term does point to a commitment towards clean and sustainable mobility. “We will promote a shift to use of public transport in urban areas. This will be complemented by clean tech and governance solutions, special mobility zones with zero fossil-fuel policy, and EV vehicles," the finance minister said.