New Delhi, Feb 1: Disappointing taxpayers hoping rate cut in the Union Budget 2022, Finance Minister Nirmala Sitharaman kept personal income tax slabs unchanged for the financial year 2022-23 while raising capex by 35% year-on-year to Rs 7.50 lakh crore to boost demand and create jobs.
In line with the previous Budget, the Finance Minister has focussed on supply side and long-term even as many economists suggested measures to lift consumer confidence which has been at a low ebb during the pandemic.
As pandemic took toll on people’s income and raised health risks, people turned risk-averse leading to further hit to consumption demand in the economy. Even before Corona virus hit the economy, consumption demand was subdued.
Higher capex is set to create jobs and crowd in private investment but given the higher gestation period of infrastructure projects it generally takes time in yielding desired outcome.
Presenting the Budget in Lok Sabha on Monday, Sitharaman said that virtuous cycle of investment requires public investment to crowd-in private investment.
“Public investment must continue to take the lead and pump-prime the private investment and demand in 2022-23. Considering the above imperative, the outlay for capital expenditure in the Union Budget is once again being stepped up sharply by 35.4% Rs 5.54 lakh crore in the current year to Rs 7.50 lakh crore in 2022-23,” she said.
She noted that capex has now increased to more than 2.2 times the expenditure of 2019-20. “This outlay in 2022-23 will be 2.9 per cent of GDP,” she said.
Abhaya K Agarwal, National Leader, Government and Public sector Infrastructure, EY India said that Budget 2022 has a major focus on the creation of infrastructure through PPP which can be seen from Gati Shakti implementation based on seven growth engines and digital highway for data transfers between various modes.
“The announcements such as 25,000 km of highways, 4 multi-modal logistics parks on PPP, 100 Gati Shakti cargo terminals, 400 Vande Bharat trains, a string of ropeway projects in hilly areas, a high priority for Ken-Betwa river link project and 60,000 crores for ‘Har Ghar Nal Se Jal’ lay the overall vision of the government,” he said.
The government’s fiscal position remains comfortable with enhanced tax collections in the current financial year. With both direct and indirect tax collections recording significant growth, it was expected that government would extend relief to common man.
The Budget provided some relief to co-operative societies by reducing tax and surcharge for them. The Alternate Minimum Tax has been proposed to be reduced to 15% for co-operative societies.
“I also propose to reduce the surcharge on co-operative societies from present 12% to 7% for those having total income of more than Rs 1 crore and up to Rs 10 crores. This would help in enhancing the income of cooperative societies and its members who are mostly from rural and farming communities,” Sitharaman said.
The Budget proposed to extend concessional tax rate for new manufacturing set-ups at the rate of 15% by one year. The move is expected to drive private investment in the economy.
“The union budget underlined the governments focus on long term growth support. Focus on increasing capital expenditure as well as on future growth drivers such as clean energy are the key positives of the budget. The fiscal deficit targets as well as the budgeted receipts and expenditures are in line with our expectations,” said Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities.
