Highlights of the Union Budget 2022-23


On 1st February 2022, Finance Minister Nirmala Sitharaman presented the Union Budget 2022-23 in Parliament. It was the second paperless budget.

  • Union Budget seeks to lay foundation and give blueprint of economy over ‘Amrit Kal’ of next 25 years – from India at 75 to India at 100.
  • India’s economic growth in the current year is estimated to be 9.2 per cent, highest among all large economies. The overall, sharp rebound and recovery of the economy from the adverse effects of the pandemic is reflective of our country’s strong resilience.

  • India’s economic growth estimated at 9.2% to be the highest among all large economies.
  • 60 lakh new jobs to be created under the productivity linked incentive scheme in 14 sectors.
  • PLI Schemes have the potential to create an additional production of Rs 30 lakh crore.
  • Entering Amrit Kaal, the 25 year long lead up to India @100, the budget provides impetus for growth along four priorities:
  1. PM GatiShakti
  2. Inclusive Development
  3. Productivity Enhancement & Investment, Sunrise opportunities, Energy Transition, and Climate Action.
  4. Financing of investments

Road Transport

  • National Highways Network to be expanded by 25000 Km in 2022-23.
  • Rs 20000 Crore to be mobilized for National Highways Network expansion.

Multimodal Logistics Parks

  • Contracts to be awarded through PPP mode in 2022-23 for implementation of Multimodal Logistics Parks at four locations.

Railways

  • One Station One Product concept to help local businesses & supply chains.
  • 2000 Km of railway network to be brought under Kavach, the indigenous world class technology and capacity augmentation in 2022-23.
  • 400 new generation Vande Bharat Trains to be manufactured during the next three years.
  • 100 PM GatiShakti Cargo terminals for multimodal logistics to be developed during the next three years.

Parvatmala

  • National Ropeways Development Program, Parvatmala to be taken up on PPP mode.
  • Contracts to be awarded in 2022-23 for 8 ropeway projects of 60 Km length.

Inclusive Development

Agriculture

  • Rs. 2.37 lakh crore direct payment to 1.63 crore farmers for procurement of wheat and paddy.
  • Chemical free Natural farming to be promoted throughout the county. Initial focus is on farmer’s lands in 5 Km wide corridors along river Ganga.
  • NABARD to facilitate fund with blended capital to finance startups for agriculture & rural enterprise.
  • Kisan Drones’ for crop assessment, digitization of land records, spraying of insecticides and nutrients.

Ken Betwa Project

  • 1400 crore outlay for implementation of the Ken – Betwa link project.
  • 9.08 lakh hectares of farmers’ lands to receive irrigation benefits by Ken-Betwa link project.

MSME

  • Udyam, e-shram, NCS and ASEEM portals to be interlinked.
  • 130 lakh MSMEs provided additional credit under Emergency Credit Linked Guarantee Scheme (ECLGS)
  • ECLGS to be extended up to March 2023.
  • Guarantee cover under ECLGS to be expanded by Rs 50000 Crore to total cover of Rs 5 Lakh Crore.
  • Rs 2 lakh Crore additional credit for Micro and Small Enterprises to be facilitated under the Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE).
  • Raising and Accelerating MSME performance (RAMP) programme with outlay of Rs 6000 Crore to be rolled out.

Skill Development

  • Digital Ecosystem for Skilling and Livelihood (DESH-Stack e-portal) will be launched to empower citizens to skill, reskill or upskill through on-line training.
  • Startups will be promoted to facilitate ‘Drone Shakti’ and for Drone-As-A-Service (DrAAS).

Education

  • ‘One class-One TV channel’ programme of PM eVIDYA to be expanded to 200 TV channels.
  • Virtual labs and skilling e-labs to be set up to promote critical thinking skills and simulated learning environment.
  • High-quality e-content will be developed for delivery through Digital Teachers.
  • Digital University for world-class quality universal education with personalised learning experience to be established.

Health

  • An open platform for National Digital Health Ecosystem to be rolled out.
  • National Tele Mental Health Programme’ for quality mental health counselling and care services to be launched.
  • A network of 23 tele-mental health centres of excellence will be set up, with NIMHANS being the nodal centre and International Institute of Information Technology-Bangalore (IIITB) providing technology support.

Saksham Anganwadi

  • Integrated benefits to women and children through Mission Shakti, Mission Vatsalya, Saksham Anganwadi and Poshan 2.0.
  • Two lakh anganwadis to be upgraded to Saksham Anganwadis.

Har Ghar, Nal Se Jal

  • Rs. 60,000 crore allocated to cover 3.8 crore households in 2022-23 under Har Ghar, Nal se Jal.

Housing for All

  • Rs. 48,000 crore allocated for completion of 80 lakh houses in 2022-23 under PM Awas Yojana.

Prime Minister’s Development Initiative for North-East Region (PM-DevINE)

  • A new scheme PM-DevINE launched to fund infrastructure and social development projects in the North-East.
  • An initial allocation of Rs. 1,500 crore made to enable livelihood activities for youth and women under the scheme.

Vibrant Villages Programme

  • Vibrant Villages Programme for development of Border villages with sparse population, limited connectivity and infrastructure on the northern border.

Banking

  • 100 per cent of 1.5 lakh post offices to come on the core banking system.
  • Scheduled Commercial Banks to set up 75 Digital Banking Units (DBUs) in 75 districts.

e-Passport

  • e-Passports with embedded chip and futuristic technology to be rolled out.

Urban Planning

  • Modernization of building byelaws, Town Planning Schemes (TPS), and Transit Oriented Development (TOD) will be implemented.
  • Battery swapping policy to be brought out for setting up charging stations at scale in urban areas.

Land Records Management

  • Unique Land Parcel Identification Number for IT-based management of land records.

Accelerated Corporate Exit

  • Centre for Processing Accelerated Corporate Exit (C-PACE) to be established for speedy winding-up of companies.

AVGC Promotion Task Force

  • An animation, visual effects, gaming, and comic (AVGC) promotion task force to be set-up to realize the potential of this sector.

Telecom Sector

  • Scheme for design-led manufacturing to be launched to build a strong ecosystem for 5G as part of the Production Linked Incentive Scheme.

Export Promotion

  • Special Economic Zones Act to be replaced with a new legislation to enable States to become partners in ‘Development of Enterprise and Service Hubs’.

AtmaNirbharta in Defence

  • 68% of capital procurement budget earmarked for domestic industry in 2022-23, up from 58% in 2021-22.
  • Defence R&D to be opened up for industry, startups and academia with 25% of defence R&D budget earmarked.
  • Independent nodal umbrella body to be set up for meeting testing and certification requirements.

Sunrise Opportunities

  • Government contribution to be provided for R&D in Sunrise Opportunities like Artificial Intelligence, Geospatial Systems and Drones, Semiconductor and its eco-system, Space Economy, Genomics and Pharmaceuticals, Green Energy, and Clean Mobility Systems.

Energy Transition and Climate Action

  • Additional allocation of Rs. 19,500 crore for Production Linked Incentive for manufacture of high efficiency solar modules to meet the goal of 280 GW of installed solar power by 2030.
  • Five to seven per cent biomass pellets to be co-fired in thermal power plants:
    • CO2 savings of 38 MMT annually,
    • Extra income to farmers and job opportunities to locals,
    • Help avoid stubble burning in agriculture fields.
  • Four pilot projects to be set up for coal gasification and conversion of coal into chemicals for the industry
  • Financial support to farmers belonging to Scheduled Castes and Scheduled Tribes, who want to take up agro-forestry.

Public Capital Investment

Public investment to continue to pump-prime private investment and demand in 2022-23.

  • Outlay for capital expenditure stepped up sharply by 35.4% to Rs. 7.50 lakh crore in 2022-23 from Rs. 5.54 lakh crore in the current year.
  • Outlay in 2022-23 to be 2.9% of GDP.
  • ‘Effective Capital Expenditure’ of Central Government estimated at Rs. 10.68 lakh crore in 2022-23, which is about 4.1% of GDP.

GIFT-IFSC

  • World-class foreign universities and institutions to be allowed in the GIFT City.
  • An International Arbitration Centre to be set up for timely settlement of disputes under international jurisprudence.

Mobilising Resources

  • Data Centres and Energy Storage Systems to be given infrastructure status.
  • Venture Capital and Private Equity invested more than Rs. 5.5 lakh crore last year facilitating one of the largest start-up and growth ecosystem. Measures to be taken to help scale up this investment.
  • Blended funds to be promoted for sunrise sectors.
  • Sovereign Green Bonds to be issued for mobilizing resources for green infrastructure.

Digital Rupee

  • Introduction of Digital Rupee by the Reserve Bank of India starting 2022-23.

Providing Greater Fiscal Space to States

  • Enhanced outlay for ‘Scheme for Financial Assistance to States for Capital Investment’:
    • From Rs. 10,000 crore in Budget Estimates to Rs. 15,000 crore in Revised Estimates for current year
  • Allocation of Rs. 1 lakh crore in 2022-23 to assist the states in catalysing overall investments in the economy: fifty-year interest free loans, over and above normal borrowings
  • In 2022-23, States will be allowed a fiscal deficit of 4% of GSDP, of which 0.5% will be tied to power sector reforms

Fiscal Management

  • Budget Estimates 2021-22: Rs. 34.83 lakh crore
  • Revised Estimates 2021-22: Rs. 37.70 lakh crore
  • Total expenditure in 2022-23 estimated at Rs. 39.45 lakh crore
  • Total receipts other than borrowings in 2022-23 estimated at Rs. 22.84 lakh crore
  • Fiscal deficit in current year: 6.9% of GDP (against 6.8% in Budget Estimates)
  • Fiscal deficit in 2022-23 estimated at 6.4% of GDP

Direct Taxes

To take forward the policy of stable and predictable tax regime:

  • Vision to establish a trustworthy tax regime.
  • To further simplify tax system and reduce litigation.

Introducing new ‘Updated return’

  • Provision to file an Updated Return on payment of additional tax.
  • Will enable the assessee to declare income missed out earlier.
  • Can be filed within two years from the end of the relevant assessment year.

Cooperative societies

  • Alternate Minimum Tax paid by cooperatives brought down from 18.5 per cent to 15 per cent.
  • To provide a level playing field between cooperative societies and companies.
  • Surcharge on cooperative societies reduced from 12 per cent to 7 per cent for those having total income of more than Rs 1 crore and up to Rs 10 crores.

Tax relief to persons with disability

  • Payment of annuity and lump sum amount from insurance scheme to be allowed to differently abled dependent during the lifetime of parents/guardians, i.e., on parents/ guardian attaining the age of 60 years.

Parity in National Pension Scheme Contribution

  • Tax deduction limit increased from 10 per cent to 14 per cent on employer’s contribution to the NPS account of State Government employees.
  • Brings them at par with central government employees.
  • Would help in enhancing social security benefits.

Incentives for Start-ups

  • Period of incorporation extended by one year, up to 31.03.2023 for eligible start-ups to avail tax benefit.
  • Previously the period of incorporation valid up to 31.03.2022.

Incentives under concessional tax regime

  • Last date for commencement of manufacturing or production under section 115BAB extended by one year i.e. from 31st March, 2023 to 31st March, 2024.

Scheme for taxation of virtual digital assets

  • Specific tax regime for virtual digital assets introduced.
  • Any income from transfer of any virtual digital asset to be taxed at the rate of 30 per cent.
  • No deduction in respect of any expenditure or allowance to be allowed while computing such income except cost of acquisition.
  • Loss from transfer of virtual digital asset cannot be set off against any other income.
  • To capture the transaction details, TDS to be provided on payment made in relation to transfer of virtual digital asset at the rate of 1 per cent of such consideration above a monetary threshold.
  • Gift of virtual digital asset also to be taxed in the hands of the recipient.

Litigation Management

  • In cases where question of law is identical to the one pending in High Court or Supreme Court, the filing of appeal by the department shall be deferred till such question of law is decided by the court.
  • To greatly help in reducing repeated litigation between taxpayers and the department.

Tax Incentives to IFSC

  • Subject to specified conditions, the following to be exempt from tax
    • Income of a non-resident from offshore derivative instruments.
    • Income from over the counter derivatives issued by an offshore banking unit.
    • Income from royalty and interest on account of lease of ship.
    • Income received from portfolio management services in IFSC.

Rationalization of Surcharge

  • Surcharge on AOPs (consortium formed to execute a contract) capped at 15 per cent.
  • Done to reduce the disparity in surcharge between individual companies and AOPs.
  • Surcharge on long term capital gains arising on transfer of any type of assets capped at 15 per cent.
  • To give a boost to the start-up community.

Health and Education Cess

  • Any surcharge or cess on income and profits not allowable as business expenditure.

Deterrence against tax-evasion

  • No set off, of any loss to be allowed against undisclosed income detected during search and survey operations.

Rationalizing TDS Provisions

  • Benefits passed on to agents as business promotion strategy taxable in hands of agents.
  • Tax deduction provided to person giving benefits, if the aggregate value of such benefits exceeds Rs 20,000 during the financial year.

Indirect Taxes

Remarkable progress in GST

  • GST revenues are buoyant despite the pandemic – Taxpayers deserve applause for this growth.

Special Economic Zones

  • Customs Administration of SEZs to be fully IT driven and function on the Customs National Portal – shall be implemented by 30th September 2022.

Customs Reforms and duty rate changes

  • Faceless Customs has been fully established. During Covid-19 pandemic, Customs formations have done exceptional frontline work against all odds displaying agility and purpose.

Project imports and capital goods

  • Gradually phasing out of the concessional rates in capital goods and project imports; and applying a moderate tariff of 7.5 percent – conducive to the growth of domestic sector and ‘Make in India’.
  • Certain exemptions for advanced machineries that are not manufactured within the country shall continue.
  • A few exemptions introduced on inputs, like specialised castings, ball screw and linear motion guide - to encourage domestic manufacturing of capital goods.

Review of customs exemptions and tariff simplification

  • More than 350 exemption entries proposed to be gradually phased out, like exemption on certain agricultural produce, chemicals, fabrics, medical devices, & drugs and medicines for which sufficient domestic capacity exists.
  • Simplifying the Customs rate and tariff structure particularly for sectors like chemicals, textiles and metals and minimise disputes; Removal of exemption on items which are or can be manufactured in India and providing concessional duties on raw material that go into manufacturing of intermediate products – in line with the objective of ‘Make in India’ and ‘Atmanirbhar Bharat’.

Sector Specific Proposals

Electronics

  • Customs duty rates to be calibrated to provide a graded rate structure - to facilitate domestic manufacturing of wearable devices, hearable devices and electronic smart meters.
  • Duty concessions to parts of transformer of mobile phone chargers and camera lens of mobile camera module and certain other items – To enable domestic manufacturing of high growth electronic items.

Gems and Jewellery

  • Customs duty on cut and polished diamonds and gemstones being reduced to 5 per cent; Nil customs duty to simply sawn diamond - To give a boost to the Gems and Jewellery sector
  • A simplified regulatory framework to be implemented by June this year - To facilitate export of jewellery through e-commerce.
  • Customs duty of at least Rs 400 per Kg to be paid on imitation jewellery import - To disincentivise import of undervalued imitation jewellery.

Chemicals

  • Customs duty on certain critical chemicals namely methanol, acetic acid and heavy feed stocks for petroleum refining being reduced; Duty is being raised on sodium cyanide for which adequate domestic capacity exists – This will help in enhancing domestic value addition.

MSME

  • Customs duty on umbrellas being raised to 20 per cent. Exemption to parts of umbrellas being withdrawn.
  • Exemption being rationalised on implements and tools for agri-sector which are manufactured in India
  • Customs duty exemption given to steel scrap last year extended for another year to provide relief to MSME secondary steel producers
  • Certain Anti- dumping and CVD on stainless steel and coated steel flat products, bars of alloy steel and high-speed steel are being revoked – to tackle prevailing high prices of metal in larger public interest.

Exports

  • To incentivise exports, exemptions being provided on items such as embellishment, trimming, fasteners, buttons, zipper, lining material, specified leather, furniture fittings and packaging boxes.
  • Duty being reduced on certain inputs required for shrimp aquaculture - to promote its exports.

Tariff measure to encourage blending of fuel

  • Unblended fuel to attract an additional differential excise duty of Rs 2/ litre from the 1st of October 2022 - to encourage blending of fuel.

(Source: PIB)

Summary of the Economic Survey 2021-22


With the central theme “Agile Approach”, the Economic Survey 2021-2022 was presented by the Union Minister for Finance & Corporate Affairs Smt Nirmala Sitharaman on 31st January 2022.

The Survey states that the year ahead is well poised for a pick-up in private sector investment with the financial system in a good position to provide support to the revival of economy.

The growth projection for 2022-23 is based on the assumption that there will be no further debilitating pandemic related economic disruption, monsoon will be normal, withdrawal of global liquidity by major central banks will be broadly orderly, oil prices will be in the range of US$70-$75/bbl, and global supply chain disruptions will steadily ease over the course of the year.

Highlights

  • As per World Bank, Adb and imf projections, India to remain the fastest growing major economy in the world during 2021-24.
  • Indian economy to grow by 9.2% in real terms in 2021-22.
  • Agriculture to grow by 3.9 % in 2021-22 in comparison to 3.6% in the previous year.
  • Industrial sector to witness sharp rebound from a contraction of 7% in 2020-21 to expansion of 11.8% in 2021-22.
  • Services to clock 8.2% growth in 2021-22 after a contraction of 8.4% last year.
  • Foreign exchange reserves stood at us$ 634 billion as on 31st December 2021 equivalent to over 13 months of imports and higher than country’s external debt.
  • Investment is expected to see a strong growth of 15% in 2021-22.
  • Consumer Price Index (cpi) combined inflation of 5.6% in December 2021 is well within targeted tolerance band.
  • Fiscal deficit for April-November 2021 contained at 46.2% of budget estimates.
  • Capital market booms despite pandemic; over Rs. 89 thousand crore raised via 75 ipo issues in April-November 2021, much higher than in any year in the last decade.
  • India to witness GDP growth of 8.0-8.5 per cent in 2022-23, supported by widespread vaccine coverage, gains from supply-side reforms and easing of regulations, robust export growth, and availability of fiscal space to ramp up capital spending.

State of the Economy

  • The Survey says, the above projection is comparable with the World Bank’s and Asian Development Bank’s latest forecasts of real GDP growth of 8.7 per cent and 7.5 per cent respectively for 2022-23. As per the IMF’s latest World Economic Outlook (WEO) growth projections released on 25th January, 2022, India’s real GDP is projected to grow at 9 per cent in both 2021-22 and 2022-23 and at 7.1 per cent in 2023-24. This projects India as the fastest growing major economy in the world in all these three years.

  • Referring to First Advance Estimates, the Survey states that the Indian economy is estimated to grow by 9.2 per cent in real terms in 2021-22, after a contraction of 7.3 per cent in 2020-21. This implies that overall economic activity has recovered past the pre-pandemic levels. Almost all indicators show that the economic impact of the “second wave” in Q1 was much smaller than that experienced during the full lockdown phase in 2020-21, even though the health impact was more severe.

Agriculture and Allied Sectors

  • The Survey states that Agriculture and allied sectors have been the least impacted by the pandemic and the sector is expected to grow by 3.9 per cent in 2021-22 after growing by 3.6 per cent in the previous year. The area sown under Kharif and Rabi crops, and the production of wheat and rice has been steadily increasing over the years. In the current year, food grains production for the Kharif season is estimated to post a record level of 150.5 million tonnes. Moreover, procurement of food grains under the central pool accordingly maintained its rising trend in 2021-22 along with minimum support prices, which augur well for national food security and farmers’ incomes. Importantly, the strong performance of the sector was supported by Government policies that ensured timely supplies of seed and fertilizers despite pandemic related disruptions. It was helped by good monsoon rains as reflected in reservoir levels being higher than the 10-year average.

Industrial Sector

  • According to Survey, the industrial sector went through a sharp rebound from a contraction of 7 per cent in 2020-21 to an expansion of 11.8 per cent in this financial year. The manufacturing, construction and mining sub-sectors went through the same swing although the utilities segment experienced a more muted cycle as basic services such as electricity and water supply were maintained even at the height of the national lockdown. The share of industry in GVA is now estimated at 28.2 per cent.

Services Sector

  • The Survey states that the services sector has been the hardest hit by the pandemic, especially segments that involve human contact. This sector is estimated to grow by 8.2 per cent this financial year following last year’s 8.4 per cent contraction. It should be noted that there is a wide dispersion of performance by different sub-sectors. Both the finance/Real Estate and the Public Administration segments are now well above pre-COVID levels. However, segments like Travel, Trade and hotels are yet to fully recover. There has been a boom in software and IT-enabled services exports even as earnings from tourism have declined sharply.

Consumption

  • The Survey added that total consumption is estimated to have grown by 7.0 per cent in 2021-22 with government consumption remaining the biggest contributor as in the previous year. Government consumption is estimated to grow by a strong 7.6 per cent surpassing pre-pandemic levels. Private consumption is also estimated to have improved significantly to recover 97 per cent of corresponding pre-pandemic output level and it is poised to see stronger recovery with rapid coverage in vaccination and faster normalization of economic activity.

Investment

  • According to the Survey, Investment, as measured by Gross Fixed Capital Formation (GFCF) is expected to see strong growth of 15 per cent in 2021-22 and achieve full recovery of pre-pandemic level. Government’s policy thrust on quickening virtuous cycle of growth via capex and infrastructure spending has increased capital formation in the economy lifting the investment of GDP ratio to about 29.6 per cent in 2021-22, the highest in seven years. While private investment recovery is still at a nascent stage, there are many signals which indicate that India is poised for stronger investment. A sturdy and cleaned-up banking sector stands ready to support private investment adequately.

Exports and Imports

  • On the Exports and Imports front, the Survey states that India’s exports of both goods and services have been exceptionally strong so far in 2021-22. Merchandise exports have been above US$30 billion for eight consecutive months in 2021-22, despite many pandemic related global supply constraints. Net services exports have also risen sharply, driven by professional and management consulting services, audio visual and related services, freight transport services, telecommunications, computer and information services. From a demand perspective, India’s total exports are expected to grow by 16.5 per cent in 2021-22 surpassing pre-pandemic levels. Imports also recovered strongly with revival of domestic demand and continuous rise in price of imported crude and metals. Imports are expected to grow by 29.4 per cent in 2021-22 surpassing corresponding pre-pandemic levels. Resultantly, India’s net exports have turned negative in the first half of 2021-22, compared to a surplus in the corresponding period of 2020-21. But current account deficit is expected to remain within manageable limits.

Balance of Payments

  • Further, the Survey points out that despite all the disruptions caused by the global pandemic, India’s balance of payments remained in surplus throughout the last two years. This allowed the Reserve Bank of India to keep accumulating foreign exchange reserves, which stand at US$634 billion on 31st December 2021. This is equivalent to 13.2 months of imports and higher than the country’s external debt.

Inflation

  • The Survey notes that inflation has reappeared as a global issue in both advanced and emerging economies. The surge in energy prices, non-food commodities, input prices, disruption of global supply chains, and rising freight costs stoked global inflation during the year. In India, Consumer Price Index (CPI) inflation moderated to 5.2 per cent in 2021-22 (April-December) from 6.6 per cent in the corresponding period of 2020-21. It was 5.6 per cent (YoY) in December 2021, which is within the targeted tolerance band. The decline in retail inflation in 2021-22 was led by easing of food inflation. Wholesale Price Inflation (WPI), however, has been running in double-digits.

Fiscal Support

  • The Survey says that fiscal support given to the economy as well as the health response caused the fiscal deficit and government debt to rise in 2020-21. However, there has been a strong rebound in government revenues in 2021-22 so far. The revenue receipts of the central government during April-November 2021 have gone up by 67.2 per cent (YOY), as against an expected growth of 9.6 per cent in the 2021-22 Budget Estimates over provisional actuals. The tax collections have been buoyant for both direct and indirect taxes and the gross monthly GST collections have crossed Rs 1 lakh crore consistently since July 2021.

Fiscal Deficit

  • It adds that on the account of a sustained revenue collection and a targeted expenditure policy by the Government of India, the fiscal deficit for April-November 2021 has been contained at 46.2 per cent of Budget Estimates (BE) which is nearly one third of the proportion reached during the same period of the previous two years (135.1% of BE in April-November 2020 and 114.8% of BE in April-November 2019).

Capital Markets

  • The Survey points out that the financial sector is always a possible area of stress during turbulent times. However, India’s capital markets have done exceptionally well and have allowed record mobilization of risk capital of Indian companies. The Sensex and Nifty scaled up to touch its peak at 61,766 and 18,477 on October 18, 2021. Rs 89,066 crore was raised via 75 IPO issues in April- November 2021, much higher than in any year in the last decade.

NPAs

  • Moreover, the banking system is well capitalized and NPAs seems to have structurally declined. The Gross Non-Performing Advances (GNPA) ratio (i.e. GNPAs as a percentage of Gross Advances) and Net Non-Performing Advances (NNPA) ratio of Scheduled Commercial banks (SCBs) continued to decline since 2018-19. GNPA ratio of SCBs decreased from 7.5 per cent at end-September 2020 to 6.9 per cent at end-September 2021.

Demand/Supply

  • The Survey expresses that another distinguishing feature of India’s economic response has been an emphasis on supply-side reforms rather than a total reliance on demand management. These supply-side reforms include deregulation of numerous sectors, simplification of processes, removal of legacy issues like ‘retrospective tax’, privatization, production-linked incentives and so on. Even the sharp increase in capital spending by the Government can be seen as both demand and supply response as it creates infrastructure capacity for future growth.

There are two common themes in India’s supply-side strategy:

  1. (i)Reforms that improve flexibility and innovation in order to deal with the long-term unpredictability of the post-Covid world. This includes factor market reforms; deregulation of sectors like space, drones, geospatial mapping, trade finance factoring; process reforms like those in government procurement and in telecommunications sector; removal of legacy issues like retrospective tax; privatization and monetization, creation of physical infrastructure, and so on.
  2. (ii)Reforms aimed at improving the resilience of the Indian economy. These range from climate/environment related policies; social infrastructure such as public provision of tap water, toilets, basic housing, insurance for the poor, and so on; support for key industries under Atmanirbhar Bharat; a strong emphasis on reciprocity in foreign trade agreements, and so on.

Other Highlights: Policy Initiatives

Process Reforms

  • An important theme that has been discussed through the course of the Economic Survey is that of ‘process reforms’. It is important to distinguish between deregulation and process reforms. The former relates to reducing or removing the role of government from a particular activity. In contrast, the latter broadly relates to simplification and smoothening of the process for activities where the government’s presence as a facilitator or regulator is necessary.

‘Barbell Strategy”

  • The Survey points out that the last two years have been difficult for the world economy on account of the COVID-19 pandemic. Repeated waves of infection, supply-chain disruptions and more recently, global inflation have created particularly challenging times for policy-making. Faced with these challenges, the Government of India opted for a ‘Barbell Strategy” that combined a bouquet of safety-nets to cushion the impact on vulnerable sections of society and the business sector. It next pushed through a significant increase in capital expenditure on infrastructure to build back medium-term demand as well as aggressively implemented supply-side measures to prepare the economy for the sustained long-term expansion. This flexible and multi-layered approach is partly based on an “Agile” framework that used feedback-loops, and the monitoring of real-time data.

High Frequency Indicators

  • The Survey underlines that Monetary policy since the outbreak of the pandemic was calibrated to provide a cushion and support growth, but carefully controlled in order to avoid the medium term dislocations of excess liquidity. An important aspect of the safety-net was the use of Government guarantees to provide access to financial support to the economy in general and MSMEs in particular. In the last two years, government leveraged an array of eighty High Frequency Indicators (HFIs) representing industry, services, global trends, macro-stability indicators and several other activities, from both public and private sources to gauge the underlying state of the economy on a real-time basis. These HFIs helped policy makers tailor their response to an evolving situation rather than rely on pre-defined responses of a Waterfall framework, which has been the conventional method for framing policy in India and most of the world.

Conclusion

  • The Survey is quite optimistic that overall macro-economic stability indicators suggest that the Indian Economy is well placed to take on the challenges of 2022-23 and one of the reasons that the Indian Economy is in good position is its unique response strategy.

(Source: PIB)

Budget Introduces Agriculture Infrastructure And Development Cess (AIDC)


Agriculture Infrastructure & Development Cess (AIDC), has been introduced in the Budget 2021-22 to aid the agri sector.

The cess is not uniform and varies from product to product.

Proposed Agriculture Cess

Items Cess (In %)
Gold, Silver and Dare Bars 2.5
Alcoholic Beverages 100
Crude Palm Oil 17.5
Crude Soyabean and Sunflower Oil 20
Apples 35
Coal, Lignite and Peat 1.5
Specified Fertilizers (Urea etc.) 5
Peas 40
Kabuli Chana 30
Bengal Gram/Chick Peas 50
Lentil (Masur) 20
Cotton (Not Carded or Combed) 5

Need for the Cess

There is an immediate need to improve agricultural infrastructure to produce more, while also conserving and processing agricultural output efficiently. This will ensure enhanced remuneration for our farmers.

Impact of this Cess on Common Citizen

  • Overall, AIDC is not expected to affect a common citizen in any major way. The Govt. has taken up few balancing acts in this regard:
  • Petrol & Diesel
    • The Union Budget has imposed an Agriculture Infrastructure and Development Cess (AIDC) of Rs 2.5 per litre on petrol and Rs 4 per litre on diesel. But, these will not result in any additional burden on consumers.
    • The reason for it is that unbranded petrol was earlier attracting a basic excise duty (BED) of Rs 2.98 and a special additional excise duty (SAED) of Rs 12 per litre. These have now been reduced to Rs 1.4 and Rs 11 per litre, respectively.
    • Similarly, the BED on unbranded diesel has been cut from Rs 4.83 to Rs 1.8 and the SAEC on it from Rs 9 to Rs 8 per litre. So, the overall excise incidence on petrol (BED+SAEC+AIDC) will now be Rs 14.9/litre, which was previously Rs 14.98, while that on diesel is Rs 13.8 (earlier Rs 13.83).
  • Alcoholic Beverages
    • A similar readjustment has been made for alcoholic beverages that currently attract 150 per cent basic customs duty. That basic import duty has now been slashed to 50 per cent, even as the Budget has proposed an AIDC of 100 per cent.
  • Gold & Silver Dore Bars
    • Gold & Silver Dore bars (2.5%) is one of them. But customs duty has come down by 5% for Gold and Silver imports. Thus there may not be any impact on this front.
    • There are other items like Apples, Crude palm oil, crude soyabean oil, peas, kabuli chana , Bengal gram etc. on which AIDC is being imposed. There is also custom duty hike in case of cotton to 10% and on raw silk and silk yarn to 15% from 10%.

Vote On Account


Why is it in News?

In the election year, the outgoing government either presents an Interim Budget or seeks ‘Vote on Account’.

What is Vote on Account?

  • The constitution says that no money can be withdrawn by the government from the Consolidated Fund of India except under appropriation made by law. For that an appropriation bill is passed during the budget process.
  • However, the appropriation bill may take time to pass through the Parliament and become a law. Meanwhile, the government would need permission to spend even a single penny from April 1 when the new financial year starts.
  • Vote on Account is the permission to withdraw money from the Consolidated Fund of India in that period, usually two months (it is generally 1/6th of the total Budget Amount).
  • Vote on Account is a formality and requires no debate.
  • When elections are scheduled a few months into the new financial year, the government seeks vote on account for four months.
  • Essentially, vote on account is the interim permission of the parliament to the government to spend money.
  • So vote on account is just an interim permission to spend money as against a full budget which is an elaborate financial statement of expenditure and receipts including changes in taxes and government policies.


Source: Economic Times