Following two years of the pandemic where the immediate priorities were to save lives and livelihoods, it is now the time to now focus on a strategy that serves both the near-term priority to provide economic boost to the economy and to provide employment while focusing on the long-term agenda of accelerating the structural development of the country.
Perhaps this was the mindset of the government and the planners because the finance minister’s speech was reflecting these twin objectives as a thematic narrative at all times.
Clearly a capital investment focused budget, it has allocated capital on building scalable infrastructure, announced programmes for developing skills and capability amongst the employable youth, widening and deepening the social sector schemes to improve the quality of lives of the poor and giving access to basic needs like water to every home, modernising the economy by accelerating digital access to the citizens and a very strong commitment towards energy transition and climate action.
The fiscal deficit for 2021-22 revised estimates is at 6.9 per cent which is understandable given the significant spend the government has done for tackling the pandemic.
The target fiscal deficit of 6.4 per cent for 2022-23 is also expected as the Government of India is clearly focused on capital investment spending that will structurally make India strong in the long term while also addressing the immediate issues of domestic growth, consumption and employment.
The infrastructure development programme through the PM Gati Shakti programme with investments in national infrastructure are critical to not only boost capital spending in the near term but also leads to enhancing India’s competitiveness in the future.
The Atmanirbhar Bharat Program has been further enhanced through increase in the reservation of 68 per cent of capital procurement of the government spend from domestic companies (up from 58 per cent).
This will have a multiplier effect on the manufacturing segment and is expected to drive private sector capital expenditure. The government procurement process is proposed to be made more transparent by migrating to a digital platform through the ebill system. Easing doing business with the government and doing away with bank guarantees will release capital for the suppliers.
The proposal to significantly enhance the capital support to the states to Rs 100,000 lakh crore in 2022-23 will help in the infrastructure development at the state level and reflects the Center’s clear intention to work with the states to co-create the national infrastructure.
The announcements on Climate Action are worthy of commendation especially to accelerate the India’s transition towards a green economy and promote circularity.
Climate finance will play a very important role in the transition to low carbon economy and the initiatives taken to make GIFT IFSC a hub for climate finance will enable access to companies to fund climate linked investments.
From the speech it looks that the finance minster has largely left the direct taxes untouched which is fair given that a significant restructuring of corporate taxes took place a few years back.
Her indirect tax proposals had a clear theme of imposing customs duty on sectors where the government wants the domestic companies to invest and build scale as part of the Atmanirbhar Bharat initiative.
Finally, given the recent pandemic experience that the country and world is going through, I was expecting the finance minister’s speech to specifically focus towards a much higher capital allocation in significant capacity expansion in the healthcare sector including building world class medical research institutions, expand undergraduate, post graduate and super speciality seats in the medical education, incentivising the private sector to invest in healthcare to enhance the healthcare system in the country.
I am hoping that the government will look at this critical issue in the near future.
(Koushik Chatterjee is executive director and chief financial officer, Tata Steel)
