India's Finance Minister Nirmala Sitharaman, today (February 1) presented a 39.45 trillion rupees ($529.7 billion) budget for the coming fiscal year allocating massive funds for expressways, affordable housing and solar manufacturing to put growth on a firmer footing.

 

The government led by Prime Minister Narendra Modi sent a clear message that the top priority was to build public infrastructure and drive economic growth in a pandemic world.

 

Asia's third-largest economy has been on the mend after the government lifted mobility measures in June to curb the spread of coronavirus, after contracting 6.6% in the previous fiscal year, reported Reuters, citing industry experts.

 

Presenting the budget to parliament, Sitharaman said total government spending in the 2022/23 fiscal year beginning in April will be 4.6% more than the current year. But it involves a wider fiscal deficit than targeted and record borrowing.

 

Growth is estimated to be 9.2% for 2021/2022, coming off a low base and slowing to 8 to 8.5% in the coming fiscal year, still the fastest among the world's major economies.

 

The recovery from the pandemic has been swift but incomplete, officials say. Private consumption has been hampered by a lack of jobs, depleted household balance sheets and wider income inequalities.

 

Sitharaman said public investment must continue to take the lead and pump prime private investment and demand.

 

"The economy has shown strong resilience to come out of the effects of the pandemic with high growth. However, we need to sustain that level to make up for the setback of 2020/21," she said.

 

She announced spending of 200 billion rupees ($2.68 billion) for a highway expansion programme and said 400 new trains would be manufactured over the next three years.

 

Hailing the 2022 Union Budget as “people-friendly”  and “progressive”, Prime Minister Modi said the Budget brings with it new energy and strength to India’s development trajectory, especially at a time when the country is fighting the pandemic, reported The Indian Express. 

 

"This budget brings more infrastructure, more investment, more growth and more jobs,” he said. 

 

The Prime Minister said that the youth of India see this Budget as one that will give wings to their ambitions, and added that the emphasis on futuristic technologies in all spheres is noteworthy and will benefit a cross section of our citizens. PM Modi, however, said that he will be speaking about the Budget in detail tomorrow.

 

Speaking at a press conference after presenting the Union Budget, Sitharaman said a conscious decision was taken not to increase taxes because of the hardship that people have been facing due to the pandemic. 

"The country is expected to grow at 9.27 per cent in the coming year. With a focus on four pillars of development — inclusive development, productivity enhancement, energy transition and climate action — the Budget gives a blueprint of economy from India at 75 to India at 100," Sitharaman said.

 

The budget estimates the effective capital expenditure of the Central government at Rs 10.68 lakh crore in 2022-23, making up about 4.1 per cent of the GDP. 

 

Modi government expects to lead the world in economic growth this year in a post-pandemic bounceback, according to Economic Survey 2022.

 

The gross GST collections for the month of January 2022 are Rs 1,40,986 crore — the highest since the inception of the tax in 2017 — the Finance Minister said. In a major push for digital currency, Sitharaman stated that digital rupee will be issued using blockchain technology by the RBI starting 2022-23. This will give a big boost to the economy, the Finance Minister said. She added that income from the transfer of any virtual digital asset shall be taxed at the rate of 30 per cent.

 

No changes were announced in income tax rates or slabs - and the stock market cheered at the absence of new taxes on the wealthy, and the sharp focus on spending, reported BBC.

 

But the emphasis on spurring private consumption - which accounts for 55% of the Indian economy and remains below pre-pandemic levels - was "lower than expected," economist Shubhada Rao said.

 

There was also disappointment over the lack of specific proposals to address India's unemployment crisis, which recently sparked riots in the eastern state of Bihar.

 

Allocations to MNREGS, a huge rural scheme that guarantees 100 days of work to every rural household, shrunk.

 

"The biggest expectation was for an urban equivalent of the rural jobs guarantee scheme, and that did not happen, which is a let-down," said Mahesh Vyas, CEO of the Centre for Monitoring the Indian Economy.

 

Sitharaman also budgeted lower spends for food and fertiliser subsidies, with economists expecting her government's free food grain programme to be phased out.

 

"With no major populist sops, the budget seems to be again putting economic growth over any political expediency - especially in light of the pending state elections," said Prabhat Awasthi - managing director & country head at Nomura. Even the higher spending on public schemes, he adds, is focused on infrastructure building - such as affordable housing - rather than direct cash handouts.

 

The hope is that these investments will end up creating jobs, increase incomes and spur consumption.

 

The budget also appeared to signal an approval for trading in cryptocurrency - although India still awaits legislation on it.

 

Sitharaman said the country's central bank - the Reserve Bank of India - will introduce a "digital rupee" this year using blockchain technology, becoming one of the first major countries to do so.

 

She also announced that India will levy a 30% tax on income from virtual digital assets.

 

"Introduction of a central bank digital currency will give a big boost to the digital economy. It will also lead to a more efficient and cheaper currency management system," she added.

 

Experts seemed to welcome it - "30% is a small cost to pay for legitimacy," tweeted Gautam Chhugani, managing director at AB Bernstein. "Building crypto for a market like India is truly transformative," he added.