The thrust for the government will be on economic growth and recovery with an aim to touch the $5 trillion economy mark—that is Finance Minister Nirmala Sitharaman’s message through the Rs 39.45 lakh crore Union Budget for 2022-23 amid the ongoing Covid 19 pandemic.

She has announced a whopping increase of 35.4 per cent in capital expenditure to Rs 7.50 lakh crore from Rs 5.54 lakh crore last year. The money will be used to finance big ticket infrastructure projects such as highways and ports that will rev up growth and create more jobs in the country. The outlay is more than twice the 2019-20 figure indicating that the development of the infrastructure sector remains the key agenda for the government.

Sitharaman pegged the fiscal deficit for this financial year (2021-22) at 6.9 per cent against the projected 6.8 per cent. For 2022-23, the fiscal deficit has been projected at 6.4 per cent. She has made it clear once again that economic growth cannot be sacrificed to excessive academic concern over the fiscal deficit.

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There has been a massive increase in the allocation of social welfare and a phenomenal Rs 60,000 crore has been allocated for providing clean drinking water to 3.8 crore households under Har Ghar, Nal Se Jal Scheme. Another Rs 48,000 crore has been set aside for much-needed housing for the poor in both rural and urban areas.  

The finance minister has also taken care of the middle class in not going in for an increase in personal income tax rates to finance the enhanced allocations for big infrastructure projects and welfare schemes for the poor.

Going by the key Budget numbers, it seems Sitharaman is betting big on economic growth to drive up GDP which in turn will yield higher tax revenue. The gross tax revenue for 2021-22 is estimated at Rs 25.16 lakh crore while the budget projections were lower at Rs 22.17 lakh crore.The next year’s projection is at Rs 27.5 lakh crore.

In what could be considered a pragmatic step, the disinvestment target for the next financial year has been substantially slashed to Rs 65,000 crore.  Against a target of Rs 1.75 lakh crore, the revised estimate showed a receipt of Rs 78,000 crore from the disinvestment exercise this year.

The Centre is, however, confident that the IPO for Life Insurance Corporation will fructify by the end of next month.

“Going by the projected revenue numbers, it seems that the finance minister has put too much emphasis on tax receipts. Now for that you need the economic growth to be on a solid ground, only then can one expect a substantial increase in tax revenue,” Nirupama Soudararajan, CEO, Pahle India Foundation told India Narrative.

Soudararajan said that the finance minister has been overoptimistic in focusing economic growth. “While infrastructure development is critical and will boost growth, gestation period for many of these projects would be longer than anticipated, so you may not see results immediately,” she pointed out.

Sitharaman has also sprung a few surprises. A 30 per cent tax on income generated from digital assets.

While the Finance Minister’s announcement had left many puzzled, she clarified later at her press conference that though there is no regulation on digital assets, it does not stop her from taxing “profits” accrued from their transaction. “Such a high rate of tax would mean you are killing the industry. Besides cryto currencies, digital gold is a key asset class encouraged by the government..what happens to that is something we need to monitor” the Pahle India boss said.

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Sitharaman has announced a welcome hike in allocation for the education sector. The outlay has increased to Rs 1.04 lakh crore in 2022-23 against the revised estimate of Rs 88,002 crore in 2021-22. The allocation made in the Budget 2021-22 was Rs 93,224 crore.

Besides, she proposed to set up a digital university to provide education that will be built on a hub and spoke model. Setting up of mental health centres under the aegis of NIMHANS is also a welcome step.

“This is an acknowledgement of the large-scale impact of the pandemic on schools. A focus on digital learning, as well as the provision of enhanced learning aids through the PM e-Vidya scheme, will give a new impetus to strengthening the school education system,” RCM Reddy, MD & CEO, Schoolnet India Ltd, a facilitator of edtech solutions said.

However, a lot would depend on the implementation of the scheme.