While Finance Minister <a href="https://www.cryptoknowmics.com/news/indian-crypto-industry-pursues-tax-clarity-in-union-budget-2022-23/">Nirmala Sitharaman</a>'s fourth budget is sensible in approach, it isn't exactly brimming with innovative ideas. Sitharaman has missed an opportunity to address the flagging consumer spending in the wake of erosion in real incomes and savings through a combination of tax breaks for the middle class and cash handouts for the poor, with the economy still in search of durable momentum that could help entrench the recovery from the previous fiscal year's record contraction.

Even though the Minister recognizes the role of public capital expenditure in crowding in private investment at a time when ‘private investments seem to require that support’ and helping to 'pump-prime' demand in the economy, the Budget outlay of INR 7.50 lakh crore for the capital account represents only a 24.4 percent increase from the revised estimate of INR 6.03 lakh crore for the current fiscal.

To be sure, Sitharaman's address emphasizes PM GatiShakti, a ‘transformative approach for economic growth and sustainable development’ fueled by the ‘seven engines’ of roads, railroads, airports, ports, mass transportation, waterways, and logistical infrastructure. While the broad scope of public infrastructure envisioned by the program might be really revolutionary if carried out as planned, the Budget is weak on information where it concerns the specifics and simply pencils in some figures for the roads and trains components.

According to the budget, a 'Master Plan for Expressways' will be developed in 2022-23 under the initiative, with 25,000 kilometers of roadways added to the National Highways network. However, the discussion of facilitating the seamless multimodal movement of products and people, as well as offering multimodal connectivity between major urban transit systems and railway stations, seems like it's been said before.

Several other key sectors, such as health care, rural development, and the vital jobs and income-generating national rural employment guarantee scheme, have all shrunk as a percentage of overall expenditure in the Budget estimates for fiscal 2023, albeit only marginally, compared to the revised estimates for the current year.

The fact that these sectors have been forced to bear the brunt of the government's desire to stick to a fiscal consolidation road map — the Budget projects a fiscal deficit of 6.4 percent of GDP in 2022-23, down from a revised estimate of 6.9 percent — speaks volumes about the government's priorities. Instead, government investment on health care should have been greatly boosted, with the lessons learned from the current pandemic's first two waves highlighting the necessity for a significant expansion of public health infrastructure.

The introduction of a ‘National Tele Mental Health Program’ to address mental health issues that have been aggravated by the tight lockdowns and myriad of fears created by the pandemic is a source of some relief.

The Finance Minister has recommended a series of tariff and policy changes that could assist support domestic manufacturing in the long run, in a gesture to the ruling party's nationalist moorings and in accordance with the Government's goal to increase self-reliance or <em>AtmaNirbharta</em>. A commitment to lessen import dependence in procurement for the country's defense forces is a crucial policy aspect.

To that purpose, the Minister has suggested allocating 68 percent of the armed forces' capital procurement budget to domestic industry in 2022-23, up from 58 percent in the current fiscal year. The tariff reductions, which affect a wide range of products including electronics, gems and jewelry, chemicals, MSME inputs, and project and capital goods, could have various short-term effects.

In particular, despite some proposed exemptions for advanced machinery, the move to gradually phase out concessional rates in capital goods and project imports and apply a moderate tariff of 7.5 percent could harm infrastructure projects and the establishment of new manufacturing capacity in the short term.

The Minister has taken a two-track strategy to address the current discussion over how to deal with virtual currency. On the one hand, Ms. Sitharaman recommends introducing a Central Bank Digital Currency in the 2019 fiscal year, which she believes will give the digital economy a huge boost and ‘lead to a more efficient and cheaper currency management system.’ Blockchain and other similar technologies would be used in the RBI-issued Digital Rupee. In the meanwhile, she plans to tax income from the transfer of any virtual digital asset at a rate of 30 percent, with only the cost of purchase being deducted.

It remains to be seen whether the government's efforts to integrate the burgeoning trade and investment in a variety of virtual digital assets, including cryptocurrencies, within the tax net would have a positive impact in addition to providing a revenue stream to the government.

The Minister's latest budget also ignores the asset monetization strategy that was outlined in the previous Budget and displays a dramatic drop in capital receipts from disinvestment. With only INR 65,000 crore from asset sales budgeted for fiscal 2023, compared to INR 78,000 crore in the revised estimates for the current fiscal, the Minister has had to increase gross borrowings to INR 14.95 lakh crore, a 24 percent increase from the current fiscal's budget estimate but a far sharper 43 percent increase from the revised estimate of INR 10.46 lakh crore. Given the Budget's absence of growth-invigorating ideas, the resource crisis manifested in the anticipated greater debt issuance is only going to get worse in the days ahead.

The pandemic has wreaked havoc on India's bottom half of the economic pyramid, claiming lives and livelihoods. In addition, inflation has eaten away at the poor's real income. The segment of micro, small, and medium businesses has been struck the worst. Unemployment among young people is dangerously high. The budget did not prioritize the hard-hit and impoverished in order to propose a program of ongoing stimulus to help the economy recover.

To be fair to Nirmala Sitharaman, there were a few projects and items sprinkled throughout her statements that might bring some respite. The choice to extend the credit guarantee scheme for another year, for example, is a prudent one. As more small-ticket loans become non-performing assets, the guarantee will kick in. Credit should be given to the minister for presenting the PM GatiShakti scheme, which has four pillars and seven engines and covers almost all of India's needs, including infrastructure, green finance, sustainable development, private investments, safety nets, and, of course, glitzy new technologies like 5G spectrum and fiber optics networks in every village, as well as the Reserve Bank of India's proposed new digital currency.

The citizen has been asked to look forward to India at 100 than gaze at the coming few months of deep uncertainty.

Union Budget 2022-23: Hopes Abound, But Ideas Are Scarce

Even though the Minister recognizes the role of public capital expenditure in crowding in private investment at a time when ‘private investments seem to require that support’ and helping to 'pump-prime' demand in the economy, the Budget outlay of INR 7.50 lakh crore for the capital account represents only a 24.4 percent increase from the revised estimate of INR 6.03 lakh crore for the current fiscal.

Prabhjeet Bhatla is a cryptocurrency writer covering startups and a researcher since 2020. She has authored many articles for Entrepreneur India and APAC (digital and print) on cryptocurrency and ever-evolving Blockchain, the technology behind Bitcoin, and other cryptocurrencies. She specializes in applied cryptography, privacy-enhanced information storage systems, anonymous cryptocurrencies, elliptic curve crypto-systems, and satellite television piracy.

Union Budget 2022-23: Hopes Abound, But Ideas Are Scarce

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