Budget 2022: Govt to spend big in a bid to lift economy, create jobs

The Covid-19 pandemic has had a huge impact on India’s economy over the last two years. While the economy has been on the mend since June last year, uncertainties around the pandemic still remain, as was seen in the recent surge in cases fuelled by a new variant of the coronavirus. In this backdrop, the government is hoping that a sharp increase in capital expenditure on building new roads, train sets and affordable housing among other things will give a leg up to the economy, create lakhs of jobs and boost consumption.

“This Budget continues to provide impetus for growth. It lays a parallel track of (1) a blueprint for the Amrit Kaal, which is futuristic and inclusive. This will directly benefit our youth, women, farmers, the scheduled castes and the scheduled tribes. And (2) big public investment for modern infrastructure, readying for India at 100,” said Nirmala Sitharaman in her Budget speech.

The outlay for capital expenditure has been increased by 35.4 per cent to Rs 7.50 lakh crore in 2022-23, from Rs 5.54 lakh crore in the current financial year ending March 2022. The outlay next year will be 2.9 per cent of the GDP.

With this investment taken together with the provision made for creation of capital assets through grants-in-aid to states, the effective capital expenditure of the central government is estimated at Rs 10.68 lakh crore next year, which will be about 4.1 per cent of GDP.

In the previous Budget, the government had projected total expenditure of Rs 34.83 lakh crore, which has since been revised to Rs 37.70 lakh crore. In 2022-23, the government has estimated total expenditure of Rs 39.45 lakh crore.

With a focus on growth, fiscal consolidation is going to be gradual; the government estimates fiscal deficit at 6.4 per cent of GDP next year, compared with 6.8 per cent it had estimated for the current year, which has now been revised to 6.9 per cent.

“The 2022-23 Budget finely balanced fiscal retreat with supporting economic recovery,” said Abheek Barua, chief economist at HDFC Bank.

“The Budget focused on a familiar strategy of driving capital expenditure to drive growth, with the intention of crowding in private investment through higher public spending,” he said.

The government is laying huge emphasis on the PM GatiShakti National Master Plan, which focuses on what Sitharaman called seven engines – roads, railways, airports, ports, mass transport and logistics infrastructure.

So, the national highways network is to be expanded by 25,000 kilometers in 2022-23. In the Indian Railways, 400 new generation Vande Bharat passenger trains are to be manufactured over the next three years.

Separately, 100 cargo terminals for multi-modal logistics facilities will be developed in the next three years. Furthermore, multi-modal connectivity between mass urban transport and railway stations will be facilitated on priority. The Budget has also envisaged a National Ropeways Development Programme in hilly areas under a public private partnership mode and contracts for 8 ropeway projects are to be awarded next year.

Arun Singh, global chief economist at Dun and Bradstreet, feels focusing on much needed physical and digital infrastructure will have a multiplier impact on the economy.

“Successful execution of various announcements under PM GatiShakti has potential to kick start economic recovery and provide sustainable growth, also create impactful infrastructure,” said Singh.

Elsewhere, the government will also take up the Ken-Betwa river linking project, which is estimated to cost Rs 44,605 crore. Allocations of Rs 4,300 crore this year and Rs 1,400 crore the next year have been made.

The government has also earmarked Rs 60,000 crore to provide tap water to 3.8 crore households in 2022-23. Next year, 80 lakh houses are also envisaged to be completed for the identified eligible beneficiaries of PM Awas Yojana, for which Rs 48,000 crore has been allocated.

Under the Bharatnet programme, the government will also award contracts for laying optical fiber in all villages, which is expected to be completed by 2025.

To facilitate domestic manufacturing for the ambitious goal of 280 GW of installed solar capacity by 2030, the Budget has also made an additional allocation of Rs 19,500 crore for production linked incentive for manufacturing of solar PV modules.

“The Budget seems to be focused on high impact areas and accelerating the capital expenditure cycle,” said Sandeep Upadhyay, MD – infrastructure advisory, Centrum Capital.

“It is pertinent to note the reference towards investments into capacity building initiatives within the infrastructure sector for much needed skill upgradation pertaining to project appraisal, planning, design and project management including technical and knowledge assistance coming from multilateral funding agencies. This certainly suggests reorientation of focus towards much needed planning, monitoring and supervision of the massive investments being planned and not just splurging towards unleashing the capital expeniture cycle,” he said.