Its skillful navigation of fiscal constraints is reflected in a modest rise in nominal expenditure, a proposed increase for 4.5% in 2022-2223 over the revised estimate for 2021-22; flat revenue expenditure; and a sharply increased capital expenditure, which represents a 24% increase over the RE for 2020-21-22. While politically complex subsidies are expected to decrease, the revenue projections, which include a 9.5% increase for tax revenue and 14% decline for non-tax revenue, seem extremely conservative. These budgetary estimates should be easily achievable and could even compensate for any excess expenditure.
Many observers expected it to be an “election budget”, but it turned out that it was not. It preserves the government’s policy plan over the past few decades and provides continuity. This path consists of an acceleration of infrastructure building, improved logistics to ensure Indian manufacturing competitiveness, and leapfrogging digital development.
The ultimate goal seems to be to put India on a path of increased competitiveness. The public sector facilitates growth in the private sector by providing infrastructure and an enabling framework. This will lead to higher real and nominal GDP growth as well as buoyant tax revenues.
It is especially creative to use fiscal tools to’manage the risks’ that individuals take through their investments in crypto assets. These risks could have greater implications for the stability and viability of the financial sector. While it may take some time to create a regulatory framework for crypto assets fully, the fiscal measures that were announced could prove to have a significant regulatory impact. It is also encouraging to hear about the launch of a digital currency.
There are three points that need to be clarified. First, while most people would not recommend a rapid fiscal consolidation at the moment, it would be helpful to articulate the fiscal roadmap the GoI envisions for the medium term.
We need a vision of India being integrated into global value chains in order to foster growth at higher rates than we have seen in the past. We are responsible for just 1.5% of the global goods and 3.5% the services. This should be doubled.
The third item that was missing was acknowledgment and accounting for the potential headwinds to the global economy. Global outlook is mixed at the moment. Global trade is buoyant, but there is high inflation and a tightening of liquidity. It is worth asking if the global outlook could pose a threat to the implementation of the Budget proposals.
Overall, it is a very constructive Budget in an extremely complex and challenging economic climate.