Expectations Galore as Countdown begins for Union Budget 2022

Annual Budget of India 2022-23

Annual budget, which is the biggest economic event of the country, will be keenly watched this time too; wish list is ready from industry to salaried class

If the last year’s budget is any reference point of the government’s intention, then we could expect a growth oriented budget this time too. But the government is also likely to target fiscal deficit between 6.3 and 6.5 per cent for the financial year 2022-23 which is slightly less ambitious in the wake of the latest Covid-19 variant,Omicron.

Less than a fortnight left for the Union Budget 2022 to be announced and expectations are only growing. Unlike the previous year, the government has a cushion of an improving economy with several top indicators of growth falling in place. But the government will still have to walk on a tight rope in order to strike a balance between its expenditures and ballooning fiscal deficits.

The government has been able to cut its fiscal deficit for FY22 (April-March) after stretching it to a whopping 9 per cent in FY21. But the deficit shot up on higher spending on welfare schemes and also paying Food Corporation of India (FCI) dues. 

It is unlikely that the government is mulling over cutting its expenditures significantly to rebalance and manage its deficits.   

The Budget 2022 speech will be made by Union Minister on February 1 and this will be her third full budget in the incumbent Government. 

Government’s announcements on key sectors including automobile, manufacturing, real estate and infrastructure, MSMEs (Micro, Small and Medium Enterprises) and agriculture will be keenly watched for hits and misses. All these sectors are high growth engines for the domestic economy.

To its credit, the government has introduced over a dozen Production Linked Incentive (PLI) schemes since April 2020 to give a fillip to the domestic manufacturing sector. The schemes have been launched in varied sectors be it electronics, semiconductor, automobile and auto components, medical devices, mobile phones, drones, chemicals, metals and mining and textile & apparels among others. 

Media reports suggest that the government’s estimates a minimum production in India as a result of the PLI schemes to reach at Rs 37.5 lakh crore over the next five years. To achieve this, the government is expected to spend Rs 346,827 crore on these 14 PLI schemes.

The industry will be looking for greater clarity in many of the schemes that have been introduced.

The industry and even the common man are looking at cuts in excise duty on petrol and diesel that has unsettled all and sundry. The inflation is now spiralling up amid unleashed commodity prices and any relief on this front could just prove to be a major kick. 

The input cost has been one of the major sore points for several industries which rely on commodities. A lower tax regime in the form of reductions or rationalisation inGoods and Services Tax (GST) is what is being sought by the manufacturing industry. 

The automobile industry is again looking at the FM to reduce GST two-wheelers and cars for them to become more financially viable for common man.   

Real Estate sector is also looking at certain incentives that could push its cause further. The pandemic has given it a much needed-boost to the residential property segment at a time when many other sectors are hit badly from it. The need for a better and bigger home due to the forced upon work from home (WFH), has acted as a big trigger. 

Higher income tax exemptions on loan repayment towards interest and principle are among the demandswhich are being reiterated by the industry. The current exemption limit is up to Rs 200,000 and Rs 150,000 respectively. 

Micro, small and medium enterprises have been severely hit since the onslaught of the pandemic with long lockdowns in place. It is looking for greater handholding and financial support not limited to credits or loans.

We could also see some big announcements for the agriculture sector considering the upcoming elections in two largest agrarian states of Uttar Pradesh and Punjab.  

Also, salaried class is looking at higher standard deductions in this year’s budget speech in the form of WFH allowance. This segment also requires a higher ceiling on investment for tax exemption under Section 80C of the Income Tax Act. 

Among other key expectations, the budget outlay on capital expenditure will be keenly watched. The government had increased the allocation by 26 per cent to Rs. 5.54 lakh crore in FY22 over Rs 4.39 lakh crore inFY21.

The government thrust on building world class infrastructure and multi-modal connectivity in the form of roads, ports, airports, affordable housing and tap water for every household could have a multiplying impact on the growth in the medium to long term. All sectors catering to them will directly benefit from it.

The government has also been emphasizing on green energy to not only reduce its carbon footprints but also save on its energy imports. One could expect some big ticket announcements in this regard.

Higher budget allocation for education, healthcare and infrastructure is expected.  

Last but not the least, the youth in this country will be looking at announcements that could boost employment, an issue that has often been talked about. 

However, one must also watch out for the Omicron variant, which has left everybody confused. While, it is being dubbed as less deadly than its predecessor Delta variant, the transmissibility remains significantly high and fears loom if the third way could overwhelm the health infrastructure again like it did in the second wave. 

The impact is however, visible even as we speak with many restrictions now coming in place. A further lockdown could only prolong the recovery. 

The Budget Session of Parliament for FY22 will be held from January 31 to April 8 and the session will begin with the address of the President of India to the joint sitting of both the Houses on January 31.

The first part of the session would conclude on February 11. After a month-long recess, the part two of the session would begin from March 14 and conclude on April 8.

​All said and done, this should be an interesting budget to watch for.

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