The budget for 2022-23 places a strong emphasis on economic growth, with a particular focus on capital investment to spur growth and jobs. The budget for 2022, as predicted, was centred on initiatives to revitalise the economy by providing productive expenditure and subsidies. The large infrastructure boost in the Budget was well received by market players. Banking, infrastructure, real estate, capital goods, healthcare, and fertiliser are the most beneficial industries. Higher corporate profit projections are also encouraging for growth. In general, the budget included no serious flaws, which is why markets have reacted positively to it.
Here are the highlights and possible positive impacts of Budget 2022 on our country
- The goal to establish a digital rupee is a foresightful action that will have a long-term good influence. With different measures to harness digital technology and drones, among other things, to digitise land records, the emphasis on next generation tools and technologies to propel the country ahead was clear.
- Allowing taxpayers to modify their IT returns for up to two years after the end of the relevant assessment year to account for underestimated income should help boost compliance and decrease litigation. This provision demonstrates a high level of respect and trust for the taxpayer.
- The news on MSMEs and the emphasis on digital banking will help to assist the economy even further. During the pandemic, the MSME sector was one of the hardest hit. The government has expanded the ECLGS scheme and modified the CGTMSE in order to better assist the MSME sector and decrease stress in this sector. The ECLGS will be extended till March 2023, with the guarantee cover being increased by Rs 50,000 crore, bringing the total insurance to Rs 5 lakh crore. With the necessary cash, the CGTMSE plan will be overhauled. This would open up Rs 2 lakh crore in new finance for MSMEs, as well as increase job prospects.
- Funding of Rs. 48,000 crore under the PM Awas Yojana for affordable housing announced by the honourable Finance Minister during the budget statement will assist the NBFC industry as well. This action would increase loan demand in the economy and boost the profitability of NBFCs that serve the industry
- The government also announced the interconnection of the Udyam, e-SHRAM, NCS, and ASEEM portals, as well as the provision of credit facilitation and entrepreneurship prospects.
- Infrastructure, real estate, industrials, financials, information technology, and pharmaceuticals are expected to prosper
Here are some challenges and possible negative impacts of the budget
- Markets will put their patience to the test on the downside as they react to rising risk premiums as a result of an approaching interest rate hike, both internationally and locally.
- The Indian rupee is expected to fall, prompting FII selling, particularly in names where private equity holdings are significant.
- Consumer staples and discretionary products are expected to underperform.
- In this process of increased expenditure, the government has failed to address the issue of inflation, which might prove to be a key bottleneck in global economic recovery.
- The increased focus on capex, which has risen to over 2.9 percent of GDP despite the fact that private sector capex has yet to kick in, is a crucial feature of the budget.
The FM has been conservative on tax collections and quite realistic on the total fiscal deficit, just as she was in the last budget. The 65000 crore divestiture objective should be easy to meet. A budget that is neutral from the standpoint of the financial markets. Let’s hope the execution matches the goals and drive of a fantastic budget.