Union Budget 2022 lays down a good framework for not just the year to follow but also, like it says, preparing for the next two and a half decades of ‘Amrit Kaal’. By focusing on near-term through several growth-enabling measures, as also the long-term through an emphasis on climate action, tech innovation and digital initiatives, the Budget is a good illustration of bifocal vision, thinking and planning for the long-term while keeping the near-term in mind.

The over 35 per cent growth in capital expenditure planned, from ₹5.5 lakh crore to ₹7.5 lakh crore, coming on the back of what was already a strong growth from last year to this year, clearly lays down the priorities for the government.

The over nine per cent GDP growth in FY22, while a function of the base effect, has also been helped by the capex trajectory last year. The government clearly does not want to lose this growth momentum. So, while private capex will continue to scale gradually, near-term green shoots will be given the full opportunity to bloom through this substantial increase in public capex. This is also a great confidence booster for the private sector and should enhance private appetite for capex.

Conservative

It is easy to put fiscal deficit on the backburner when pushing for growth and investments. However, the government has been conservative on this count, estimating a 6.4 per cent deficit in FY23. With tax revenues showing a strong traction, it wouldn’t be surprising to manage this number well within the target. In fact, with the strong revenue traction, it might even be prudent to exceed this number by 40-50 bps as long as the difference is focused on growth investment.

The country is still recovering from the shocks of the pandemic and the new wave is sure to have some impact on business, especially the small businesses. In that respect, the continuation of ECLGS is an important measure.

The scheme has met with great success since introduction, helping save millions of jobs and preventing many businesses from going under. More such enabling reforms would help unleash the full force of the animal spirits of small businesses.

It was also great to see the government emphasising on responsible growth environment friendly initiatives like green routes for train operation, sovereign green bonds, expanding scope of single window green clearances system, EV battery swapping policy, amongst numerous others come at a most opportune time.

The shift towards green energy has been a key mega-trend across the world and India will play a leading role in this journey, as global investors increasingly favour ESG-friendly countries.

Digital push

Lastly, the digital push through numerous initiatives, the most important being the launch of the central bank digital currency (CBDC), is a great step with an eye on the future. Technology and digital are going to be the foundations for the world of future and the government has signaled its intention to be in lock-step with this evolution.

The Budget 2022 ticks a lot of boxes. These now need to be accentuated with enabling reforms at both government as well as regulatory levels. Consumption is starting to lag after a good recovery recently and some financial support to drive this will be key in the near-term.

Overall, the growth has been strong, the sentiment is highly positive and the Budget seeks to leverage and push these to the next level. A successful execution could potentially lay the groundwork for decades of Indian dominance not just regionally but globally.

(Rashesh Shah is the Chairman of Edelweiss Group)

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