The Budget FY22 presents a comprehensive package that will accelerate economic growth and dramatically boost business confidence — just what a pandemic-hit economy needed. The Budget is built around the government’s credo of minimum government and maximum governance. It lays out an action plan to deliver on the Prime Minister’s clarion call for an ‘Atmanirbhar Bharat’.

In doing so, the FM has unleashed a slew of bold and unconventional stimulus measures that will revitalise the economy. Understandably, these measures will lead to a sharp increase in the fiscal deficit. The FM estimates the fiscal deficit to be 6.8 per cent of GDP in FY22. On the positive side, though, much of the borrowings will be utilised for capital expenditure. The FM has made a bold move to budget an increase in the capital expenditure by 35 per cent to ₹5.4-lakh crore in FY22 from ₹4.1-lakh crore budgeted last year. The Central government’s capex next year will amount to 2.5 per cent of the GDP from 1.9 per cent in the previous year.

The increased capital expenditure is expected to be spread across key pillars of infrastructure. The Budget has aptly focussed on strengthening the roadways, railways, including metro rail, port development, micro irrigation and much needed distribution infrastructure for gas connectivity. For example, the government has an outlay of ₹1.18-lakh crore for the Ministry of Road Transport and Highways. This will be utilised to further build highways with a target to expand India’s highway network by 8,500 km by March 2022 and complete an additional 11,000 km of the national corridors. Interestingly, the FM listed specific infrastructure projects in her Budget speech this time in great detail. This reflects that the Budget plan for infrastructure is much beyond mere capital allocation; this would potentially have a strong multiplier effect on the economy.

The National Infrastructure Pipeline, which was launched with 6,835 projects in 2019, has now been expanded to 7,400 projects. The focus on enhancing infrastructure targets will have its trickle-down benefits for the industry, too. This will help in two ways. One, by creating job opportunities and income, which will add substantially to incremental aggregate demand in the economy. Two, by making the industry more cost-efficient, by reducing the cost of logistics and transportation. The government believes that for a $5-trillion economy, the manufacturing sector has to grow at double digits, on a sustained basis, and needs to become an integral part of global supply chains. Along with production-linked incentives, world-class infrastructure will be a key pillar of that vision.

Further, the Budget has been path-breaking with an innovative approach to monetise the assets beyond the disinvestment targets of public sector units during the year. Monetising operating public infrastructure assets is a very important financing option for new infrastructure construction. The government plans to launch a National Moneti’sation Pipeline’ of potential brownfield infrastructure assets. An asset monetisation dashboard will also be created for tracking the progress and provide visibility to investors. The debt-financing of Infrastructure Investment Trusts (InVITs) and real-estate investment trust (REITs) by foreign portfolio investors (FPIs) is expected to be enabled by making suitable amendments in the relevant legislations. This will further ease access of finance to InVITS and REITs, thus augmenting funds for infrastructure and realty sectors. Additionally, a Development Finance Institution will be seeded to fund long gestation projects, mainly in infrastructure.

The Budget has also enhanced spending on health and education sectors. In the post-pandemic year, it was imperative to scale up health spending, including that on nutrition, to match it with other peers. In many ways, health and education can be said to be the soft infrastructure which builds human capital, which is what leads to sustainable growth of the future knowledge economy.

Budget 2021 is far-sighted in its vision, and bold and ambitious in its thinking. This is a game-changing Budget.


The writer is Chairman, Aditya Birla Group