NEW DELHI: The main focus of this year’s budget, as was expected, has been on infrastructure and the government has tried to allocate enough resources towards that. The government has massively increased the allocation to capital expenditure by 35% to Rs 7.5 lakh crore in 2022-23. This is 2.9% of GDP, the highest ever.
“Capital investment holds the key to speedy and sustained economic revival and consolidation through its multiplier effect,” says the finance minister while announcing the increase in capital expenditure allocation.
According to her, capital investment also helps in creating employment opportunities, inducing enhanced demand for manufactured inputs from large industries and MSMEs, services from professionals, and help farmers through better agri-infrastructure.
In the previous budget, Rs 5.54 lakh crore was allocated for capital expenditure. However, the capex budget for 2021-22 has been revised to Rs 6 lakh crore. In the previous budget also the government had increased the capital expenditure allocation by 34.5%.
The effective capital expenditure of the central government is estimated at Rs 10.68 lakh crore in 2022-23 after taking into account the provision made for creation of capital assets through Grants-in-Aid to States. Finance Minister Nirmala Sitharaman explained why it was important for the government to significantly increase its capital expenditure.
“At this stage, private investments seem to require that support to rise to their potential and to the needs of the economy,” she said. However, a big chunk of the capital expenditure has been set aside for the capital infusion to Air India Asset Holding Limited, the company carved out of erstwhile Air India.
“If we set aside the capital infusion/loans to AI Asset Holding Limited for the settlement of past guaranteed and sundry liabilities, then the government capex would come in at 2.4% of GDP,” says an India Rating analysis.
India Ratings further adds that the capex is concentrated in eight ministries/ departments, with atomic energy accounting for 1.9% of the total capex, telecommunications 7.2%, defence 20.3%, transfer to states 14.9%, police 1.4%, housing and urban affairs 3.6%, railways 18.3% and road transport and highways 25.0%.
If one looks at the details of the capex allocation, Rs 3.51 lakh crore has been allocated to transportation alone in line with PM Gati Shakti National Master Plan focussing on the seven engines- roads, railways, airports, ports, mass transport, waterways and logistics infrastructure.
The Centre also wants states to push their capital expenditure and has accordingly allocated Rs 1 lakh crore to assist the states in ‘catalysing overall investments in the economy’. This amount will be in the form of fifty-year interest-free loans, over and above the normal borrowings allowed to the states.
Disinvestment receipts pegged at Rs 65,000 crore; LIC IPO soon
The government's receipts from disinvestment proceeds in the next financial year beginning April have been pegged at Rs 65,000 crore, lower than the current year's estimated mobilisation of Rs 78,000 crore. "The public issue of the LIC is expected shortly. Others too are in the process for 2022-23," Sitharaman said. So far, the government has mopped up Rs 12,030 crore from PSU disinvestment and strategic sale.
Change in IBC for efficient resolution
The government will bring about "necessary amendments" in the Insolvency and Bankruptcy Code to enhance corporate resolution and facilitate the cross-border insolvency process, Finance Minister Nirmala Sitharaman proposed in the Union Budget 2022-23. "Necessary amendments in the Code will be carried out to enhance the efficacy of the resolution process and facilitate cross-border insolvency resolution," she said.
Processing Accelerated Corporate Exit
Several IT-based systems have been established for accelerated registration of new companies. Now the Centre for Processing Accelerated Corporate Exit (C-PACE) with process re-engineering, will be established to facilitate and speed up the voluntary winding-up of these companies from the currently required two years to less than six months, the finance minister said while presenting the Budget.
Surcharge on co-op societies cut from 12% to 7%
The FM has reduced the surcharge on co-operative societies from present 12% to 7% for those having total income of more than Rs 1 crore and up to Rs 10 crore. This would help in enhancing the income of cooperative societies and its members who are mostly from rural and farming communities. She also reduced the Minimum Alternate Tax (MAT) rate for the cooperative societies from 18.5% to 15%.