Balanced Budget but Big Miss!!!

135 Bn eyes were set to watch budget on 1 Feb, keeping high hopes from the same. Government managed to do fairly well on most of accounts, seeks to lay a footprint and blue-print to drive economy over Amrit Kaal…. journey of India from 75 to 100 years. It is a realistic budget and government has not chased the vote bank.  High focus on growth, higher capex, generating employment etc but missed the class of commoners and businesses. We would also like to see the budget from the lens of 100 Bn. Newspapers filled with pleasing articles but subtle otherwise.

However, it is a prudent Budget, keeping check on expenses and realistic conservative revenue estimation, aimed to restrict the fiscal deficit. Detailing key parameters of the budget:

1. Revenue expenditure (Neutral- as important to see impact of reduced subsidies)
   • Flat growth of 1%, believing in theory of money saved is money earned.   
   • Managing the subsidies is key (Food, Petroleum & Fertiliser).
   • Reduction in subsidies may impact the over all chain and may further induce inflation. Also, impacting the consumption majorly in rural areas.

• Capex (Big HIT of the Budget):
  • 35% increase in capex, is the welcome step. Enhancing employment, inducing demand, higher wages etc.
  • Domino effect on sectors like cement, industrials etc.
  • But, will be supported by high borrowing, impacting bond yields negatively may further impact gross margins. This may have ripple effect on overall scheme of things.
• Revenue number looks achievable (Hit- Realistic projections)
  • Government has substantially reduced the disinvestment target, taking a cue from past.
  • Revenue numbers will be supported by higher GST, Taxes and Income, Corporate taxes and Customs. While fall in Union Excise duty, driven by increased global prices & step towards supporting the inhouse manufacturing. Still there is underestimation in tax revenues.
  • Estimation on RBI dividend has been reduced, which looks more realistic in years to come. Also, can be buffer for government to meet the targets.  
  • However, underestimation of tax for rest of FY 22 and FY 23, may bring breather on fiscal and also on borrowing front in future.
• Fiscal Deficit (Difficult to Achieve): 6.9% in FY 22 and 6.4% in FY23, important to see if government able to restrict the deficit, provided higher inflation & increased oil prices etc. Also, fiscal deficit is contained by higher borrowing of 11.18 Trn against 7.76 Trn in FY22 to meet expenditure, while gross borrowing of 14.9 Trn as against of 12 Trn.

Note: 67% of deficit will be financed by borrowing in FY 23 against 49% in FY 22.

Word of Caution: Impacting bond yield because of the higher borrowing, may impact other parts of budget.

• Taxes (Something in storehouse for HNIs only)
  • Neither increase or decrease on tax front, some times no action is also a good action.
  • Reduction in surcharge by capping it to 15% on unlisted space, benefitting our new born unicorns, employees with ESOPs & HNIs. Majorly, benefitting people falling above 2 Cr and 5 Cr income.
  • Taxing Crypto is sane decision, as any form of gains will be taxed at 30%. Government has done homework and restricting all avenues of gain.
  • Tax breather of Co-ops , MAT for corporative societies reduced to 15% from 18.5%.
• Supporting Local Business Men (Addressing very limited section, Missed)
  • Custom duty on Imitation Jewelry has increased, discouraging imports.
  • Custom duty on unpolished Diamond reduced to 5% (majorally benefitting our Guju Bhai’s).
  • Duty concessions on parts of phone chargers, transformers etc. supporting domestic manufacturing.
  • Unable to address the large section of business man and sectors effected badly by COVID and otherwise in last 2-3 years.
  • Extension of Emergency Credit Line Gaurantee Scheme for MSME till 31 March 2022

…… and many more such measures.

• Enhancing green energy
  • Introduction of policy EV Battery swapping, encouraging shift to electric vehicles.
  • Additional allocation of Rs. 19500 Crs for PLI specially to sectors like drone, green energy etc. , step towards Atmnirbhar Bharat also generating 60 lakh jobs.
  • 5-10% of Biomass pellet cofired with thermal plant, addressing stubble burning to extent.

…… few more in list.

Budget Missed… Again & Again:

Government has missed the section, which has been unnoticed from long time i.e. our common men, small business man and few of COVID hit sectors. These are the sections, which are bleeding to an extent and always have high hopes from budget.

1. No good news for the few of sectors impacted badly by covid. Sectors with job loss & witnessed consolidation.
2. Lack of relief for income slabs, the class where 81% of households start living on credit from mid of the month. There salaries are not sufficient enough and inflation will further worsen the situation.  
3. No steps to induce rural and urban demand, which is key for the private capex. Will further enhance the employment, wages etc.

Budget managed to support long term growth, satisfying big corporates, Start-ups, HNIs (investing heavily in unlisted space), making few of luxury items cheaper, financial inclusion through digital assets  etc etc…..cheering the stock market.  But no direct measures to induce the demand in rural and urban sector.

Still, few populist measures are expected and needed in order to support the revival post covid. Nothing much to cheer for common class…… A BIG MISS. However, common men & small businesses plays a critical pillar to lay a stepping stone for Amrit Kaal.

May be we have one before Lok Sabha Election…. & have SABKA SAATH SABKA VIKAS.