Budget 2022: All You Need To Know
Budget 2022: Economy, India Inc., Personal Tax - What to expect.
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Union Budget 2022 will be the tenth budget presented by Prime Minister Narendra Modi's government, including one interim budget presented in the general election year of 2019. It will be Finance Minister Nirmala Sitharaman's fourth budget presentation.
She will begin her budget speech in Lok Sabha at 11.00 am on Feb. 1. You can watch it on the BloombergQuint website or on any of our social media platforms, including here on YouTube.
Union budgets in India are often more than just a presentation of key financial metrics - revenue, expenditure, deficit...
The run up to the budget is filled with clamour from industry and taxpayers on changes necessary - though this has reduced somewhat since GST was introduced and the annual tinkering of indirect taxes curtailed.
Yet, the government's taxation targets and expenditure decisions offer as much a view of the state of the economy as they do the direction of political winds.
The stated intent of the government has been to keep fiscal deficits, the gap between expenditure and revenue, in check. A long term path from 9.5% in FY21 to 6.8% in FY22 and 4.5% by FY26 was articulated last year.
That will be helped this year (FY22) by a big jump in tax collections, expected to exceed the Rs 15.4 lakh crore net revenue estimate, though divestment proceeds, a much smaller contributor, will be nowhere close to the target of Rs 1.75 lakh crore if the LIC IPO doesn't make it before year end.
Meanwhile, a weakening post-pandemic recovery has economists calling for continued support from the government through targeted spends, such as on rural jobs guarantee scheme and capital projects such as infrastructure.
Also, the 2022 union budget comes just days before 5 key state elections giving rise to expectations of higher social sector spends and a social security plan even.
So, what will it be - a tight-fisted budget or an election-oriented one?
Ajeet Yadav and his family returned to farm work as urban jobs dried up.
Macro Economy
India's debt-to-GDP ratio rose to 87.8% in FY21. In FY22, it is estimated to decline modestly to 87.4%, with high nominal growth playing a role in bringing it down.
Economists advise the government follow a more calibrated fiscal consolidation path to reduce the debt-to-GDP ratio, to ensure growth remains strong over the next few years.
Higher-than-expected tax collections are likely to help the government in reducing its budget gap in the coming year.
That may leave marginal room to increase expenditure and the focus should be on reprioritisation towards more capital expenditure.
In the budget for 2021-22, the government stepped up capital expenditure. States, too, budgeted for increased capex but were slow to spend in the first half of the current year.
No Indian Left Behind
BloombergQuint's has themed its reporting around a thrifty budget but one that focuses its efforts at leaving no Indian behind. Slowing growth in 2019-2020 and then two devastating pandemic-affected years have decimated the informal sector and small businesses, deepened unemployment and widened inequality.
India Inc.'s Wishlist
What most businesses want is an acceleration in consumer demand, supported by government expenditure while private capex revives slowly.
In Search Of An Investment Cycle
L&T Chairman AM Naik writes on how growth ingredients are in place but it is important to avoid past mistakes.
Tax Expectations
Chances are slim that the government would make any structural changes to the personal or corporate income tax rate regime - though there is pressure from ordinary tax payers to reduce their burden at a time when incomes have been hurt by the pandemic. Yet, given the small proportion of Indians that do pay taxes, this is highly unlikely, especially as it's a bulwark of revenue collections this year.
As for corporate tax - rates were cut in 2019. No change is expected but on the fringe there is concern that declining corporate tax collections might prompt some review. The global race to the bottom in corporate tax rates is also showing signs of turning.
A change in GST rates is already being studied by a group under the aegis of the GST Council.
Big changes aside, there are several meaningful, smaller ones on the tax wish list. From tax incentives to the pandemic pummeled services sector to higher deduction limits for those affected by Covid. And hey, what about those of us working from home?
Sector Winners & Losers
The budget's expenditure decisions will help some industry sectors and leave others out in the cold.