Critical Considerations of the Indian Government’s Budget- 2022-23

The Budget of the Government of India is an important document that details all the expenditure, revenue collection and development plans of the government for the current financial year. Every year, the budget is presented by the Finance Minister in the Parliament of India and provides the basis for allocating resources for the economic and social welfare of the country. Every year, the budget also includes announcements, initiatives, and measures taken to improve the country’s existing fiscal and economic fundamentals. In this article, we will discuss the summary of Union Budget 2022-23.

What is a Government Budget?

According to the constitution, the budget is a statement of estimated income and expenditure of the government for a given year. It serves as a financial plan for the government to operate over the financial year. The budget is also known as the national annual financial statement. The legislature discusses the government budget, which is then approved by the president and prepared by the country’s finance minister. The budget document consists of Actual Transactions for the previous year, Revised Estimates for the current year and Budget Estimates for the next year. For example, the Union Budget 2022–2023 provided actual transactions for 2020–2021, revised estimates for 2021–2022 and budget estimates for fiscal year 2022–2023.

Importance of Budgeting

The following are the importance of Budgeting:

• Although budgets cannot guarantee 100% economic stability, they help prevent failure.
• A budget is a tool for turning a broad concept into a concrete, feasible and ambitious goal.
• It helps in identifying and focusing on the development of disadvantaged people.
• Establishes the standard against which success or failure in meeting objectives is judged, as well as appropriate corrective action.

Expected Particulars of Union Budget 2022-23

The 2022-23 budget felt like a simple, clean budget that didn’t get into any complex restructuring of the tax regime and instead appeared to focus on increasing government spending to boost investment and economic growth. However, there are several discrepancies in the budget that are worth highlighting.

The FY2022-23 budget targets aim to support India’s aspirations in the Amrit Kaal as it moves towards the centenary of independence.

• Focus on growth and all-inclusive well-being
• Support for technology-based development, energy transition and climate action
• A fair cycle starting from private investment, overflowing with public capital investment.

The Union Budget for the fiscal year 2022-2023 aims to strengthen infrastructure this year, focusing on four priorities:

• Prime Minister of GatiShakti
• Inclusive development
• Productivity and investment, dawn opportunities, energy transition and climate action
• Investment financing

Some strategies that may be present in Government Budget 2022- 2023

The following are some strategies that you may see in the Government Budget 2022- 2023:

Economic Growth: Investment

With private investment demand sluggish, the government was widely expected to increase capital expenditure (capex) in the budget in line with its announcement last year, when investment spending was increased by 34.5%. In line with expectations, the budget included a 35.4% increase in capital expenditure for FY2022-23.

The quality (ie nature) of government spending is also important as it relates to the government’s ability to service debt. While consumption spending only adds to the existing debt stock, capital investment generates productive assets and thus enables the government to repay its debt. This is especially important in the current situation, as the government debt has increased manifold during the pandemic period.

Economic growth: Exports

Unlike our Asian counterparts like Bangladesh, Vietnam or China, India has always missed the bus when it comes to using exports as the main tool to boost growth. But now there is a historic opportunity to join the club of major exporting countries, as foreign firms increasingly seek opportunities to diversify outside of China. Thus, one important growth strategy in the budget may have been to openly signal the government’s willingness to encourage foreign companies to come to India to manufacture and export.

Fiscal strategy: Borrowing program

In terms of fiscal strategy, two elements stood out in the Union budget. During the pandemic, the central government deficit increased significantly. Already, the budget for FY2022-23 projected a higher than expected deficit of 6.4%. This deficit will be financed by a high level of borrowing.

Fiscal strategy: Medium-term Programme

Apart from the massive borrowing plan, another notable feature of the budget was the absence of a medium-term fiscal strategy.

With its debt burden mounting, the government should have drawn up a plan to indicate how and when it plans to reduce its deficits and debt back to pre-pandemic levels. However, the budget did not touch on any such strategy. Two problems arise in this context.

The best way to restore the fiscal position is through rapid economic growth as this would increase the income of the people and thereby ensure sufficient revenue for the government while reducing its need to spend on social programs such as MNREGA (Mahatma Gandhi National Rural Employment Guarantee Act). 1. However, it is doubtful that a strategy of protectionism, even if accompanied by pressure on capital expenditure, will succeed in reviving private investment and generating strong growth.

Objectives of the Government Budget 2022- 2023

Some objectives of the government budget are:

Redistribution of Resources:

Through budgetary policy, the government seeks to redistribute resources in accordance with the country’s economic (profit maximization) and social (public welfare) priorities. The allocation of resources is done by:

Tax credits or Subsidies:

To encourage investment, the government can provide manufacturers with tax breaks, subsidies, etc. For example, the government discourages the production of harmful consumer goods (such as liquor, cigarettes, etc.) through high taxes and encourages the use of “khaki products” by providing subsidies.

Directly producing Goods and Services

If the private sector does not show interest, the government can directly take over production.

Reducing inequalities in Income and Wealth

Economic inequality is important for any economy. The government aims to reduce these income and wealth inequalities through its fiscal policy. The distribution of income is done by taxing the rich and spending more on the welfare of the poor. It will reduce the incomes of the rich and raise the living standards of the poor, thus reducing inequalities in the distribution of income.

Economic Stability

The government budget serves to prevent business fluctuations of inflation or deflation to achieve the goal of economic stability. The aim of the government is to control the various phases of fluctuations in business through its budgetary policy. A policy of budget surplus during inflation and deficit budget during deflation helps maintain price stability in the economy.

Management of Public Enterprises

There are a large number of public sector industries (especially natural monopolies) that are established and managed for the social welfare of the public. The budget is being prepared to create various arrangements for managing these businesses and providing financial assistance.

Economic Growth

A country’s growth rate depends on the rate of savings and investment. To this end, budgetary policy focuses on mobilizing sufficient resources for public sector investment. The government therefore creates various measures in the budget to increase the overall rate of savings and investment in the economy.

Reducing regional Differences

The goal of the government budget is to reduce regional disparities through tax and spending policies to support the establishment of production units in economically backward regions.

Key Features of Budget 2022- 2023

Key documents such as those listed below are presented to Parliament during the budget submission process:

• Annual Financial Statement (AFS)
• Demand for Grants (DG)
• Finance Bill

Explanatory statements such as those below are also provided for easy reference.

• Expense budget
• Income budget
• Spending profile
• Budget at a glance
• Memorandum explaining the provisions of the Finance Act
• Output Outcome Monitoring Framework

Initiatives by the Government for Budget 2022- 2023

In recent years, the Indian government has come up with some unique initiatives and measures in its budget to accelerate the development and growth of the economy. Some of the unique things in the Indian government budget are as follows:

• Direct Tax Incentives to Support IT Industry: In order to accelerate economic growth and development in the IT sector, the Government of India has announced special direct tax benefits in the form of special financial incentives and tax breaks for IT investors and innovators. This initiative is aimed at building an environment of competitiveness, innovation and entrepreneurship in the technological space.
• Transfer of unused funds from government programs to the PM CARES Fund: As part of the solution to the health crisis caused by the corona virus, the government announced special provisions for the transfer of unused funds from various government programs to the Prime Minister’s Citizen Assistance and Relief Fund (PM CARES). This step will enable faster and more efficient delivery of emergency aid to those affected by the crisis.
• Responsibility of Shipping Companies to Establish Free Ports: In order to boost the country’s maritime economy, the government has announced a special deficit commitment for major domestic and international shipping companies. The responsibility requires these companies to set up free ports to facilitate import and export The aim of this move is to provide infrastructure that contributes to the growth of trade in the maritime sector.
• Support Package for Micro, Small and Medium Enterprises: The government has announced a package of direct and indirect support to help revive the SME sector. This includes an infusion of liquidity through soft loans, tax exemptions, and deferral of certain payments. The measure is aimed at stabilizing the sector of small and medium-sized enterprises and helping to revive it.
• Special package for Health Services: As part of the solution to the health crisis caused by the corona virus pandemic, the government announced a special package of financial assistance and tax relief for health services. This includes direct funding for medical facilities, exemption of medical supplies and equipment from import duties, and provision of special research grants for medical facilities. These are some of the unique things in the Indian government budget which are aimed at addressing the weaknesses in the economy and speeding up its recovery in the current economic scenario. These initiatives will undoubtedly boost the prospects of economic recovery and growth in the country and should therefore be implemented in earnest.
• Relief Package for Farmers: To help farmers affected by the corona virus pandemic, the government has announced a special package of direct and indirect financial assistance to farmers. This includes cash transfers and harvest exemptions. The move aims to provide immediate relief to farmers from the economic impact of the pandemic.

Final words

These are some of the unique things in the Indian government budget which are aimed at addressing the weaknesses in the economy and speeding up its recovery in the current economic scenario. These initiatives will undoubtedly boost the prospects of economic recovery and growth in the country and should therefore be implemented in earnest.

Great, so far we have discussed all the expected particulars that we may see in the Government Budget for 2022-2023, however, if you further feel any issue regarding it, then don’t worry we are here to Help. You can connect with us at Legal Window for the same.