Finance minister Nirmala Sitharaman stated in her Budget 2022 speech that this Budget seeks to lay the foundation, and steer the economy, for the next 25 years, i.e., from India @75 to India @100. In order to attain the goals of this 'Amrit Kaal' (critical period), the government has laid four priorities:
- PM GatiShakti
- Inclusive development
- Productivity enhancement & investment, sunrise opportunities, energy transition and climate action
- Financing of investments
With this in mind, the capital expenditure budget has been increased by 35.4 per cent from Rs 5.54 lakh crore in FY22 to Rs 7.5 lakh crore in FY23. This represents an outlay of about 2.9 per cent of GDP. The budget speech was one of the shortest of recent times and the FM did not dole out any big-bang reforms, as was the case last year. Still, let's look at some of the important developments that will affect businesses.
Infrastructure (roads, highways and railways)
- Formulation of PM GatiShakti Master Plan for Expressways in FY23 to facilitate faster movement of people and goods.
- The national highways network will be expanded by 25,000 km in FY23. Rs 20,000 crore will be mobilised towards this end.
- Contracts for 4 multimodal logistics parks will be awarded in FY23 through PPP (public-private partnership) model.
- 'One Station-One Product' concept will be introduced to help local businesses & supply chains. Railways will develop new products and efficient logistics services for small farmers and SMEs.
- 400 new-gen Vande Bharat trains to be manufactured in the next three years.
- 100 PM GatiShakti cargo terminals to be developed in the next three years.
- Rs 2.37 lakh crore worth of direct payment of MSP (minimum support price) to farmers in FY22.
- Chemical-free natural farming is to be promoted throughout the country.
- Promoting post-harvest value addition, consumption and branding of millet products.
- As a measure of import substitution, a comprehensive scheme to increase the domestic production of oilseeds will be implemented.
- Extension of exemptions on implements and tools for the agri-sector which are manufactured in India.
- The use of 'Kisan Drones' to be promoted for crop assessment, digitisation of land records, spraying of insecticides and nutrients.
- Rs 68,000 crore to be allocated under PM Kisan.
- Udyam, e-Shram, NCS and ASEEM portals will be interlinked. Their scope will be widened with an aim to further formalise the economy and enhance entrepreneurial opportunities for all.
- ECLGS (Emergency Credit Line Guarantee Scheme) cover will be expanded by Rs 50,000 crore to Rs 5 lakh crore and will be extended up to March 2023. This additional amount has been earmarked exclusively for the hospitality and related businesses.
- Infusion of funds in Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) will facilitate an additional credit of Rs 2 lakh crore to micro and small enterprises.
- Raising and Accelerating MSME Performance (RAMP) programme with an outlay of Rs 6,000 crore over 5 years will be rolled out.
- An open platform for the National Digital Health Ecosystem will be rolled out.
- National Tele Mental Health Programme will be launched to improve the access to quality mental health counselling and care services.
- Rs 37,800 crore allocated to National Health Mission.
- Rs 10,000 crore allocated under Pardhan Mantri Swasthya Suraksha Yojana.
PLI allocation for pharmaceuticals budgeted at Rs 1,629 crore for FY23.
- Har Ghar, Nal Se Jal - Rs 60,000 crore has been allocated to cover 3.8 crore households in FY23 to ensure tap water availability.
- Housing for All - Rs 48,000 crore has been allocated to provide 80 lakh houses under the PM Awas Yojana.
- Rs 39,553 crore allocated to National Education Mission.
- In 2022, all 1.5 lakh post offices will be live on the core banking system.
- 75 digital banking units to be set up in 75 districts by scheduled commercial banks.
Clean energy & sustainable mobility
- To promote the use of public transport in urban areas, the government will introduce electric vehicles and a zero fossil fuel policy.
- Battery swapping policy and interoperability standards are to be formulated to deal with the constraint of setting up battery charging stations at scale in urban areas.
- An additional allocation of Rs 19,500 crore for PLI to manufacture high-efficiency solar modules, with priority to fully integrated manufacturing units.
- 5 to 7 per cent biomass pellets will be co-fired in thermal power plants resulting in carbon dioxide savings of 38 MMT annually.
- Four pilot projects for coal gasification and conversion of coal into chemicals required for the industry will be set up.
- To encourage the efforts for blending of fuel, unblended fuel shall attract an additional differential excise duty of Rs 2 per litre from October 2022.
- Provisions have been made for payment of 75 per cent of running bills, mandatorily within 10 days and for encouraging settlement of disputes through conciliation.
- An end-to-end online e-Bill System will be launched for use by all central ministries for their procurements. This system will enable the suppliers and contractors to submit online their digitally signed bills and claims and track their status from anywhere.
- Further, to reduce indirect costs for suppliers and contractors, surety bonds will be made acceptable as a substitute for a bank guarantee.
- A task force will be set up to realise the potential of the animation, visual effects, gaming and comics (AVGC) sector.
- 5G spectrum auctions to be conducted in 2022.
- A scheme for design-led manufacturing will be launched to build an ecosystem for 5G as part of the PLI scheme.
- Contracts for laying optical fibre in all villages will be awarded under the Bharatnet project through PPP in FY23.
- PLI allocation for telecom and networking products budgeted at Rs 528 crore for FY23.
- 68 per cent of capital for the defence sector earmarked for the domestic industry in FY23, compared to 58 per cent in FY22.
- Defence R&D to be opened up for industry, startups and academia.
- Data centres and energy storage systems will be included in the harmonised list of infrastructure to facilitate credit availability for digital infrastructure and clean energy storage.
Tax incentives for start-ups
- The eligibility criterion to avail tax incentives has been extended by one year to March 2023.
- The surcharge on long-term capital gains, arising on transfer of any type of asset, has been capped at 15 per cent. This will further increase the use of ESOPs to attract and retain employees and also encourage investment.
Tax incentive for newly incorporated manufacturing entities
- To provide the benefit of a concessional tax regime of 15 per cent to newly incorporated manufacturing facilities, the last date for commencement of manufacturing has been extended by one year from March 2023 to March 2024.
Exemptions, customs and tariffs
- Several duty exemptions and project import duty concessions have hindered the growth of the capital goods sector. To tackle this, the government has proposed to phase out the concessional rates in capital goods and project imports gradually and apply a moderate tariff of 7.5 per cent.
- A few exemptions are being introduced on inputs, like specialised castings, ball screws and linear motion guides, to encourage domestic manufacturing of capital goods.
- More than 350 exemptions are proposed to be gradually phased out including exemption on certain agricultural produce, chemicals, fabrics, medical devices and drugs and medicines for which sufficient domestic capacity exists.
- Customs duty exemption given to steel scrap last year is being extended for another year to MSME secondary steel producers.
- Certain anti-dumping and countervailing duties on stainless steel and coated steel flat products, bars of alloy steel and high-speed steel are being revoked, considering the high prices of metals.
- Exemptions are being provided on items such as embellishment, trimming, fasteners, buttons, zipper, lining material, specified leather, furniture fittings and packaging boxes that may be needed by exporters of handicrafts, textiles and leather garments, leather footwear and other goods.
- Duty reduced on certain inputs required for shrimp aquaculture.
- Customs duty rates are being calibrated to provide a graded rate structure to facilitate domestic manufacturing of wearable devices, hearables and electronic smart meters.
- Duty concessions are also being given to parts of a transformer of mobile phone chargers and camera lens of mobile camera module and certain other items.
- PLI allocation for large-scale electronics and IT hardware budgeted at Rs 5,300 crore for FY23.
Gems and jewellery
- Customs duty on cut and polished diamonds and gemstones is being reduced to 5 per cent.
- Simply sawn diamond would attract no customs duty.
- A customs duty of at least Rs 400 per kg is being prescribed on imports of imitation jewellery.
- Customs duty on certain critical chemicals, namely, methanol, acetic acid and heavy feedstocks for petroleum refining are being reduced.
- Duty is being raised on sodium cyanide for which adequate domestic capacity exists.
- The Centre for Processing Accelerated Corporate Exit (C-PACE) will be established to speed up the voluntary winding-up of companies from 2 years (at present) to less than 6 months.