Union Budget 2022: A step towards India becoming a $5 trillion economy


Finance Minister Nirmala Sitharaman presented her fourth Union Budget amidst concerns over the recent COVID-19 wave on India’s GDP growth. However, this budget is clearly a step ahead in line with government’s efforts over the past few years to fulfil the vision of making India a $5 trillion economy. The pace of India’s recovery is likely to continue due to the government efforts to bring in structural, fiscal, and infrastructural reforms.

The following themes highlighted in Budget 2022 will further fast-track India’s journey in becoming $5 trillion economy:

Bold Plans

The Budget focused on a familiar strategy of driving capital expenditure to boost growth, through higher public spending. The government’s capex infusion of Rs 7.5 lakh-crore in FY22-23 will have a multiplier effect on investment activities in the overall manufacturing sector.

The government announced the expansion of National Highways by 25,000 km. In addition, the government introduced the ‘One Station-One Product’ concept to develop logistics for local businesses, 400 new energy-efficient trains, and 100 new cargo terminals for the Indian Railways.

This push in infrastructure development is going to have a downstream impact on expansion in manufacturing sectors such as steel, cement, and construction.

Make in India

Budget 2022 maintained the government’s focus on boosting India’s manufacturing strengths. While the Production Linked Incentives (PLI) schemes across 13 sectors were introduced last year with an outlay of Rs 2 lakh-crore, this Budget received two additional PLIs, with the intent to promote solar and new-age manufacturing processes involving 5G technology.

To facilitate domestic manufacturing in the solar energy sector, an additional allocation of Rs 19,500 crore for PLI in manufacturing of high-efficiency modules will be made.

The Budget has a special focus towards R&D across multiple ‘sunrise’ sectors such as AI, geospatial systems, space economy, genomics and pharma, green energy and clean mobility systems, where the government plans to introduce supportive policies in order to boost the production capacity. These initiatives will further bolster the government’s vision of self-reliance in manufacturing, and in reducing the import bill.

Propelling Growth

For the MSME sector, the government extended the Emergency Credit Line Guarantee Scheme (ECLGS) up to March 2023, and also extended the cover to a total of Rs 5 lakh-crore. The extension of this scheme will especially help hospitality and related services within the MSMEs.

The Raising and Accelerating MSME Performance (RAMP) programme worth Rs 6,000 crore was introduced, and will be rolled out over five years. The MSME portals such as Udyam, eSHRAM, NCS, and ASEEM will be interlinked, and will now perform with live, organic databases providing G2C, B2C, and B2B services. This will enable credit facilitation, skilling, and recruitment for the MSMEs with an aim to formalise the economy and promote entrepreneurship.

In view of the pandemic, the government had extended text incentive for eligible startups by an additional year, up to March 31, 2023. This will help startups drive economic growth and further bolster investments from PEs and VCs.

The ESG Push

The government has also shown an intent to develop electric vehicles (EV) as the ‘sunrise sector’. To further promote electrification, it has encouraged private sector to create sustainable and innovative business models i.e., a battery-swapping policy which includes the concept of energy/battery as a service. This will help in developing the requisite charging station ecosystem.

To adopt green energy, the government has taken initiatives in investing in solar energy, which will help in achieving the ambitious goal of 280 GW of solar capacity by 2030. In addition, the government will issue sovereign green bonds for funding green infrastructure. These projects will have positive impact on environment or climate effects and will help to reduce carbon intensity of the economy.

Focus On Labour, Women Workforce Participation

With a focus on making the labour pool more employable, the government will launch up-skilling programmes and partnerships with the industry to promote continuous skilling avenues through the DESH-Stack e-portal. It will provide API-based trusted skill credentials, find relevant jobs, and entrepreneurial opportunities.

At the same time, focus on women-led development schemes such as Mission Shakti are launched to help them better equip for greater participation in the workforce. With a focus on requirements for a manufacturing-led $5 trillion economy, these initiatives will help in ensuring continuous skilling and re-skilling of workforce to acquire future-ready skillsets. (Money Control)