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Budget is a booster shot for the economy: President CII; The huge capex push balanced with fiscal consolidation commendable
Feb 01, 2022

Responding to the budget proposals, Mr T V Narendran, President CII, applauded the Hon’ble Finance Minister for recognizing the need for public investment to crowd in private investment and for setting the virtuous cycle of demand, investments, and jobs in motion.

“The proposed 35.4 per cent increase in the allocation for capital expenditure on top of the last year’s increase of 34.5 per cent, is a booster shot for the economy. It will pump prime demand and private investment and create jobs; said Mr T V Narendran. In absolute terms the budgeted capital expenditure has increased from Rs 4 lakh crores in FY21 to Rs 7.5 lakh crores in FY23.

What is also commendable is that the capex push has been balanced well with fiscal consolidation, with fiscal deficit for FY 23 pegged at 6.4 per cent. This is in line with the economic strategy of higher capex along with a gradual glide path for fiscal consolidation, as suggested by CII in its pre – budget suggestions to the Government.

The capex push is not only limited to the spending by Union Government, but the budget also proposes to support State Governments in their capital expenditure. The allocation for the ‘Scheme for Financial Assistance to States for Capital Investment’ has been increased to Rs 1 lakh crores as against Rs 15,000 crores spent on the scheme this year. The scheme provides fifty-year interest free loans to states for capital expenditure.

The increase in public expenditure will not only help speed up infrastructure development, create demand and shore up economic growth but would create the much-needed jobs and provide the requisite impetus to our development journey.

The budget proposals cater to multiple important dimensions of the Indian economy.

It takes forward the thrust on infrastructure through the Gati Shakti interventions, which will boost the overall competitiveness of the Indian economy and create jobs.

It takes forward the thrust on manufacturing through interventions like the Ease of Doing Business 2.0, with trust as the basis for government business interface, and extending the 15 per cent corporate tax rate to manufacturing units coming into production by 31 March 2023, from the earlier 31 March 2022. Manufacturing is key to employment generation, absorbing the surplus workforce from the agriculture sector and boosting exports. Given the global supply chain disruptions in the wake of the pandemic and the changing geo-political scenario, manufacturing also assumes strategic significance, making the budget proposals significantly important.

The budget provides boost to startups, the engines of innovation, job creation and social impact. The proposal period of incorporation of tax eligible start-ups by one more year, has been extended till March 2023. A fund with blended capital is proposed to finance startups for agriculture & rural enterprise, relevant for farm produce value chain. Defence R & D will be opened up to start-ups along with industry and academic and 25 per cent of defence budget for R & D would be earmarked for the same.

Climate Change action and sustainability have received significant attention, in line with the Hon’ble Prime Minister’s commitments at COP26. The additional allocation of R 19,500 crores for the Production Linked Incentive for manufacture of high efficiency modules will help India achieve the ambitious target of 280 GW of solar capacity by 2030. The plans for promoting circular economy, through interventions in 10 identified sectors and also on cross cutting themes such as infrastructure, reverse logistics, technology upgradation and integration is a welcome move. The budget also promises to bring in policies and required legislative changes to promote agro forestry. The interventions demonstrate that the Government is following up its commitment with concrete action.

The budget proposals also take forward the government’s priority on equitable growth. The announcements for increasing digital penetration under BharatNet through PPP; increased outlay on Pradhan Mantri Gram Sadak Yojana (PMGSY) & Awas Yojana; push for fintech and setting up 75 Digital Banking Units (DBUs) in 75 districts by Scheduled Commercial Banks; will go a long way to promoting equitable and economic growth, expressed President CII. The interventions will help in mitigating the inequalities exacerbated by the pandemic.

The budget has also extended support to the pandemic hit MSMEs, through the extension of the ECLGS upto March 2023 and an additional allocation of Rs 50,000 crores taking the total allocation to Rs 5 lakh crores.  Support to MSMEs is important for job creation, for boosting exports and more regionally distributed growth and development.

The tax proposals in the Union Budget have focused on stability and predictability, which is very important for nurturing the incipient revival in the private capex cycle. The higher gross GST collections for the month of January 2022 at Rs 1,40,986 crores which is the highest since the inception of GST is an indicator of the industry coming to a fast track, added Mr Narendran.

Summing up his views on the budget, President CII said “like last year, many of CII’s suggestions have found a place in the budget proposals and we are confident that India is on a firm path to becoming a US$ 40 trillion economy, during the Amrit Kaal, the 25-year period to India@100”.

1 February 2022

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