Here are some highlights from India’s Economic Budget for financial year ( FY ) 2022 – 2023. They are collated from study of select government documents and expert reviews being published on the economic budget released by Hon’ble Finance Minister Nirmala Sitharaman on this 1st February 2022. I don’t intend to be comprehensive while sharing my salient points which are from the perspective of impacts and opportunities for the Architecture, Engineering and Construction (AEC) Industry. Further i was also looking out to see any Green measures in context of climate targets committed by Government of India ( G.O.I. ) at COP26 held at Glasgow in November 2021.
Four Priorities for this Budget:
One of the key positive aspects I am happy about is that predicted growth rate of India is about 8%-8.5% for coming year. In this union budget the capital expenditure has been increased from INR 5.5 Lakh Crore to 7.5 Lakh Crore ( 110.5 Billion USD ) with the hope to spur growth and facilitate further private investments in key areas. So over all India is expecting to make a strong come back after Covid slowdown. Four main priorities mentioned in the official budget documents are:
- PM Gati Shakti
- Inclusive Development
- Productivity Enhancement and Investment, Sunrise Opportunities, Energy Transition and Climate Action
- Financing of Investments
Continued Support for Transport Infrastructure Development:
The government plans to develop a national masterplan using the concept of multimodal connectivity and synergy between Roads, Waterways, Railways, Sea ports, Airports, Mass transport systems and Logistics infrastructure. This initiative is given the name called PM Gati Shakti (translates to ‘Power of Speed’ in English)
A highways masterplan is being formulated with aim of completing 25000 km of national highways in this coming financial year.
400 new faster (Vande Bharat) trains to be built, along with 2000 km of rail network will be upgraded with new signalling system.
Special emphasis will be given to development of Infrastructure in North-East and Northern states including villages which presently lag behind.
Interestingly, the budget also proposes a National Ropeway Masterplan as an alternate to building roads in certain areas.
Numerous reforms and rationalisations have been planned for the Customs department especially to support SEZ’s.
Clean mobility initiatives like Metro’s systems and electric vehicles are expected to support climate action goals. Total of INR 19130 Crores are allocated for appox. 122 km of new Metro lines.
Improving transport and logistics is expected to have a multiplier effect on real-estate and construction business. So, this is expected to help AEC industry indirectly.
Renewed Emphasis on Urban Development:
63% of the 7,933 towns and cities (urban settlements) in India do not have master plans!
5 centres of excellence will be planned with INR 250 crore each to support education and training in urban planning.
Budget encourages Modernisation of building byelaws, implementing Town Planning Schemes and Transit Oriented Developments.
For improving ‘Ease of Living’ and also ‘Ease of Doing Business’ urban rejuvenation emerges as an important piece of the development puzzle. The government plans to form a high-level committee of planners and experts to advise on urban rejuvenation matters.
Focus on urban development via the concept of mega cities and enhanced focus on Tier 2 and Tier 3 cities is expected to provide indirect support to the real estate sector.
The budget announcements have extended the exemption on steel scrap duty by another year. Certain Anti-dumping duties will be removed on Stainless Steel. So that’s some positive for steel Industry. Steel and Cement Industry expects to benefit from improved demand due to increased infrastructure spending announced by GOI.
Emergency Credit Line Guarantee Scheme ( ECLGS ) which provides credit support for Hospitality sector distressed by Covid-19 has been extended till March 2023.
The well-known Smart Cities Mission continues its efforts with allocation of INR 6800 Crores. Its initiatives are wide in their scope including smart mobility , smart governance, citizen engagement, water and waste management , development of urban and green spaces, water bodies and river front development , climate resilience etc.
Swachh Bharat scheme gets INR 2300 Crores to improve hygiene, cleanliness and build toilets in urban areas.
Stronger Push for Affordable Housing:
Trying to meet the earlier ambitious construction targets set under the ‘Housing for All by 2022’ initiative, now the GOI has allocated another INR 48000 Crore ( approx. USD 6.4 Billion ) this FY22-23 for construction of another 80 lakh ( 8 million ) affordable housing units under the PMAY scheme. This scheme supports EWS/low-income group and middle-income group housing in rural as well as urban areas.
Despite an initial estimated demand of 50 million units, later more realistic targets were set by GOI to construct 32.6 million units. 21.4 million in PMAY-Rural and 11.2 in PMAY-Urban by 2022. Out of that till July of 2021 about 67% of Rural Houses and 43% of Urban Houses had been constructed. So PMAY is attempting to scale up its efforts in 2022-23 to get close to PM’s target.
Continuing the Indian Digital Revolution:
During recent years India has become the worlds largest digital payment ecosystem and GOI aims to support it further.
In effort to regulate digital money, budget plans Introduction of Digital Rupee by RBI starting 2022-23. Cryptocurrency will be taxed rather heavily at 30% perhaps to discourage its use.
A Digital University is announced as part of the budget which will impart lessons in all regional languages creating a network of ‘hub and spoke’. The university will work with the other central universities in the country to provide the required digital infrastructure and training
Online Skill Development will get a push by the increased allocation into the Education sector this year. In total about INR 39553 Crore are allocated for the National Education Mission.
A new Digital Health Ecosystem will be unrolled this year with a special programme to support tele-medicine for mental health and initiatives to upgrade 2 lakh ( 0.2 million ) Anganwadi health infrastructures in the villages
100% of the Postal Offices in India will start operating as full-fledged banks. Due to their far flung reach into the Indian hinterland, this is expected to encourage digital payments as well as easier availability of loans for house construction.
Integration of various digital portals is also being taken up for example creation of a unified logistics interface platform for different modes of transport and integrating postal and railway network for easier movement of goods.
Encouraging New Technologies:
Budget has as part of various initiatives developed support for rapid incorporation of new technologies.
Drone technologies are recently gaining interest in India. Only in mid-2021 did India come up with its first policy document for regulating drone use. This budget encourages its use especially in Agriculture sector ( called Kisan Drones ) for crop monitoring as well as in Defence sector where drones have become a necessity.
Opening up defence R&D for industry, start-ups and academia is envisaged in the budget with upto 25% of R&D budgets being eligible for this innovative move.
Budget will enable a battery swapping policy as an alternative to setting up charging stations in urban areas, which may help hasten the adoption of electric vehicles.
Infrastructure status has been given to building of Data Centres and Energy storage systems. This is a welcome move which will enable easier credit availability and a rapid growth of this area is expected in the next 5 years.
More support for Indian Start-up Ecosystem:
During last 5 years the government is seeing great results from Indian Startups. Today India is the third largest ecosystem of 60,000 startups which is only after US and China and ahead of the UK in numbers. With 90 unicorn companies existing in India in 2021, it’s an obvious area of priority for GOI especially keeping in mind the Atmanirbhar Bharat initiative.
Budget proposes launching fund with blended capital to finance agriculture start-ups.
Drone Shakti initiative plans to support start-ups developing drones as a service in India. This is also expected to advance drone usage for urban surveillance, environmental and construction monitoring.
Capping of long-term capital gain surcharge to 15% for digital assets is welcomed by investors. It is expected to benefit start-ups.
Various Sustainable Development Initiatives:
The budget is promoting use of chemical-free farming and the first pilot areas are going to be next to river Ganga.
INR 60,000 CR ( increased from last year ) are allocated to power the Jal Jeevan mission. 3 crore household in India will benefit from running water connection under the Har Ghar, Nal se Jal initiative of the government. This will support SGD targets in the broader context.
Vocational Education, Skill training especially enhanced via online courses is proposed. Education Ministry is better funded this year with the increased allocation being INR 37800 Crores.
Green Bonds to mobilise resources for green infrastructure and energy transition expected to help finance availability.
For 2022-23 States will be allowed a fiscal deficit of 4% of GSDP of which 0.5% will be tied to power sector reforms.
Many other schemes not mentioned in this article continue the sustainable development agenda for GOI with varying degree of funding allocations.
Output and Outcome Based assessment of Impact
In this budget, similar to practise adopted since Budget 2017-18, in addition to the financial outlays of schemes of the Ministries being indicated in the Budget document, the expected outputs and outcomes of the schemes are also being presented in a consolidated Outcome Budget document, along with the Budget. These Outlays, Outputs and Outcomes are being presented to the public in measurable ( qualitative or quantitative ) terms, bringing-in greater accountability for the agencies involved in the execution of government schemes and projects.
About the Author: Harsh Thapar is an architect and sustainable design expert with 19 years of experience working in India and the UK
Sources:
https://www.indiabudget.gov.in/doc/OutcomeBudgetE2021_2022.pdf
https://www.indiatimes.com/explainers/technology/india-drone-rules-explainer-548087.html