Presenting the Analysis for Union Budget 2022.

1. Notes from an Investor's Diary
Tuesday, 01 February 2022
Union Budget FY22 – Catching up and plumbing
The finance minister presented the union budget for FY23 this morning. The 90minutes speech was apparently the
shortest budget speech delivered by the incumbent finance minister. There is little doubt that the presentation of both
the budget and economic survey are smartly aimed at markets and investors.
The two fundamental ideas underlying the budget speech appear to be – (i) the government is now in a hurry to
catch the digital train it has been missing for past more than a decade; and
(ii) the government is earnestly keen to plug the leakages and loopholes in the taxation system.
Though the budget speech and economic surveys have made overwhelming use of digital and management jargon,
signifying that professional managers are now running the policy defining exercise at North Block, I would try to
derive the key message from the budget in common man language.
Positive take away
The three best features of the Union Budget for FY23 are perhaps
1. The general status quo on tax rates.
2. The government conspicuously accepts the role of facilitator in investment, providing the lead role to the
private sector. The government capex (up 9% over FY22RE) is mostly focused on four facilitating sectors –
Roads, Railways, Communication and defense. Rest all has been left to the private entrepreneurs with a
promise of supporting and transparent policy regime.
3. Institutionalization of “Vivad se Vishwas” settlement scheme through “Updated Return” process. This along
with restriction on repetitive appeals on matter law shall curtail tax litigation significantly.
Besides, the following are key positive take away from the budget:
 The government appears willing to be a part of the global digital transition. Initiative to increase the use of
digital technologies in key sectors like education, health, logistics, agriculture is a good omen. Infrastructure
status to data centers is a step in rightdirection.
The initiatives like digital education platforms, health registry, documents registry could potentially bring
meaningful difference to many lives. India may be running 10-12years behind in adopting digital as way of life
and governance, but hopefully no more delays will happen and the proposals will be implemented without
much delay.
Recognition of animation, visual effects, gaming, and comic (AVGC) sector as a high potential employment
opportunity for youth; introduction of digital currency; and recognition of virtual digital assets (VDAs) like
cryptocurrencies and NFTs, as legitimate assets, demonstrate the change in bureaucratic mind set.
 Both the budget and economic survey have overwhelmingly emphasized on the need to promote the clean
energy. Incentives for solar panel manufacturing, national battery swapping policy, differential duty for blended
fuel, mandatory co-firing of biomass pallets in thermal plants etc. are some key initiatives announced in this
budget.
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2. 01 February 2022
 Developing a 5km wide chemical free agriculture corridor alongside the river Ganga is a noble thought.
Hopefully it will be implemented fast and in right earnest.
 The river linking project is given further impetus. After Ken-Betwa, DPR for 5 more river linking projects has
been completed.
 2023 has been announced as the International Year of Millets. Support will be provided for post-harvest value
addition, enhancing domestic consumption, and for branding millet products nationally and internationally.
 Recognition of mental health as one of the top priorities.
 Need for a paradigm shift in urban planning process recognized.
 Transparency and promptness in government payments to contractors and suppliers.
 Required spectrum auctions to be conducted in 2022 to facilitate rollout of 5G mobile services within 2022-23
by private telecom providers.
Negatives
The finance minister may not have answered the wishes of many people. They can see it as key negative take away of
the budget.
For me the key negatives are:
 The detail of ministry wise allocations of budgeted capital expenditure also raises many questions. Allocation to
4 ministries (Roads, Railways, Defense, and Communication) and Transfer to states for central schemes
accounts for 87% of FY23BE capital expenditure. This leaves little allocation for important ministries like
Tourism, Food processing, Science & technology, Education, Power etc. This seems incongruent to the stated
objective of inclusive growth.
 There has been too much emphasis on “reform” of taxation of charitable institutions for past few years. The
trend continues this year also. While the government has is doing its best to plug the loopholes and repair the
leakages, it has not addressing the legitimate hardships being faced by the institutions doing genuine work to
help the poor and destitute. During Covid second wave, many of these institutions worked much more than the
government institutions to help the distressed people.
 The size of LIC IPO seems to have been cut to below Rs500bn fromRs1trn earlier. Disinvestment target for has
been cut from Rs1.75trn (FY22BE) to Rs780bn (FY22RE) and further lower to Rs650bn in FY23BE. This is
incongruent to the promise of less government more governance.
 Lower disinvestment target is translating into higher net borrowing.
 The reliance on expensive source of funding (small saving fund) the fiscal deficit remains high; even though it
has come down little from the previous year level.
 The gap between the fiscal deficit and revenue deficit continues to rise and is now 2.6% of GDP. In FY18 it had
shrunk to 90bps.
 NIL allocation for capital expenditure on building capacity for Bio Technology R&D.
 The futile lack of transparency and attempts to manipulate the truth. Not mentioning “end of bonus stripping”;
terming payment of Air India liabilities worth Rs50bn as capital expenditure does not bode well for
transparency. Adjusted for this, FY22RE is marginally less than FY22BE.

3. 01 February 2022
Ministry
Budget Allocation for
Capital Expenditure in FY23
Percentage of
Total Capital Exp
Roads and Highways 187744.00 25.02%
Defense 160419.60 21.38%
Railways 137100.00 18.27%
Tfr to States 111899.42 14.92%
Communication 54150.00 7.22%
Others 52987.32 7.06%
Housing and Urban Development 27341.00 3.64%
Police 10500.00 1.40%
Health 5632.57 0.75%
Port, Shipping, Waterways 574.31 0.08%
MSME 506.00 0.07%
Jal Shakti 419.83 0.06%
Electronics & IT 388.00 0.05%
Skill Development 151.46 0.02%
Science & technology 95.20 0.01%
Culture 88.00 0.01%
Fishries, Animal Husbandary, Dairy 80.61 0.01%
Employment 47.31 0.01%
Agriculture 39.25 0.01%
Textile 25.03 0.00%
Education 18.01 0.00%
Power 13.11 0.00%
New and renewable Energy 11.74 0.00%
Chemical & fertilizer 6.68 0.00%
Youth Affairs and Sports 5.32 0.00%
Women and Child Development 2.00 0.00%
Ayush 0.00 0.00%
Coal 0.00 0.00%
Food processing 0.00 0.00%
Panchayati raj 0.00 0.00%
Tourism 0.00 0.00%
Total 750245.77
Key themes
The finance minister has proposed to base the country’s development agenda on the following four pillars:
1 Accelerated development of world class infrastructure (PM Gati Shakti)
2. Using digital capabilities for delivering inclusive development
3. Productivity Enhancement & Investment, Sunrise Opportunities, Energy Transition, and Climate Action
4. Crowding in private investment through enabling policy environment

4. 01 February 2022
Some key budget statistics

5. 01 February 2022
Fiscal Trends

6. 01 February 2022
Trends in government expenditure