What is our View?

  • This was a growth-oriented budget with the highest capital expenditure allocation of ₹7.5 lakh Crore. 
  • An increase in capital expenditure without adding any revenue expenditure on subsidies and pensions or salaries, with no increase in tax exemptions is the right step to improve the long term macro fundamentals of the country. The nominal GDP growth projected in the budget estimates is about 11.1% while the tax collections have been conservatively estimated at 9.6%. Increased tax collections are likely to result in reduced government debt borrowings.
  • This budget focused on firstly creating employment opportunities, secondly the scope for business improvements and shorter implementation time  and thirdly Capex oriented, tech-enabled and green energy initiatives. The budget was more structural in nature and not one with short term benefit doles.
  • Increase in revenue expenditure has only short-term benefits and its multiplier effect is 0.99 times the GDP whereas a rupee spent on Capex gives a long term structural boost and its multiplier effect is approximately 2.45 times on the GDP.
  • The higher borrowing in the bond market is likely to increase bond yields in the short term.
  • Multiple reforms, attractiveness as an investment destination, fastest-growing economy tag, high degree of double vaccination among adults against covid, and government’s CAPEX focus are strong factors that will help in maintaining the long term attractiveness of Indian Equity Markets

What are the risks that we need to consider?

  • The Skillset development and employability levels
  • A potential slowdown in Consumer Demand
  • A Slowdown in Private Capex as capacity utilisation rate at present is between 65 to 70%
  • Ineffective use of the allocated capital expenditure budget and Improper execution of Government-sponsored projects

What are the things that may affect individual investors?

  • There was no change in Income Tax rates and tax slabs.
  • The Maximum surcharge payable has been capped to 15% on long term capital gains on all assets.
  • Now taxpayers can file updated IT Returns within a time span of 2 years if any information was wrongly represented by them. There will be an additional 25% charge on the tax and interest payable on the additional income if filed in the first 12 months and a 50% charge if filed later but within 2 years.
  • Cryptocurrencies, and other Virtual Digital Assets, are going to be taxed at 30% on the gains. There will be no deductions on any additional costs other than the acquisition cost. There will also be no option to offset losses with other asset classes. A transaction in virtual assets would also attract 1% TDS on the sale value.

Union Budget 2022 – In-depth Analysis

We went into this budget with the best vital stats possible as far as the economy goes. We saw a GDP growth of 9.2% for FY22 and 8.5% for FY23 with the fastest growing economy tag. We also saw All-time best export figures of 37.8 Billion USD in December. January GST collections stood at a record high of ₹1.41 Lakh Crores. 

In a nutshell, we are just coming out of a year in which we were taken aback by a brutal pandemic wave 2. 

We, however, countered that with a strong GDP growth rebound, export growth and record tax collection numbers and importantly, inflation within the comfort range for RBI. 

Therefore, all that was needed was to carry on with the schemes that have worked well in the current financial year. 

A key feature of FY22 has been the rise in tax collection. While we should be happy that there is an emerging trend of better tax compliance, it is worth noting that India’s Gross Tax to GDP ratio is only 10.7%. 

This is way below the OECD ratio of 34%. Any restraint on fiscal borrowings combined with increasing capital expenditure with not so high support from tax collection is indeed quite commendable.  

Reviving employment and livelihood post-Covid

Post covid, India was seeing a high unemployment rate and the consumption side of the economy has been seeing a decline. To counter this, India needed to announce massive infrastructure and manufacturing opportunities to generate employment opportunities. 

The budget has proposed a 35% jump in capital expenditure to fund infrastructure projects. The National Infrastructure Pipeline plan can create massive employment opportunities at a time when post covid, many informal workers face unemployment. Under the Atma Nirbhar plan, the proposed  PLI scheme in 14 sectors will help in creating around 60 lakh jobs.

The credit guarantee provision to MSME’s ensures that there is no dearth of credit for the MSME’s thereby supporting one of the largest employment generating machines.

China plus 1 Strategy 

There is an opportunity for India to offer to the world, a potential China replacement option for manufacturing in the electronics, textile, and speciality chemicals sectors. The “Make in India” scheme, and the PLI scheme, have been given adequate recognition in the budget.

The reduction in customs duty on important components will help in making exports of finished goods competitive.

Promoting Start-ups

The budget has proposed opening up defence R&D for industry, startups, and academia. It also proposed launching a blended capital fund to finance agriculture start-ups. Along with other tech solutions for Agriculture, the budget clearly lays out possibilities of Agri start-ups that will modernise Indian Agriculture.

Start-up investments are likely to see more participation by High-net Worth Individuals through funding and by senior employees through stock option plans. For this, we can thank the budget for capping the surcharge on long-term capital gains to 15%.  This cap is across asset classes, including equity shares of unlisted companies. 

Eligible startups incorporated before 31st Mar 2023 (the earlier date was 31st Mar 2022), will get 3 consecutive years of tax holiday benefit out of the first 10 years since incorporation. 

Make in India

The concessional tax regime of 15% for newly incorporated domestic manufacturing companies has been extended till 31st March 2024.

The government has continued with its policy to rationalise import duty structure on input components. This is to boost domestic manufacturing. 

There has been import duty concession on inputs needed for the manufacture of mobile phones, smartwatches and hearing devices. The gems and jewellery sector has also seen a reduction in customs duty on cut and polished diamonds and gemstones to 5% to facilitate the export of Jewellery goods.

On the other side, the FM has proposed the replacement of concessional rates on capital goods and project imports gradually, with a moderate tariff of 7.5%. This would help in reducing imports in the Capital Goods space, especially the Power sector. 

68% of defense procurement would be earmarked for the domestic industry in FY23, up from 58% in FY 22.


Speed is an important variable be it the speed of setting up a business, speed of transportation of goods, speed of resolution in disputes. 

At present, India has moved up to 63 on the global index in 2020 from 142 in 2014 on the World Bank’s Ease of Doing Business Index. The budget talks about reducing compliance burden, repealing archaic laws, faster resolution and decisions on bankrupt companies. The budget proposed launching “Ease of Doing Business 2.0”. 

The budget proposes an international arbitration centre to be set up at GIFT City, Gujarat. This will provide faster dispute resolution. The amendments in the bankruptcy code aim to speed up resolutions by introducing cross border insolvency rules. There is a proposal for the establishment of the Centre for Processing Accelerated Corporate Exit (C-PACE) which will speed up the process of voluntary winding up from the current 2 years time frame to less than 6 months time frame.

The FM mentioned that Gati Shakti will be a massive transportation, logistics, warehousing plan. Under the Prime Minister’s Gati Shakti Plan, the FM announced the government’s plan to expand the network of National Highways by 25,000 km in FY23. This initiative will cost ₹20,000 crores. The plan focuses on seven different streams which are: Roads, Railways, Airports, Ports, Mass Transport, Waterways, and Logistics Infrastructure. 

For real-time data exchange across different modes of transport, the Unified Logistics Interface Platform will be revamped. The government will offer contracts for 4 multi-modal logistics parks in FY23.

Technology-enabled growth

It is said that technology is the “x” factor that uplifts an economy much faster than any linear combination of labour and capital (land and money). 

To this extent, there has been a lot of intent shown by the government to use technology in the form of digitisation, data analytics, surveillance. All government procurements in the form of E-Bills will reduce corruption and ensure faster repayment on company receivables.

This has been a major problem related to doing business with Government agencies. Encouraging the use of drones in logistics and surveillance will result in massive cost benefits over the long term. Some of the tech and tech-related proposals in the budget were as follows:

1. E-Passports with embedded chip technology.

2. Laying out optical fibre in all villages as part of 100% optical fibre connectivity.

3. Digital currency to be launched by RBI.

4. Reduced customs duty for parts in mobile phone chargers, camera lenses.

5. One class – One channel initiative to provide supplementary education from classes 1 to 12.

6. 75 digital banking units to be established in 75 districts of India.

7. 5G Spectrum auctions to enable 5G mobile services.

8. Drones to be provided for farmers for digital assessment of the acreage and delivery of digital and hi-tech services to farmers in viable funding options.

9. Paperless E-Bill for government purchases.

10. Last-mile connectivity by integrating post offices.

11. A digital ecosystem for skilling and livelihood will be launched to promote online training and skilling.

12. National Tele Mental Health Programme

Other initiatives

Importantly, the government increased the Emergency Credit Line Guarantee Scheme (ECGLS) by ₹50,000 Crores and extended the scheme till March 31st, 2023 for MSMEs. 

This budget also talks about green bonds issued by the government for green projects. 

Gift (Gujarat International Financial Tech) City is likely to emerge as a major financial hub and destination for foreign inflows following announcement in the budget regarding 

1). Setting up of an international arbitration centre for cross-border dispute resolution 

2). Foreign universities offering finance-related courses 

3) Tax exemptions on income from leasing extended to the shipping sector as well with last year’s budget announcement for the airline sector. 

4) Tax exemptions on Non-Resident specific Portfolio Management Services have also been proposed.   

Green Energy and Green Technology

The budget has focused on green energy and technology initiatives. It has tried to create solutions to tackle climate change and the transition to a cleaner energy situation. All green projects will be considered for clearance through a single-window portal – “Parivesh”.

Thematic funds with a blended financing option for sunrise sectors including climate change initiatives with a 20% government share and remaining private share have also been proposed.

The budget has proposed the issuance of Sovereign Green Bonds. The proceeds of these bonds will be deployed in carbon negative public sector projects. 

There were many proposals related to clean energy solutions through announcements on cleantech solutions, battery swapping policies, and EV manufacturing. 

The FM also proposed enhancing the funding under the PLI scheme for domestic solar cells and module manufacturing to ₹24,000 crores from the existing ₹4,500 crores. The battery swapping policy and recognizing battery or energy as a service will help to improve the EV infrastructure, remove “roadblocks” (pun intended), and result in faster EV adoption.