By Koushik Chatterjee

Following two years of the pandemic—when the priority was to save lives and livelihoods—it is now the time to now focus on a strategy that serves the near-term priority to provide a boost to the economy and provide employment as well as the the long-term agenda of accelerating the structural development of the country. Perhaps this is the prevailing mindset within the government and among its planners, because the finance minster’s Budget speech reflected these twin objectives as a thematic narrative at all times.

Clearly, a capital-investment-focused one, Budget FY23 has allocated capital to building scalable infrastructure, announced programmes for developing skills and capability amongst the employable youth, for widening and deepening the social sector schemes to improve the quality of lives of the poor and giving access to basic needs like water to every home, and for modernising the economy by accelerating digital-access for citizens; it also underlines a very strong commitment towards energy transition and climate action.

The fiscal deficit for FY22 (revised estimates) is at 6.9%, understandable given the significant spending by the government on tackling the pandemic. The target fiscal deficit of 6.4% for FY23 is also expected as the Centre is clearly focused on capital-investment spending that will structurally make India strong in the long term while addressing the immediate issues of domestic growth, consumption and employment.

The infrastructure development programme through the PM Gati Shakti, with investments in national infrastructure, is critical—not only to boost capital spending in the near term but also to enhance India’s competitiveness in the future. The Atmanirbhar Bharat programme has been further enhanced, by increasing the reservation in capital procurement for government-spend from domestic companies from 58% to 68%. This will have a multiplier effect on the manufacturing segment and is expected to drive private-sector capex. The government procurement process is proposed to be made more transparent by migrating to a digital platform through the e-bill system, easing doing business with the government. Doing away with bank guarantees will release capital for the suppliers.

The proposal to significantly enhance the capital support to the states, by Rs 100,000 lakh crore, in FY23 will help infrastructure development at the state level; it reflects the Centre’s clear intention to work with the states to co-create national infrastructure.

The announcements on climate action are commendable, especially on accelerating India’s transition towards a green economy and promoting the circular economy. Climate finance will play a very important role in the transition to a low-carbon economy and the initiatives taken to make GIFT IFSC a hub for climate finance will enable access to companies to fund climate-linked investments.

From the speech, it seems the finance minster has largely left the direct taxes untouched, which is fair given significant restructuring of corporate taxes was done a few years ago. Her indirect tax proposals had a clear theme of imposing customs duty on sectors where the government wants the domestic companies to invest and build scale as part of the Atmanirbhar Bharat initiative.

Finally, given the recent pandemic experience, I was expecting the finance minister’s speech to specifically focus on a much higher capital allocation in significant capacity expansion in the healthcare sector, including building world-class medical research institutions, expand undergraduate/post graduate/ super speciality seats in the medical education, incentivising the private sector to invest in healthcare to enhance the healthcare system in the country.

I am hoping that the government will look at this critical issue in the near future.

The author is executive director & CFO, Tata Steel. Views are personal