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Facts About Budget 2022

  • February 03 2022
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Facts About Budget 2022




Nirmala Sitharaman is Indias second women finance minister, After Indra Gandhi. Indra Gandhi presented the budget in the house only one time in 1970-71 whereas this is the 4th budget to be presented by  Nirmala Sitharaman in the house.

 

State of the Economy:

 

 

1. The year ahead is poised for a pickup in private sector investment with the financial system in a good position to provide support for the economy’s revival. 

2. As per IMF’s latest World Economic Outlook projections, India’s real GDP is projected to grow at 9 percent in 2021-22 and 2022-23 and at 7.1 percent in 2023-2024, which would make India the fastest-growing major economy in the world for all 3years.

 

3. On-demand side, consumption is estimated to grow by 7.0 percent, Gross Fixed Capital Formation (GFCF) by 15 percent, exports by 16.5 percent, and imports by 29.4 percent in 2021-22.

4. Macroeconomic stability indicators suggest that the Indian Economy is well placed to take on the challenges of 2022-23.

5. A combination of high foreign exchange reserves, sustained foreign direct investment, and rising export earnings will provide an adequate buffer against possible global liquidity tapering in 2022-23.

6. Economic impact of the “second wave” was much smaller than that during the full lockdown phase in 2020-21, though the health impact was more severe.

7. Government of India’s unique response comprised of safety-nets to cushion the impact on vulnerable sections of society and the business sector, significant increase in capital expenditure to spur growth and supply-side reforms for a sustained long-term expansion.

8. The government’s flexible and multi-layered response is partly based on an “Agile” framework that uses feedback loops, and the use of eighty High-Frequency Indicators (HFIs) in an environment of extreme uncertainty.

 

Fiscal Developments:

9. The revenue receipts from the Central Government (April to November 2021) have gone up by 67.2 percent (YoY) as against expected growth of 9.6 percent in the 2021-22 Budget Estimates (over 2020-21 Provisional Actuals).

10. Gross Tax Revenue registers a growth of over 50 percent from April to November 2021 in YoY terms.  This performance is strong compared to pre-pandemic levels of 2019-2020 also. 

11. During April-November 2021, Capex has grown by 13.5 percent (YoY) with a focus on infrastructure-intensive sectors.

12. Sustained revenue collection and a targeted expenditure policy have contained the fiscal deficit for April to November 2021 at 46.2 percent of BE.

13. With the enhanced borrowings on account of COVID-19, the Central Government debt has gone up from 49.1 percent of GDP in 2019-20 to 59.3 percent of GDP in 2020-21 but is expected to follow a declining trajectory with the recovery of the economy. 

 

 

 

 

 

 

 

 

 

External Sectors:

 

14. India’s external debt rose to US $ 593.1 billion at the end-September 2021, from the US $ 556.8 billion a year earlier, reflecting additional SDR allocation by IMF, coupled with higher commercial borrowings.

 

 

Monetary Management and Financial Intermediation:

 

15. The liquidity in the system remained in surplus.

  • Repo rate was maintained at 4 percent in 2021-22.

  • RBI undertook various measures such as G-Sec Acquisition Programme and Special Long-Term Repo Operations to provide further liquidity.

16.The economic shock of the pandemic has been weathered well by the commercial banking system:

  • YoY Bank credit growth accelerated gradually in 2021-22 from 5.3 per cent in April 2021 to 9.2 per cent as on 31st December 2021.

  • The Gross Non-Performing Advances ratio of Scheduled Commercial Banks (SCBs) declined from 11.2 per cent at the end of 2017-18 to 6.9 per cent at the end of September, 2021.

  • Net Non-Performing Advances ratio declined from 6 percent to 2.2 per cent during the same period.

  • Capital to risk-weighted asset ratio of SCBs continued to increase from 13 per cent in 2013-14 to 16.54 per cent at the end of September 2021.

  • The Return on Assets and Return on Equity for Public Sector Banks continued to be positive for the period ending September 2021.

17. Exceptional year for the capital markets:

  • Rs. 89,066 crore was raised via 75 Initial Public Offering (IPO) issues in April-November 2021, which is much higher than in any year in the last decade.

  • Sensex and Nifty scaled up to touch peak at 61,766 and 18,477 on October 18, 2021.

  • Among major emerging market economies, Indian markets outperformed peers in April-December 2021.

Prices and Inflation:

 

18. The average headline CPI-Combined inflation moderated to 5.2 per cent in 2021-22 (April-December) from 6.6 per cent in the corresponding period of 2020-21.

  • The decline in retail inflation was led by easing of food inflation.

  • Food inflation averaged at a low of 2.9 per cent in 2021-22 (April to December) as against 9.1 per cent in the corresponding period last year.

  • Effective supply-side management kept prices of most essential commodities under control during the year.

  • Proactive measures were taken to contain the price rise in pulses and edible oils.

  • Reduction in central excise and subsequent cuts in Value Added Tax by most States helped ease petrol and diesel prices.

19. Wholesale inflation based on Wholesale Price Index (WPI) rose to 12.5 per cent during 2021-22 (April to December).

  •  This has been attributed to:

    • Low base in the previous year,

    • Pick-up in economic activity,

    • Sharp increase in international prices of crude oil and other imported inputs, and

    • High freight costs.

20. Divergence between CPI-C and WPI Inflation:

  • The divergence peaked to 9.6 percentage points in May 2020.

  • However, this year there was a reversal in divergence with retail inflation falling below wholesale inflation by 8.0 percentage points in December 2021.

  • This divergence can be explained by factors such as:

    • Variations due to base effect,

    • Difference in scope and coverage of the two indices,

    • Price collections,

    • Items covered,

    • Difference in commodity weights, and

    • WPI being more sensitive to cost-push inflation led by imported inputs.

  • With the gradual waning of base effect in WPI, the divergence in CPI-C and WPI is also expected to narrow down.

 

Sustainable Development and Climate Change:

 

21. India’s overall score on the NITI Aayog SDG India Index and Dashboard improved to 66 in 2020-21 from 60 in 2019-20 and 57 in 2018-19.

22. Number of Front Runners (scoring 65-99) increased to 22 States and UTs in 2020-21 from 10 in 2019-20.

23.In North East India, 64 districts were Front Runners and 39 districts were Performers in the NITI Aayog North-Eastern Region District SDG Index 2021-22.

24. India has the tenth largest forest area in the world. 

  • In 2020, India ranked third globally in increasing its forest area during 2010 to 2020.

  • In 2020, the forests covered 24% of India’s total geographical, accounting for 2% of the world’s total forest area.

25. In August 2021, the Plastic Waste Management Amendment Rules, 2021, was notified which is aimed at phasing out single-use plastic by 2022.

  • Draft regulation on Extended Producer Responsibility for plastic packaging was notified.

  • The Compliance status of Grossly Polluting Industries (GPIs) located in the Ganga main stem and its tributaries improved from 39% in 2017 to 81% in 2020.

  • The consequent reduction in effluent discharge has been from 349.13 million liters per day (MLD) in 2017 to 280.20 MLD in 2020.

  • The Prime Minister, as a part of the national statement delivered at the 26th Conference of Parties (COP 26) in Glasgow in November 2021, announced ambitious targets to be achieved by 2030 to enable further reduction in emissions.

  • The need to start the one-word movement ‘LIFE’ (Lifestyle for Environment) urging mindful and deliberate utilization instead of mindless and destructive consumption was underlined.

 

  • India runs one of the largest food management programmes in the world.

  • Government has further extended the coverage of food security network through schemes like PM Gareeb Kalyan Yojana (PMGKY).

 

Industry and Infrastructure:

Index of Industrial Production (IIP) grew at 17.4 percent (YoY) during April-November 2021 as compared to (-)15.3 percent in April-November 2020.

·Capital expenditure for the Indian railways has increased to Rs. 155,181 crores in 2020-21 from an average annual of Rs. 45,980 crores during 2009-14 and it has been budgeted to further increase to Rs. 215,058 crores in 2021-22 – a five times increase in comparison to the 2014 level.

Extent of road construction per day increased substantially in 2020-21 to 36.5 Kms per day from 28 Kms per day in 2019-20 – a rise of 30.4 percent.

·Net profit to sales ratio of large corporates reached an all-time high of 10.6 percent in in July-September quarter of 2021-22 despite the pandemic (RBI Study).

  • Introduction of Production Linked Incentive (PLI) scheme, major boost provided to infrastructure-both physical as well as digital, along with measures to reduce transaction costs and improve ease of doing business, would support the pace of recovery.

 

 

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