Budget 2022: FM unveils a bold budget – paves the path for sustained long term growth for India

While the budget is bold and balanced at the same time, it is the effective implementation of the budgetary allocation that will determine the path towards sustainable economic recovery.

Umesh Revankar, VC and MD, Shriram Transport Finance breaks down the finer points and the impact of Budget-2022 on India's growth story.

The union budget 2022-23 is a bold step undertaken by the Indian government which aims to prioritize growth with a thrust on capital spending that will result in a multiplier effect on the economy. With a primary focus on fiscal push and rebound in public-private spending, it is heartening to see that the government addressed the three strong drivers in sight– capex with a strong multiplier, technology boost and contact sectors to normalize. The finance minister presented a well-balanced budget with an equal emphasis on growth and social objectives. 

One of the biggest highlights of the Union budget 2022 is capital spending which has been hiked by 35.4 per cent to Rs 7.5 lakh crore. The budget will lead to a multiplier effect on the economy and benefit the Aam Aadmi, despite no direct benefit transfers. The FM extended massive investment in infrastructure that will propel sectors like cement, steel, construction and building materials. Encompassing the ‘PM Gati Shakti’ plan will catalyze sustainable growth, inclusive development and further facilitate the faster movement of people and goods, thus providing a boost to the transportation industry and pushing bulk transportation movement. With the continued efforts to spend on Infra, we expect this will lead to a pick up in CV demand in the upcoming quarters. The last two years have seen demand contraction in the medium and heavy commercial vehicle (M&HCV) truck segment and will thus get a fillip with increased allocation towards infrastructure spending.  

The Union Budget 2022 has also shown its intent on promoting cleaner mobility and the government’s focus on new technologies with its zero fossil fuel policy. The step undertaken for EV penetration in public transport and creating special mobility zones reflects the poise towards accelerating EV adoption. Keeping in line with the Net Zero commitment of 2070, the emphasis on digital economy and reducing carbon footprint, we are steering forward in our commitment to creating an emission-free country in the vehicle sector. Easy accessibility of EVs and charging stations will positively impact the demand for new vehicles and we are optimistic about credit uptake in the economy. 

Affordable housing has always been the focal point of the incumbent government. The budget allocated Rs 48000 crore under PM Awas Yojana (PMAY) and around 80 lakh homes are expected to be completed by 2023 under PMAY. This union budget announcement is likely to boost affordable housing in the country and give a push to the real estate sector and developers who are building affordable homes. Earmarking these funds will also provide a fillip to the demand across product categories including steel, cement, construction products generating employment opportunities across various sectors and also giving a fillip to overall credit demand in the economy.  

The MSME sector has been one of the most impacted during the pandemic. Focusing on further supporting the MSME sector and reducing stress in this segment, the Government has widened the ECLGS scheme and revamped Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE). The government widening the Emergency Credit Line Guarantee Scheme (ECLGS) by Rs 50,000 crore to Rs 5 lakh crore and extending the cover to the next fiscal and the revamping of CGTMSE will lead to accelerate growth for the MSME segment and also help reduce stress in this segment. The schemes have helped small businesses to tide over any liquidity crunch faced in the wake of the intermitted lockdowns. Such fully guaranteed schemes by the government encourage lending to SMEs.  

While the budget is bold and balanced at the same time, it is the effective implementation of the budgetary allocation that will determine the path towards sustainable economic recovery. The Government seems to have committed to a long term growth of over 8 per cent for the next three years. India economy is now well placed and we are optimistic about credit uptake in the economy.