Budget Outlook 2022: Will it be growth friendly? Read here

January 31, 2022 Trading 3 min read
Budget Outlook 2022

It is that time of the year when the annual Union Budget will be soon presented to the Parliament by the Finance Minister. This also means that industry leaders, financial experts, and the common man will be eagerly wanting to know what the budget 2022 has in store.

What will be interesting to see is the budget’s provisions for overall economical growth and development. As the pandemic has had a severe effect on the trajectory of growth.

The second quarter of FY22 had witnessed a GDP growth of 8.4% closer to the pre-covid era. However, the third COVID-19 wave may bring with it several implications in the route to economic growth for the upcoming financial year.

The Economic Growth Prediction

On the basis of advance estimates, the budget 2022, can seek to achieve a 13-14% GDP growth in its budgetary algorithm. It is also expected that the government will not want to overestimate the GDP and may close it at 9.2%. This is higher than the RBI’s prediction of GDP growth to be 7.8%

Several economists have predicted that the new financial year will witness a growth of 8%, whereas the World Bank expects it to be at 8.7%. IMF states that it would be 7.8%, ADB at 7.5% and research firm ICRA states that it would be 9%. 

Expectations from the Budget 2022

The proposed budget 2022 is expected to have a respectable balance between growth and tax to ensure that the economy achieves a significant growth rate.

It is also expected that the Indian economy will witness exports worth US $400 billion while trying to reduce the current account deficit to 0.9-1.1% in the upcoming financial year.

What the Government needs to do

Considering the various economic opportunities and challenges before the government, it will need to showcase ingenious allocation of funds to ensure a balanced budget while also keeping in mind the numerous priorities and limitations.

To begin with, it will need to allocate a higher allocation of Capex funds on green investments, healthcare, education, infrastructure, defence, subsidies, and social welfare. Additionally, it is also pertinent to mention that the upcoming budget expectations will include financial and economical measures and alternatives to tackle the effect of any further COVID-19 wave.

The budget 2022 will be expected to explore the increase of tax rationalisation, privatisation, and aim for overseas inflows. Several industry leaders are also of the opinion that the government will relax the taxes on the micro, small, and medium enterprise to relieve them of the financial stress that has been caused due to the results of the various waves of the pandemic.

In the pre-COVID era, the government had boldly announced that the Indian economy aimed to be a US $5 trillion economy, for this to be achieved, it is critical for the upcoming budget to prioritise the manufacturing industry of the country. 

Furthermore, industry leaders are also expecting that the 15% benchmark on the corporate sector will also be included in the budget that is to be presented on February 1st 2022 in the parliament. This along with several schemes are to be introduced to domestic manufacturers. 

It is no secret that the last couple of financial years has been severely impacted due to the COVID-19 pandemic. The proposed budget 2022 is expected to have several measures to not only compensate for the loss caused but also include measures that will accommodate any further event of COVID-19 waves.  

Additionally, it would be reasonable to expect that the government will include several measures to put the Indian economy back on track of significant growth. 

FAQs on the Indian Budget

What are the two components of the Budget?

The two major components of the budget are the Capital Budget and the Revenue Budget. The Capital budget comprises government payments. Whereas the Revenue Budget includes expenditures and revenue receipts.

Why February 1st is the day of presenting the budget to the Parliament?

Earlier, the budget was presented on February’s last working day. However, the former Finance Minister Mr. Arun Jaitley changed the status quo by announcing that the budget would now be presented on 1st February, differing from the colonial tradition of presenting it on the last working day of February

What is the halwa ceremony?

The halwa ceremony signifies the initiation of printing the budget. Attended by the Finance Minister and key officials of the ministry, halwa is prepared in a large wok and served. It also is a token of appreciation for the hard work associated with preparing the annual budget.

Do check out our detailed analysis on ‘Budget 2022’ here –

Conclusion: The budget 2022 will have all stakeholders closely monitoring it as it is expected that the budget will be one of the most interesting and critical budgets to be presented in the history of modern India. It is expected that it will be growth-oriented while focussing on MSME, privatisation, healthcare, agriculture and the corporate sector. 

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