Union Budget 2022: Strong emphasis on Capex by Public sector

By Mr. Shashikant Hegde, CEO, Projects Today

Finance Minister Nirmala Sitharaman presented her fourth Union Budget on 01 February 2022. While the Budget talks about many reform measures to bring back the economy to the normal growth path, the clear emphasis is on increasing the public sector capex expenditure during 2022-23. A sharp increase of 35.4 percent in the capital expenditure programme reflects the mood of the government.

At the macro level, the Finance Minister has managed to keep the fiscal deficit for 2021-22 at 6.9 percent of GDP as against 6.8 percent projected in the Budget Estimates. While pegging the fiscal deficit for 2022-23 at 6.4 percent of GDP, she has reiterated her government’s intention to reach a fiscal deficit of around 4.5 percent by 2025-26. The current high fiscal deficit has been justified to nurture growth, through public investment in the short run.

The strong emphasis laid on infrastructure building under the PM GatiShakti programme is not only to create more demand for products and services offered by both large industries and millions of MSMEs but also to generate employment opportunities. The government rightly hopes that high investment in infrastructure will crowd-in private investment, which is showing signs of revival in recent quarters.

To pump-prime the public sector investment, the outlay for capital expenditure in the Union Budget has been stepped up sharply by 35.4 percent from Rs 5.54 lakh crore in 2021-22 to Rs 7.50 lakh crore in 2022-23. Additionally, allocations under the Scheme for Financial Assistance to States for Capital Investment have been increased steeply from Rs 15,000 crore in 2021-22 to Rs one lakh crore in 2022-23. These fifty-year interest free loans are over and above the normal borrowings allowed to the states.

The allocation will be used by the states for PM GatiShakti related and other productive capital investments like PM Gram SadakYojana, digitisation of the economy, including digital payments and completion of OFC network, and reforms related to building bye-laws, town planning schemes, transit-oriented development, and transferable development rights.

Capex Plans:

Under the PM GatiShakti Master Plan for Expressways to be formulated in 2022-23, the national highways network will be expanded by 25,000 km.

One Station-One Product concept will be popularized in the Railways sector to help local businesses & supply chains. Further, under the Atmanirbhar Bharat, 2,000 km of network will be brought under Kavach, the indigenous world-class technology for safety and capacity augmentation in 2022-23. Four hundred new-generation Vande Bharat Trains with better energy efficiency and passenger riding experience will be developed and manufactured during the next three years

Contracts for implementation of Multimodal Logistics Parks at four locations through PPP mode will be awarded in 2022-23.

One hundred PM GatiShakti Cargo Terminals for multimodal logistics facilities will be developed during the next three years.

Parvatmala: National Ropeways Development Programme to access difficult hilly areas will be taken up on PPP mode. Contracts for 8 ropeway projects for a length of 60 km will be awarded in 2022-23.

Ken Betwa project and Other River Linking Projects will be executed at an estimated cost of Rs 44,605 crore. The mega irrigation project will benefit 9.08 lakh ha of farm land, provide drinking water supply for 62 lakh people and generate 103 MW of Hydro and 27 MW of solar power. In addition to the allocation of Rs 4,300 crore in 2021-22, Rs 1,400 crore has been set aside for this project in 2022-23.

HarGhar, Nal Se Jal: Current coverage of HarGhar, Nal Se Jal is 8.7 crore. Of this 5.5 crore households were provided tap water in the last two years. Allocation of Rs 60,000 crore has been made with an aim to cover 3.8 crore households in 2022-23.

Housing for All: In 2022-23 a total of 80 lakh houses will be completed for the identified eligible beneficiaries of PM AwasYojana. Rs 48,000 crore is allocated for this purpose.

Telecom Sector: Required spectrum for the rolling out of 5G mobile services, auctions will be conducted in 2022. Further, contracts for laying optical fibre in all villages, including remote areas, will be awarded under the Bharatnet project through PPP in 2022-23.

Solar Power: To enable the country to meet the ambitious goal of 280 GW of installed solar capacity by 2030, an additional allocation of Rs 19,500 crore under the Production Linked Incentive is made for the manufacture of high-efficiency modules, with priority to fully integrated manufacturing units from polysilicon to solar PV modules.

Defence: For promoting AtmaNirbharta in equipment for the Armed Forces, 68 per cent of the capital procurement budget will be earmarked for the domestic industry in 2022-23.  Defence R&D will be opened up for industry, startups and academia with 25 percent of the Defence R&D budget earmarked.  Private industry will be encouraged to take up Design and Development of military platforms and equipment in collaboration with DRDO and other organizations through SPV model.

Reform Policies:

To encourage increase in the number of startups, tax incentives were given in the last year’s Budget. Accordingly, eligible start-ups established before 31 March 2022 were provided a tax incentive for three consecutive years out of ten years from incorporation. The eligibility criteria for the startups has been extended by one more year, up to 31 March 2023.

To encourage more investment in the manufacturing sector, a concessional tax regime of 15 percent tax was introduced by the government last year for newly incorporated domestic manufacturing companies. The last date for commencement of manufacturing or production has been extended by one year i.e. from 31 March 2023 to 31 March 2024.

Green Clearances: A single window portal, PARIVESH, for all green clearances was launched in 2018. The scope of this portal will now be expanded, to provide information to the applicants. Based on location of units, information about specific approvals will be provided. It will enable application for all four approvals through a single form, and tracking of the process through Centralized Processing Centre-Green (CPC-Green).

MSME: The Emergency Credit Line Guarantee Scheme (ECLGS) introduced by the government last year provided additional credit to more than 130 lakh MSMEs. As micro and small enterprises, are yet to regain their pre-pandemic level of business, the ECLGS has been extended by one more year to March 2023. Further, the Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) scheme will be revamped with the required infusion of funds. This will facilitate additional credit of Rs 2 lakh crore for Micro and Small Enterprises.  Additionally, the Raising and Accelerating MSME Performance (RAMP) programme with an outlay of Rs 6,000 crore will be rolled out over the next five years.

Green Bonds: As a part of the government’s overall market borrowings in 2022-23, sovereign Green Bonds will be issued for mobilizing resources for green infrastructure. The proceeds will be deployed in public sector projects which will help in reducing the carbon intensity of the economy.

SEZ: The Special Economic Zones Act will be replaced with a new legislation that will enable the states to become partners in ‘Development of Enterprise and Service Hubs’. This will cover all large existing and new industrial enclaves to optimally utilise the available infrastructure and enhance the competitiveness of exports.

Infrastructure Status to Data Centres and Energy Storage Systems including dense charging infrastructure and grid-scale battery systems will be included in the harmonized list of infrastructure. This will facilitate credit availability for digital infrastructure and clean energy storage.

While this year’s Budget has laid the right emphasis on building modern infrastructure in a coordinated manner under the PM Gati Shakti program, the call of the time is execution of the identified 9,000+ projects under the NIP without much delays. This requires constant and continuous monitoring of those projects.


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