Powering sustained growth
Budget 2022 paves the way for India’s formal entry into the digital currency domain by introducing distributed ledger technology enabled digital currency and making it a legal tender.
Union Budget 2022–23, presented by the Finance Minister, builds on the vision set out in the previous budgets and provides a blueprint for steering the economy towards a sustained high-growth trajectory in the 25-year-long lead-up to India @100.
The budget provides a framework for growth by focusing on four key themes: (i) public investment for building modern infrastructure under PM Gati Shakti; (ii) inclusive development; (iii) productivity and investment, sunrise opportunities, energy transition, and climate action; and (iv) financing of investment. Additionally, the Finance Minister has announced several tax and regulatory measures which should go a long way towards removing difficulties faced by taxpayers, reducing litigation, providing certainty and widening the tax base.
The Finance Bill, 2022 (Amended Bill) was passed by the Lok Sabha on 25 March 2022 with amendments to the original Bill that was tabled before the Lok Sabha on 1 February 2022. Subsequently, the Bill was affirmed by the Rajya Sabha without any further amendments and has now been enacted.
The proposals, announcements and amendments impacting various sectors demonstrates the Government's intent to develop digital infrastructure.
"Budget 2022 highlights the government’s thrust on building a robust foundation for a pro-development, growth-oriented economy and provides a blueprint for a #FitForFuture India," says PwC's Vivek Prasad.
The budget has announced the ‘National Tele Mental Health Programme’ which will include a network of 23 tele-mental health centres of excellence, with NIMHANS being the nodal centre.
Under the Ayushman Bharat Digital Mission, an open platform consisting of digital registries of various health providers and facilities will be rolled out. This National Digital Health Ecosystem will also include aspects around unique health identity and consent framework, and will assist in enabling universal access to health facilities.
Two hundred thousand Anganwadis (rural child care centres) will be upgraded to ‘Saksham Anganwadis’ with better infrastructure and audiovisual aids. They will be powered by clean energy and thus provide an improved environment for early child development.
Additional spending of INR 600 bn under the ‘Har Ghar, Nal Se Jal’ scheme to cover 38 m households.
The pandemic revealed a silent mental health epidemic globally. It is estimated that at least one in eight Indians has a mental affliction. Mental health was hitherto an ignored area. The use of telemedicine to diagnose and treat such patients has proved to be highly effective, given the unobtrusive nature of the interaction which also maintains patient privacy. Given the shortage of mental health professionals, especially in rural areas, telemedicine will greatly enhance accessibility for patients requiring psychiatric help. Funding in Indian mental health start-ups has seen exponential growth of 4-5x in the last year.
The National Digital Health Ecosystem is an extension of the various initiatives announced under the Ayushman Bharat Digital Mission in the last couple of months. The digital health register will help create a comprehensive interoperable network to store and fetch health records. An open platform will encourage wider adoption and innovation encompassing start-ups, ensuring UPI-like adoption. It will be key to extend the coverage to the million-plus providers in the country and bring them on this platform. A start has to be made by integrating existing registries. This will need centre-state cooperation, health being a state subject.
One out of five start-ups in India has a healthcare linkage. The benefits in this budget will create an enabling environment for them to increase accessibility and affordability for the larger population.
Providing clean water under ‘Har Ghar, Nal Se Jal’ will help reduce the burden of communicable disease which still remains a major cause of daily-adjusted life years (DALY) (in the country. The prevalence of water, sanitation and hygiene (WASH) related diseases in India is greater than 5% for all outpatient visits and hospital admissions.
Anganwadis are at the forefront of delivering healthcare, especially in rural areas. Upgrading these Anganwadis will enable last-mile delivery of quality care.
Extension of the concessional tax regime of 15% to newly incorporated domestic manufacturing companies will give a boost to domestic manufacturing in the medical devices and technology space.
By Joydeep K Roy, Partner and Leader, Insurance, PwC India
The insurance industry supports all other industries, provides risk mitigation for businesses, offers long-term savings and protection to families, and provides important long-term capital to infrastructure projects. Hence, the budget announcements have a direct impact on industry as well.
|RBI to introduce Digital Rupee using blockchain technology in 2022–23||Digital Rupee, a Central Bank Digital Currency, is expected to promote transparency, traceability and convenience. It can be interoperable with other global digital currencies and issued as legal tender backed by the Central Government in lieu of currency notes and coins.|
|Virtual digital assets||The Government has proposed to launch a scheme for the taxation of virtual digital assets (e.g. cryptocurrencies, NFTs). Income from virtual digital assets to be taxed at 30%. Losses from the sale of virtual digital assets cannot be offset against other income. Gifts of cryptocurrencies to be taxed at the receiver’s end.||This move formally brings virtual digital assets such as cryptocurrencies and non-fungible tokens under the tax net, thereby increasing the probability of virtual digital assets being recognised by the government. It also accelerates the probability of the crypto bill being formulated and approved.|
|Financial support for the digital payment ecosystem||The financial support for the digital payment ecosystem announced in the previous Budget will continue in 2022–23.||Last year, the FM had earmarked INR 1,500 crore for a proposed scheme that will provide a financial incentive to promote digital modes of payment in order to give a further boost to digital transactions. Part of this can be used for reimbursement of zero MDR fees for UPI and RuPay debit transactions (P2M).|
|Anytime–anywhere post office savings||In 2022, 100% of 1.5 lakh post offices will shift to the core banking system.||Getting the post offices on the core banking system is expected to increase access of these accounts to digital channels like net banking, mobile banking and ATMs, thereby increasing the number of digital payment transactions in the country.|
Digital banking units
|75 digital banking units to be set up across 75 districts||The Government has proposed to set up 75 digital banking units in rural areas to enable all sections of society to get the benefits of digital payments innovation. This is expected to be in the form of digital kiosks which will be staffed and other banking services that can be provided.|
|Online e-bill system||Government to introduce a completely paperless, online e-bill system to manage payments||As a further step to enhance transparency and to reduce delays in payments, a completely paperless, end-to-end online e-bill system will be launched for use by all Central ministries for their procurements. The system will enable suppliers and contractors to submit their digitally signed bills and claims online and track their status from anywhere. There is a possibility of linking the payment gateway to this system to facilitate ease of payments fund flow.|
|Gujarat International Finance Tec-City (GIFT City) – payments business set-up||World-class foreign universities and institutions will be allowed in the GIFT City to offer courses in various areas such as financial management and FinTech. To facilitate the availability of high-end human resources for financial services and technology, domestic regulations will not apply to these institutions.||Government support for the development of a FinTech hub in GIFT City would provide smaller digital payments technology firms with a platform to explore and innovate more cost-efficient and easily adaptable financial products.|
With a focus on institutional capacity building for job creation, skill development and employability, the budget promises inclusive and equitable growth in a digital India. Drones for agriculture and digitised land records, AI-based geospatial analysis, open-source platforms for digital health, chip-based e-passports, 75 digital banking units across districts, support for digital lending and payments and the launch of Digital Rupee using blockchain – this enhanced thrust on digital across sectors and technology enablement are steps towards making the country #FitForFuture. Similarly, manufacturing and PLI support for drones and semiconductors, and granting infrastructure status to data centres are progressive moves. Levying 30% tax on transfer of digital assets affecting crypto trades and other NFTs is a prudent step taken by the Finance Minister.Arnab Basu, Leader, Advisory, PwC India
Digital transformation has been a hallmark of this Union Budget with tech enablements announced in agriculture, banking, education and payments and monetary systems. A definite path toward a more tech-oriented economy.Vivek Prasad, Partner & Leader, Markets, PwC India
The budget is focused on moving forward the Digital India agenda with digital infrastructure, governance and trust as the key underlying themes. The proposed roll-out of 5G spectrum and e-passport in 2022–2023, impetus on electronics manufacturing, and the announcement of the blockchain-based Digital Rupee by the RBI are steps which will augur well towards the creation of a #FitForFuture India. The thrust on ICT infrastructure and data centres being given infrastructure status, especially as part of the PM Gati Shakti initiative, are promising moves. The BharatNet scheme being pushed further by increasing optical fibre outreach and the introduction of 75 digital banking units in 75 districts are steps taken towards making technology usage more inclusive. The budget has also prioritised mental health. IIIT-B providing key digital technology support to NIMHANS and making significant progress on strengthening digital health infrastructure are very prudent initiatives.Pawan Kumar S, Partner and Leader - TMT, PwC India
The proposal to allocate an additional INR 19,500 crore for PLI to manufacture high-efficiency modules and prioritise the full integration of manufacturing units into solar PV modules will encourage the private sector, which has shown a strong interest to invest. It will also help India to position itself as a manufacturing hub in the clean technology manufacturing space.Mohammad Athar, Partner and Leader, Industrial Development, PwC India
The Government’s focus on sustainable and alternative mobility for hilly terrains is a welcome move. The Parvat Mala announcement with 8 ropeway projects in 2022–23 will not only diffuse transport linked congestion in hilly areas but also enable growth of tourism in these locations. Our ability to bring global capabilities in operating and developing ropeway systems will be critical for the success of the programme in the short term and help build capabilities within the country in the long term.Mohammad Athar, Partner and Leader Industrial Development, PwC India
The proposal to amend the Special Economic Zones (SEZs) Act with a new legislation was long needed by the industry to enable India's export competitiveness and also improve the utilisation of assets under SEZs. It remains to be seen how the new legislation aligns with the WTO requirements, meets the industry’s supply chain demands and promotes SEZs in new and upcoming sectors.Mohammad Athar, Partner and Leader Industrial Development, PwC India
The extension of the 15% tax guideline till 2024 for new manufacturing units is a welcome move to attract more investments in the short run and support the Make in India initiative driven by the Production Linked Incentive (PLI) scheme and similar such programmes.Mohammad Athar, Partner and Leader, Industrial Development, PwC India
The focus on start-ups and AgriTech in the budget will be helpful for the development of a digital ecosystem and technology inclusion in the agri sector. However, most industry aspirations remain unmet.Ajay Kakra, Leader, Food and Agriculture
A growth boosting budget has been delivered with a significantly higher capital expenditure. The budget allocation at the Central Government level has been enhanced by INR 3.5 trillion. Another INR 1 trillion has been allocated as a 50-year interest-free loan to the states for capex. The states have also been allowed to have a higher deficit of 4% of the GSDP. The fiscal deficit target of 6.8% has been missed marginally to 6.9%, but the actual deficits could well be below the target numbers, with revenue being buoyant as an all-time high GST collections of over INR 1.4 trillion were reported in January. The fiscal deficit target for FY23 at 6.4% looks very realistic with the positive trends in tax revenue collections. The announcements on the launch of a digital currency, the Drone Shakti programme, battery swapping policy for faster adoption of EVs, and the inclusion of renewable energy infra in a harmonised list of infrastructure are some of the announcements that reflect the progressive thinking of the Government which is sensitive to the fast-paced technological developments in the economy.Ranen Banerjee, Partner and Leader, Economic Advisory Services, PwC India
Budget 2022–23 is focused on bringing about inclusive and sustainable technology led development, with clear emphasis on climate-related actions. It supports design-led manufacturing, clean energy transition, and circular economy, with innovative financing models to reduce carbon intensity.Sambitosh Mohapatra, Partner and Leader, ESG
The focus on building the national highways network, affordable homes under PM Awas Yojana and new-generation trains is expected to increase the demand for sectors like cement, engineering goods and industrial manufacturing. Support for the MSME sector in the manufacturing space (RAMP) was much needed and it will improve credit and market access, and help them rebound from the COVID-induced crisis. The PLI scheme for solar PV modules will boost India’s COP26 commitment of green energy along with encouraging the ‘Make in India’ initiative, and augurs well for sustainable economic growth. The balanced approach of phasing out import duty concessions for capital goods and machinery in sectors like chemicals and textiles may have a short-term adverse impact of increasing capex. However, this will enhance resilience in the overall supply chain in addition to boosting demand for the capital goods sector. Overall, this is a capex-led growth-oriented budget with a strong focus on building self-reliance in the industrial products and capital goods sector. We are hopeful that the timely implementation of these initiatives will pump-prime the economy towards sustainable and inclusive growth.Sudipta Ghosh, Partner and Leader, Industrial Products PwC India
The pandemic has caused a silent global mental health epidemic. The use of telemedicine to diagnose and treat such patients has proved to be highly effective given the unobtrusive nature of the interaction which also ensures patient privacy. Given the shortage of mental health professionals, especially in rural areas, telemedicine will greatly enhance accessibility for patients requiring psychiatric help.Dr Rana Mehta, Partner and Leader- Healthcare, PwC India
The extension of the ECLGS scheme till March 2023 will be a big boost for MSME growth which has been affected by the pandemic. This will help banks and NBFCs extend more financial support to the most impacted MSMEs. The Government's move to integrate 1.5 lakh post offices into the core banking system for financial inclusion will see additional flow of money in savings schemes, mutual funds and insurance. This will also help in widening credit access by bringing in more new credit customers.Nitin Jain, Partner, Financial Services, PwC India
A new scheme of taxation has been introduced with regard to digital assets. The definition suggests that this would include cryptocurrencies, NFTs and similar assets. Any income from transfer of such assets will be taxable at a rate of 30%. There will be no deduction for any expenses incurred on such transactions, other than the cost of acquiring such assets. Any loss incurred from such transactions cannot be set-off against any other income of the taxpayer. In addition, any payment of proceeds to a taxpayer from the sale of digital assets will require a 1% TDS on transactions above INR 50,000 in a year. Gifting such digital assets will also be taxable for the recipient.Amit Rana, Partner, PwC India
With the introduction of core banking systems in Post Offices, we can expect greater rural penetration of microinsurance. Additionally, the introduction of more technology in agriculture will lead to increase in data quality, leading to a much-needed boost in agri-insurance.Joydeep K Roy, Partner & Leader - Insurance, PwC India
The overhaul given to SEZs will benefit Indian pharma exports and improving logistics by creating a Unified Logistics Interface Platform will reduce the supply chain bottlenecks. Overall, the Budget has focused on creating digital health ecosystems which will drive greater transparency and market access for the pharmaceutical and healthcare industries.Sujay Shetty, Partner & Leader - Health Industries, PwC India
The government's support to sunrise sectors such as Artificial Intelligence, Drones, Spacetech through a collaborative approach in R&D is commendable and will boost the startup ecosystem. Startups in the areas of EVs, Fintech, Agritech will also benefit through various proposed measures.Amit Nawka, Partner - Deals and India Startups Leader, PwC India
Transport infrastructure and logistics have clearly occupied the centre stage in this budget. While a massive 35% increase in capital outlay to INR 7.5 lakh crore reflects a continuation of this Government's commitment towards infrastructure spending, with Gati Shakti, the emphasis is clearly on speedy implementation. Besides efficient planning and usage of technology, the initiative of capacity building of agencies will be a critical element of realising the impact of Gati Shakti. This budget also sets the course for more collaborative play with states in infrastructure creation through a seven-fold increase in capital allocation to INR 1 lakh crore. However, it also underlines the need for states to invest in capacity building for project preparation if they have to gain maximum benefit. Linking this allocation to achieving sector-level reforms at state levels would be very desirable. With ULIP, the stage is also being set for a disruptive play in logistics-leveraging technology and real-time data analytics.Manish R Sharma, Leader - Capital Projects & Infrastructure, PwC India
A capital expenditure oriented budget which will lead to demand generation in the long term for the automobile industry. This, along with already announced policies such FAME, PLI schemes for Auto and ACC batteries will accelerate India’s transformation towards clean and green mobility.Kavan Mukhtyar, Partner & Leader - Automotive, PwC India
The budget is clearly focused on mainstreaming green and clean energy in different sectors of the economy and achieving 500 GW by 2030 in the long term. Push to solar energy generation and adoption is visible. An additional allocation of INR 19,500 crore to solar manufacturing through the PLI scheme will help India in becoming Aatmanirbhar in this space. Also, encouragement to electric vehicles and battery storage is a big takeaway from this budget. Giving infrastructure status to battery storage, battery swapping and guidelines to be developed for interoperability will help this industry. Energy efficiency implementation in commercial buildings and the launch of new trains expand the footprint further in the energy demand side.Amit Kumar, Partner and Leader, Power & Utilities, Mining, PwC India