The second was on taxation where there were several expectations. Here, the Finance Minister has not really given any consumption boosting measures and has concentrated more on administrative reforms to ease the processes.
Third is on expenditure, and here it does appear that the Budget has been aggressive, especially when we look at the composition. The capex for the year has been placed at Rs 5.54 trillion, which while being an increase of 26 per cent over the revised estimate for FY21, is a good start. However, admittedly there will be a lot to be done by the private sector for investment rate to really pick up during the year. This amount is around 2.5 per cent of GDP, which can prod but not drive overall investment in the economy. The setting up of a new DFI is an affirmative step taken and hopefully should materialize in the year will provide the right impetus for infrastructure.
Last is the disinvestment target, which at Rs 1.75 trillion for the year may once again look to be optimistic given the track record we have had. It has been indicated that the plans for disinvestment are ready and it is only the implementation button that has to be pushed. This time big names are on the list and includes two public sector banks, Life Insurance Corporation (LIC), one general insurance company, Air India, BPCL, and others. The government has also spoken of monetisation of government assets like land, and this could be a minor contributor this year, but has potential to be a revenue earner in future. Ideally, such schemes must involve leases so that the asset is still owned by the government.
On the whole, the Budget has delivered a fairly effective boost on capex while bringing about some reforms in the financial sector: bad bank, DFI and bank capitalisation. The pressure on liquidity will be there given the higher deficit and borrowings which is reckoned. This can mean that interest rates will have to be monitored by the RBI closely.
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