Sitharaman unveils ‘Capex Mahotsav’, no income tax changes and ‘crypto tax’

New Delhi: Finance Minister Nirmala Sitharaman has announced plans to increase capital spending by more than 30% in the next fiscal year, emphasizing an integrated central infrastructure plan, under the various announcements made during his speech on the 2022-2023 budget on Tuesday morning.

The speech – which was a shorter and more low-key affair than in previous years – also pegged the budget deficit at 6.4% for FY23. The budget deficit for FY22 will come in at 6.9 % of GDP, which is higher than the 6.1% projected by a Bloomberg poll of economists.

“The 2021-22 budget provided for a sharp increase in public investment. Throughout the year… our economic recovery continues to benefit from the multiplier effect. This budget continues to give impetus to both. First, a futuristic project…and second, a big public investment for modern infrastructure ready for India in 100 years,” the finance minister said.

Government capital expenditure for FY23 is pegged at Rs 7.5 lakh crore, representing about 2.9% of India’s GDP. The announced capex is 35.4% higher than the budget estimate of Rs 5.54 lakh crore for FY22.

The fine print for the allocation from all central ministries is still awaited – including key spending on programs like MNREGA – as are details of increased capital spending.

Gati and Shakti

The finance minister spent a lot of time developing the PM Gati Shakti Plan, a platform to track infrastructure projects.

In particular, Sitharaman announced the expansion of the national highway network by 25,000 kilometers in the next fiscal year and noted that the expressways master plan will be formulated in 2022-23 to facilitate faster movement of people and goods.

“Rs 20,000 crore will be mobilized through innovative means of financing to supplement public resources,” Sitharaman said.

Other highlights of Prime Minister Gati Shakti’s announcement include:

1) Railways will offer new products to small farmers and MSMEs, integrate the coastal and railway network.

2) The “One station, one product” concept will be popularized to help local businesses. 400 new generation Vande Bharat trains will be developed and manufactured in the next three years.

3) 100 PM Gati Shakti cargo terminals will be developed in the next three years.

4) 2,000 km under Kavach for increased safety and capacity.

No income tax change, but a tax on cryptos

The budget speech made no reference to changing India’s income tax brackets, but laid out the outlines of what appears to be a “crypto tax”. The finance minister also announced that a new “digital rupee” will be rolled out this financial year by the Reserve Bank of India.

The “digital rupee” will help boost the digital economy, Sitharaman said, adding that the central bank’s digital currency will make currency management cheaper and more efficient. The RBI has been working on developing its own digital currency for at least two years

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