Climate, crypto, and concessions: Indian students dissect Nirmala Sitharaman’s 2022 budget

Heading in the right direction?
Heading in the right direction?
Image: Reuters/Anushree Fadnavis
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In finance minister Nirmala Sitharaman’s budget speech on Feb. 1, India’s youth saw a mix of lofty long-term ambitions and little short-term relief.

The Narendra Modi government’s budget for the financial year 2022 stuck to its formula of big spending and big borrowing. Sitharaman announced a 25-year-plan anchored around promoting clean energy with major funds going to renewable energy, energy efficiency, electric mobility, and green bonds.

For crypto enthusiasts, the budget was a double-edged sword: a 30% tax on transfer gains made crypto earnings pricey but also gave the digital currency legal recognition.

Yet, after a pandemic-ravaged two years, the budget didn’t offer the struggling middle class any relief.

As part of our annual tradition, Quartz invited graduate students from the Indian Institutes of Management in Bangalore (IIM-B), Calcutta (IIM-C), Shillong (IIM-S), and Lucknow (IIM-L), among other schools, to share their reactions to the budget.

The responses have been edited for length, grammar, and clarity:

On clean, green initiatives

Speech: Considering the constraint of space in urban areas for setting up charging stations at scale, a battery-swapping policy will be brought out and inter-operability standards will be formulated. The private sector will be encouraged to develop sustainable and innovative business models for “Battery or Energy as a Service.”

Abhilash Maji, IIM-C: The electric vehicle (EV) sector suffers from fear of range—vehicles stopping in the middle of the road due to low battery power is a scary thought. Battery-swapping services offer an instant solution to the problem but a lot of work will need to be done in standardisation protocol and supply chain. If successful, it could lead to widespread acceptance of EVs, especially in the two- and three-wheeler segments.

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

Aagam Parikh, IIM-S: The decision to issue sovereign green bonds exhibits the ambition towards a sustainable path. India stood at a lagging 17th position among green bond issuing states in 2021. Green bonds have seen roaring international popularity owing to climate change. The push to finance public projects with these bonds will help India transition towards a carbon-neutral economy and put India on the global sustainability map.

On cryptocurrencies and the digital rupee

Speech: I propose to provide that any income from transfer of any virtual digital asset shall be taxed at the rate of 30%.

Aditya Raj, IIM-C: Although the 30% tax rate on this virtual digital asset will affect cryptocurrency enthusiasts, it is a progressive move for the rapidly emerging crypto and blockchain industry in India.

Speech: Introduction of central bank digital currency will give a big boost to digital economy. Digital currency will also lead to a more efficient and cheaper currency management system. It is, therefore, proposed to introduce digital rupee, using blockchain and other technologies, to be issued by the Reserve Bank of India starting 2022-23.

Aayush Kumar Jain, IIM-S: We can witness two different schools of thought emerging at this point. On one hand, it might be safe to assume that the road to the regularisation of cryptocurrencies and exchanges will become smoother and faster, aiding India’s dream of becoming a $5 trillion digital economy by 2025. On the other hand, this can be seen as a government move to discourage retail investments in cryptos and other unregulated blockchain-based currencies by levying tax rates as high as 30%.

Abhilash Maji, IIM-C: This might mean that although it (the government) has recognised cryptocurrencies as a thing, it still isn’t sure in which asset group they belong. It also means the government might be looking into more comprehensive regulations as more digital assets gain public acceptance.

On public capital investment

Speech: Considering the above imperative, the outlay for capital expenditure in the union budget is once again being stepped up sharply by 35.4% from Rs5.54 lakh crore in the current year to Rs7.5 lakh crore in 2022-23. This has increased to more than 2.2 times the expenditure of 2019-20. This outlay in 2022-23 will be 2.9% of GDP.

Mridul Sureka, IIM-B: The government has taken an excellent step by focusing on infra spending in the last 2-3 fiscals, especially given the recessionary pressures present even before the pandemic hit. At the same time, due to global supply-side shocks and other inefficiencies, it is really important that we unlock value to control inflation while stimulating demand right from the bottom up. Capital expenditure on infrastructure ensures that manufacturing industries face huge demand, and being labour intensive, this leads to immense employment creation and improvement of purchasing power among the lower-middle and middle class. This then stimulates private consumption demand.

On fiscal deficit

Speech: The total expenditure in 2022-23 is estimated at Rs39.45 lakh crore, while the total receipts other than borrowings are estimated at Rs22.84 lakh crore…The fiscal deficit in 2022-23 is estimated at 6.4% of GDP.

Akshat Sharma, IIM-S: Running a controlled fiscal deficit will not harm the economy as long as the public expenditure is done in genuine public interest and stimulates economic growth. As long as the economic growth rate exceeds the increase in fiscal deficit, the country should see a reduction in the debt to GDP ratio.

Pradnyee Kantak, IIM-L: While the actual expenditure exceeds the budgeted by over 8%, the rise in actual deficit over the budgeted one has been only about 1.4%, owing to robust tax collections which are expected to show a similar rising trend in the coming year as well.

On post offices and financial inclusion

Speech: In 2022, 100% of 1.5 lakh post offices will come on the core banking system enabling financial inclusion and access to accounts through net banking, mobile banking, ATMs, and also provide online transfer of funds between post office accounts and bank accounts.

Aagam Parikh, IIM-S: Incorporating the extensive network of post offices in India into the core banking system can prove to be a masterstroke. The decision not only enables a wider reach of banking services but does it using existing infrastructure. Therefore, financial inclusion in the most remote parts of the country can be achieved. A path-breaking step indeed.

On helping some…

Unnati Tanwar, IIM-Shillong: Agriculture has been given a boost in the form of technology, with an emphasis on Kisan drones, revised agriculture university curriculum, and startup encouragement, which is a good initiative for the sector. The government has announced direct payments for MSP after the farmers’ protest was called off two months ago.

Sanyam Chhangani, IIMC’23: The government also extended the Emergency Credit Line Guarantee Scheme up to March 2023 recognising distress in the hospitality sector.

…but not others

Swarnadeep Ghosh, IIM-C: As far as markets are concerned, it was a well-balanced budget with a “No bad news is good news” mood, thanks to the taxation schemes remaining largely unaltered.

Akriti Kulshrestha, IIM-S: The full brunt of the third wave of covid-19 has mainly been felt on income and inflation. So some tax relief would have been a welcome move for the middle class. But considering the government’s piling debt and interest expenditure, coupled with a significant increase in capital spending, it comes as no surprise that this year’s budget didn’t meet the widespread expectations of the salaried class by foregoing any modifications to income tax rules.