Part 2: Analysis of Budget 2022-23

The budget of 2022-23 was consistent with the past policies of the government in general and the budget of the previous year in particular. The prime focus has continued on public expenditure on infrastructure to create growth. In Part 2 we have covered the salient portions of the budget along with the comments of respected economists as well as my own.

Salient Features


  • The total expenditure in 2022-23 is estimated at ` 39.45 lakh crore, while the total receipts other than borrowings are estimated at ` 22.84 lakh crore. 
  • The revised Fiscal Deficit in the current year is estimated at 6.9 per cent of GDP as against 6.8 per cent projected in the Budget Estimates. The Fiscal Deficit in 2022-23 is estimated at 6.4 per cent of GDP.
  • Aim is to achieve a fiscal deficit level below 4.5 per cent by 2025-26. 

Focus on Infrastructure

  • Public Capital Investment
    • Public investment to continue to pump-prime private investment and demand.
  • Outlay for capital expenditure stepped up sharply by 35.4% to Rs.7.50 lakh crore in 2022-23 from Rs.5.54 lakh crore in the current year
  • Outlay in 2022-23 to be 2.9% of GDP
  • ‘Effective Capital Expenditure’ of Central Government estimated at Rs.10.68 lakh crore in 2022-23, which is about 4.1% of GDP.
  1. Providing Greater Fiscal Space to States
    • Enhanced outlay for ‘Scheme for Financial Assistance to States for Capital Investment’ from Rs.10,000 crore in Budget Estimates to Rs.15,000 crore in Revised Estimates for current year.
    • Allocation of Rs.1 lakh crore in 2022-23 to assist the states in catalysing overall investments in the economy: fifty-year interest free loans, over and above normal borrowings
    • In 2022-23, States will be allowed a fiscal deficit of 4% of GSDP, of which 0.5% will be tied to power sector reforms.
  1. Agriculture and Allied Sectors
    • Rs.2.37 lakh crore direct payment to 1.63 crore farmers for procurement of wheat and paddy.
    • Chemical free Natural farming to be promoted throughout the county. Initial focus is on farmer’s lands in 5 Km wide corridors along river Ganga.
    • NABARD to facilitate fund with blended capital to finance startups for agriculture & rural enterprise.
    • ‘Kisan Drones’ for crop assessment, digitization of land records, spraying of insecticides and nutrients.
  1. MSMEs & Industry
    • Udyam, e-shram, NCS and ASEEM portals to be interlinked.
    • 130 lakh MSMEs provided additional credit under Emergency Credit Linked Guarantee Scheme (ECLGS).
    • ECLGS to be extended up to March 2023.
    • Guarantee cover under ECLGS to be expanded by Rs.50000 Crore to total cover of Rs.5 Lakh Crore.
    • Rs.2 lakh Crore additional credit for Micro and Small Enterprises to be facilitated under the Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE).
    • Raising and Accelerating MSME performance (RAMP) programme with outlay of Rs.6000 Crore to be rolled out.
  1. Education
    • One class-One TV channel’ programme of PM eVIDYA to be expanded to 200 TV channels.
    • Virtual labs and skilling e-labs to be set up to promote critical thinking skills and simulated learning environment.
    • High-quality e-content will be developed for delivery through Digital Teachers.
    • Digital University for world-class quality universal education with personalised learning experience to be established.
  1. Saksham Anganwadi
    • Integrated benefits to women and children through Mission Shakti, Mission Vatsalya, Saksham Anganwadi and Poshan 2.0.
    • Two lakh anganwadis to be upgraded to Saksham Anganwadis.
  1. Health
    • An open platform for National Digital Health Ecosystem to be rolled out.
    • National Tele Mental Health Programme’ for quality mental health counselling and care services to be launched.
    • A network of 23 tele-mental health centres of excellence will be set up, with NIMHANS being the nodal centre and International Institute of Information Technology-Bangalore (IIITB) providing technology support.
  1. Energy Transition & Climate Action
    • Additional allocation of Rs.19,500 crore for Production Linked Incentive for manufacture of high efficiency solar modules to meet the goal of 280 GW of installed solar power by 2030.
      • Five to seven per cent biomass pellets to be co-fired in thermal power plants:
    • CO2 savings of 38 MMT annually.
    • Extra income to farmers and job opportunities to locals.
    • Help avoid stubble burning in agriculture fields.
      • Four pilot projects to be set up for coal gasification and conversion of coal into chemicals for the industry.
      • Financial support to farmers belonging to Scheduled Castes and Scheduled Tribes, who want to take up agro-forestry.
  1. Sunrise Opportunities
    • Government contribution to be provided for R&D in Sunrise Opportunities like Artificial Intelligence, Geospatial Systems and Drones, Semiconductor and its eco-system, Space Economy, Genomics and Pharmaceuticals, Green Energy, and Clean Mobility Systems.
  1. Banking
    • 100 per cent of 1.5 lakh post offices to come on the core banking system.
    • Scheduled Commercial Banks to set up 75 Digital Banking Units (DBUs) in 75 districts.

Infrastructure Plan

Road Transport  

PM GatiShakti Master Plan for Expressways will be formulated in 2022-23 to facilitate faster movement of people and goods. The National Highways network will be expanded by 25,000 km in 2022-23. ` 20,000 crore will be mobilized through innovative ways of financing to complement the public resources. 

Seamless Multimodal Movement of Goods and People 

The data exchange among all mode operators will be brought on Unified Logistics Interface Platform (ULIP), designed for Application Programming Interface (API). This will provide for efficient movement of goods through different modes, reducing logistics cost and time, assisting just-in-time inventory management, and in eliminating tedious documentation. Most importantly, this will provide real time information to all stakeholders, and improve international competitiveness. Open-source mobility stack, for organizing seamless travel of passengers will also be facilitated. 

Multimodal Logistics Parks 

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


  • Railways will develop new products and efficient logistics services for small farmers and Small and Medium Enterprises, besides taking the lead in integration of Postal and Railways networks to provide seamless solutions for movement of parcels. 
  • ‘One Station-One Product’ concept will be popularized to help local businesses & supply chains. 
  • As a part of 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. 
  • One hundred PM GatiShakti Cargo Terminals for multimodal logistics facilities will be developed during the next three years. 

Mass Urban Transport including Connectivity to Railways 

 Innovative ways of financing and faster implementation will be encouraged for building metro systems of appropriate type at scale. Multimodal connectivity between mass urban transport and railway stations will be facilitated on priority. Design of metro systems, including civil structures, will be re-oriented and standardized for Indian conditions and needs. 

Parvatmala (National Ropeways Development Programme) 

As a preferred ecologically sustainable alternative to conventional roads in difficult hilly areas, National Ropeways Development Programme will be taken up on PPP mode. The aim is to improve connectivity and convenience for commuters, besides promoting tourism. This may also cover congested urban areas, where conventional mass transit system is not feasible. Contracts for 8 ropeway projects for a length of 60 km will be awarded in 2022-23. 

Har Ghar, Nal Se Jal 

 Current coverage of Har Ghar, Nal Se Jal is 8.7 crores. Of this 5.5 crore households were provided tap water in last 2 years itself. Allocation of ` 60,000 crore has been made with an aim to cover 3.8 crore households in 2022-23. 

Housing for All 

 In 2022-23 80 lakh houses will be completed for the identified eligible beneficiaries of PM Awas Yojana, both rural and urban. ` 48,000 crore is allocated for this purpose.

The Central Government will work with the state governments for reduction of time required for all land and construction related approvals, for promoting affordable housing for middle class and Economically Weaker Sections in urban areas. We shall also work with the financial sector regulators to expand access to capital along with reduction in cost of intermediation. 

Prime Minister’s Development Initiative for North East Region (PMDevINE) 

 A new scheme, Prime Minister’s Development Initiative for NorthEast, PM-DevINE, will be implemented through the North-Eastern Council. It will fund infrastructure, in the spirit of PM GatiShakti, and social development projects based on felt needs of the North-East. This will enable livelihood activities for youth and women, filling the gaps in various sectors. It will not be a substitute for existing central or state schemes. While the central ministries may also pose their candidate projects, priority will be given to those posed by the states. An initial allocation of ` 1,500 crore will be made. 

Vibrant Villages Programme 

 Border villages with sparse population, limited connectivity and infrastructure often get left out from the development gains. Such villages on the northern border will be covered under the new Vibrant Villages Programme. The activities will include construction of village infrastructure, housing, tourist centres, road connectivity, provisioning of decentralized renewable energy, direct to home access for Doordarshan and educational channels, and support for livelihood generation. Additional funding for these activities will be provided. Existing schemes will be converged. We will define their outcomes and monitor them on a constant basis. 

AtmaNirbharta in Defence

  • Government is committed to reducing imports and promoting AtmaNirbharta in equipment for the Armed Forces. 68 per cent of the capital procurement budget will be earmarked for domestic industry in 2022-23, up from 58 per cent in 2021-22.  Defence R&D will be opened up for industry, startups and academia with 25 per cent of 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. An independent nodal umbrella body will be set up for meeting wide ranging testing and certification requirements. 

Comments of Major Economists

P Chidambaram

As per P Chidambaram, the former FM, GDP at constant prices in 2019-20 was Rs 145,69,268 crore. In 2020-21, owing to the pandemic, the GDP had declined to Rs 135,12,740 crore. It is only when the GDP crosses the number of 2019-20 can we say that the decline has been wiped out and we are back to where we were at the end of 2019-20.  According to the NSO, that outcome is likely in 2021-22; according to many observers it is not likely. 

Running to stay

 According to NSO, the GDP will exceed Rs 145,69,268 crore by a small amount of Rs 1,84,267 crore, or by 1.26%. That is, statistically, an insignificant amount. If anything goes wrong, the projected excess output will vanish.  For example, if private consumption dips marginally or exports to a few markets are disrupted or investment lags slightly, the ‘excess’ will vanish.

The best we can hope for is that, in 2021-22, the GDP at constant prices will equal—and not fall short of—Rs 145,69,268 crore.  Achieving that number will mean the level of output of India’s economy will, after two years, be the same as it was in 2019-20—thanks to the pandemic and incompetent management of the economy. 

In the two years that India’s economy will record (-)7.3% and (+)9.2%, leaving the GDP flat, China is estimated to have recorded rates of +2.3% and +8.5%. So, which country’s economy has grown and which country is indulging in vain boasts?

Average Indian Poorer

The NSO’s numbers also show that the average Indian was poorer in 2020-21, and will be poorer in 2021-22 too, as compared to 2019-20.  Also, he/ she spent and will spend less in the two years than he/ she spent in 2019-20.  

There are also other worrying indicators.  Despite appeals to augment substantially government expenditure, the Government Final Capital Expenditure (GFCE) was only Rs 45,003 crore more in 2020-21 than in the previous year. Similarly, it will be only Rs 1,20,562 crore more in 2021-22 than in the previous year. 

Investments are also limping.  Gross Fixed Capital Formation in 2021-22 will move up a tad (Rs 1,21,266 crore) over the level achieved in 2019-20, totally insufficient in a pandemic-hit economy.

Reality check

Among the people, however, there is more conversation about prices of gas, diesel and petrol than about the GDP. There is concern about unemployment.  According to the CMIE, the urban unemployment rate is 8.51% and the rural unemployment rate is 6.74%.  The reality is grimmer: many persons who hold a ‘job’ are disguising their unemployment. There is concern about prices of essentials like pulses, milk and cooking oil. 

There is concern about the education of children: in rural India and poor neighbourhoods of urban India, children have received no teaching during the last two years. There is concern about security: most mixed communities in the states of north and central India are like a tinderbox fearing the spark that will start a conflagration. There is concern about hate speech, digital abuse, trolls and crime, especially crimes against women and children. 

The rulers do not care about the real concerns of the people. They have taken the high road to fight election battles. On the road, they are laying foundation stones, opening unfinished bridges, inaugurating empty hospitals, claiming that ‘80% will fight 20%’, and coining a slogan a day. It is surreal. The boast that India is the fastest growing economy is also surreal.


Former Chief Economic Advisor Arvind Subramanian said that Budget 2022 made matters worse for long-term growth in India by not focussing on enabling private investments and leveraging India’s potential as a large exporter. 

The biggest crisis for India post pandemic is long-term growth – which comes from private investment and exports – and job creation. This has to be the long-term growth strategy but Budget 2022, he said, has fallen short on all three counts and made matters worse for long-term growth.  

“We need to build roads and bridges (referring to the increased capex allocation). But long-run growth is going to come from private investments and exports. Here, the government is maybe even going backwards.” 

There are broader issues around regulatory certainty, level playing fields, timely payment and non-arbitrary decision making which are affecting private investment, he said. “That’s not a matter of the budget or corporate tax rates. The government seriously needs to think why the environment is still not attracting private investments – both foreign and domestic. That’s a big issue.” 

Pointing out that the Budget has reinforced protectionism through its ‘Aatmanirbharta’ push, when there exists a “historic opportunity” for India to become a leading exporter in the world because China has become uncompetitive and Vietnam faces its own challenges, is “not a promising long-run growth strategy”. Instead of becoming more open and attracting FDI, especially in critical labour-intensive sectors, we have doubled down on “Aatmanirbharta” and, frankly, that’s going backwards.” 

He said the country’s employment data can be contested. But he referred to proxies like increased demand for the rural employment scheme MNREGA and states imposing rules around ‘jobs for locals only’ as real indicators of the extent of India’s employment crisis. Further, he said, the pandemic’s impact on the small and medium enterprises is still not clear because they’ve had support from the banks. Add to that India’s economy was weak even pre-pandemic. “That’s why we should take the talk about a relatively weak economy not creating jobs seriously and respond to it.” 

But the solution does not lie in focussing on startup unicorns and new-energy sectors to create jobs. While certainly a pocket of dynamism, he said, the capital-intensive, skill-intensive and tech-intensive sectors’ job creation ability is limited. “You create 100 unicorns. What does it do the bottom 50-70% of the country?” 

Adding that tax collections have been buoyant this year because of a K-shaped recovery in the economy after the pandemic impact, where different sectors have recovered at different paces, it may not be the case next year. “If revenues surprise on the upside and the growth situation is not too bad, any saving they make this year, I would urge the government to continue (fiscal) consolidation as a way of preserving stability at a time when the international environment can get a bit tricky.” 

Talking about the government’s disinvestment targets, he said LIC’s possible privatisation will drive up profitability, its corporate governance, the way it does business and disclosure will all improve.” If you look at privatisation as a tool of efficiency, LIC and other public sector banks would be important privatisation targets going forward.” 

Raghuram Rajan

The Indian economy has “some bright spots and a number of very dark stains” and the government should target its spending “carefully” so that there are no huge deficits, noted economist and former RBI Governor Raghuram Rajan said.

Generally, a K-shaped recovery will reflect a situation where technology and large capital firms recover at a far faster rate than small businesses and industries that have been significantly impacted by the pandemic.

“My greater worry about the economy is the scarring to the middle class, the small and medium sector, and our children’s minds, all of which will come into play after an initial rebound due to pent up demand. One symptom of all this is weak consumption growth, especially for mass consumption goods,” he said.

He said, the economy has some bright spots and a number of very dark stains.

“The bright spots are the health of large firms, the roaring business the IT and IT-enabled sectors are doing, including the emergence of unicorns in a number of areas, and the strength of some parts of the financial sector,” he said.

On the other hand, “dark stains” are the extent of unemployment and low buying power, especially amongst the lower middle-class, the financial stress small and medium-sized firms are experiencing, “including the very tepid credit growth, and the tragic state of our schooling”.

The country’s GDP is expected to grow over 9 per cent in the current financial year that ends on March 31. The economy, which was significantly hit by the pandemic, had contracted 7.3 per cent in the last fiscal.

On whether the government should go for fiscal consolidation or continue with stimulus measures, Rajan pointed out that India’s fiscal situation, even coming into the pandemic, was not good and this is why the finance minister cannot spend freely now.

While the government must spend where necessary at this time to alleviate the pain in the most troubled areas of the economy, he said, “We must target the spending carefully so that we do not run huge deficits.”

Regarding the rising inflationary trends, Rajan said inflation is a concern in every country, and it would be hard for India to be an exception.

According to him, announcing a credible target for the country’s consolidated debt over the next five years coupled with the setting up of an independent fiscal council to opine on the quality of the budget would be very useful steps.

“If these moves are seen as credible, the debt markets may be willing to accept a higher temporary deficit,” he said, adding that to convince markets that “we will be responsible, we should strengthen the institutional support to future fiscal consolidation.”

Further, Rajan said that one way to expand budgetary resources is through asset sales, including parts of government enterprises and surplus government land.

“We need to be strategic about what we can sell, and how we can improve the economy’s performance through those sales… Once we decide to sell, though, we should move fast, something we have not done so far,” he opined.

Pronab Sen

Professor Pronab Sen, the former chief statistician says this Budget will make the rich richer and possibly make the poor poorer or, at least, leave them where they are. 

In an interview to The Wire, Sen, who is the country director of the International Growth Centre, began by agreeing with many of the concerns and questions about the alleged Rs 2 lakh crore increase in government capital expenditure raised by former finance secretary Subhash Chandra Garg, Tamil Nadu finance minister Palanivel Thiaga Rajan and member of the Prime Minister’s Economic Advisory Council Neelkanth Mishra.

The economist also said that alongside the claim of a Rs 2 lakh crore increase in government capital expenditure, there’s a sharp reduction in the Budget in revenue expenditure. This will reduce the Centre’s contribution to many state-run schemes. How the states respond is yet to be seen but this is likely to be one of downsides of the Budget.

Speaking specifically about MSMEs, Sen said that the government does not properly see and understand the plight they are facing. What is needed is a plan to resurrect and revive MSMEs that have died. The credit guarantee scheme or new credit lines will not help. We may have to wait for a new generation of MSMEs to be born.

Sen also pointed out that the credit guarantee scheme can only be availed of by MSMEs who have been servicing their debt. Those that have been unable to do so – and this could be a very large number – will not qualify for the credit guarantee. Therefore, this measure will not be of any use to them.

Speaking about trade, hotels, transport, communication, etc., which according to the first Advance Estimate are 8.4% below pre-pandemic levels but account for 30.5% of employment, and for whom the Budget has created an exclusive Rs 50,000 crore credit guarantee, Sen said some enterprises in this section of the services sector would avail of the guarantee because they need to continue to pay staff, but their fortunes will only change when demand picks up. 

Speaking about the very small allocation in the budget for vaccines – Rs 5,000 crore – Sen said this is a clear sign that the government is now leaving it to the states to vaccinate people. He said this also means that some states, possibly the richer ones, will do so effectively and comprehensively whilst others would do so less well. This means that the potential for infection continuing and breeding new variants will remain and that, in turn, could endanger the rest of the country.


CAPEX Will Decrease

Subhash Chandra Garg, one of India’s former finance secretaries has said that the claimed increased capex by Rs 2 lakh crore is simply not the case.

In a nutshell, he points out that whilst claiming to have increased the Union government’s capex by Rs 2 lakh crore the budget details show that the capital expenditure by Union government owned-PSUs and agencies (like NHAI and the Railways, etc.) has shrunk by Rs 1,20,000 crore. Therefore, in the first instance, the aggregate CAPEX increase is only Rs 80,000 crore and not Rs 2 lakh crore.

In fact, he argues, CAPEX has marginally shrunk compared to last year by around Rs 10-15,000 crore.

With regard to the offer of 1 lakh crore as interest free 50-year loans to the states, Garg views this as a political ploy by the Union government to curb the fiscal independence and, therefore, fiscal sovereignty of state governments and instead assert a measure of its own financial control over them. This is because under Article 293 if a state accepts a loan from the Union government it cannot seek further loans without the Union government’s consent. In this case, since the loans are of a 50-year duration, it means states that accept these loans would have their fiscal independence curbed for half a century. Also, under Article 293 these loans cannot be paid back early.

$5 Trillion Economy by 2024-25

 Garg said that the goal of becoming a $5 trillion economy by 2024-25 is beyond India’s reach. He says at best India can reach this target in 2026-27.

He said the original announcement was vague because it set the target date as simply 2024. It was then fine-tuned in the budget to financial year 2024-25. This required growth of 11-12% in dollar terms which, Garg says, “was ambitious but achievable”.

In the three years since then growth in dollar terms has been only 4% and in real terms between 1.7 and 1.8%. Therefore, to achieve the $5 trillion target by 2024-25 India requires 17% growth in dollar terms each year. This, he says, is “almost impossible”.

Garg said that by his estimation India is at the moment a $3.09 trillion economy. Therefore, it can only become a $5 trillion economy, an increase of 67%, in 2026-27, provided the economy grows at 13% per year in nominal dollar terms and there’s no significant change in the rupee exchange rate.

In the interview, Garg points out that the truth about the increase in capex will also affect the finance minister’s claim that her alleged increase in capex will crowd-in additional private investment and, furthermore, it also affects her claim that the budget will create up to 60 lakhs jobs in the next five years. Garg makes it clear he is very doubtful of both these claims.

My Views on Budget 2022-23

  • The planned increase in CAPEX is a good idea. I agree with the logic of Garg that in reality the CAPEX is lower by 10-15,000 crore compared to last year. It is very much in keeping with Modi’s philosophy of focusing on false headlines (remember “doubling of farmers’ income by 2022 and the “Rs 20 lac crore stimulus package).
  • The advertised growth and jobs will not come. This is consistent with PM Modi’s past track record.
  • Agriculture sector will continue to suffer.
  • MSMEs will continue to remain in a bad shape.
  • The rich-poor divide will continue as it is.
  • Education and healthcare will continue to remain in a bad shape.
  • Unemployment situation will get more acute.
  • Inflation will rise and interest rates will also rise.
  • Poverty which rose under Modi’s misrule is unlikely to reduce in the year.
  • Domestic demand will remain subdued.
  • Private investment will not rise because capacity utilization is unlikely to cross 70%.
  • In short, we are going to witness continuation of “bure din”, for “achche din” we the people have to do something because PM Modi is unlikely to provide us anything more than false promises and propaganda.

Part 3

In Part 3 we shall analyze as to what needs to be done to improve India’s economy as well as governance. 


World Economic Forum: Youth Disillusionment Among Top Risks For India (


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