Growth-centric, expansionary

This is a growth-centric and expansionary budget that pushes many right buttons, while focussing on improving India’s mid-term growth trajectory.

Spending will continue despite limited new tax revenue, and the focus is clearly on stimulating growth after a once-in-a-century shock.

While this implies higher-than-anticipated fiscal deficit and borrowings, and therefore adds an upside risk to interest rates, the quality of spending will improve.

The compound annual growth rate for capital expenditure over fiscal 2020 is a praiseworthy 28%, while revenue expenditure growth is contained at 12%.

Reduced dependence on Internal and Extra Budgetary Resources – essentially off-balance sheet financing done through public sector and government entities such as the National Highways Authority of India – for funding capex is also a positive.

The fiscal consolidation path has been stretched, and can be realised if growth remains healthy. The good part is, there are a number of steps to push that up.

The onus was clearly on the government to do the heavy lifting for reviving the investment cycle as a broad-based recovery in private capex is not yet in sight. Quite in line, the capex allocation for fiscal 2022 has been increased by 26% on-year, with sharp focus on infrastructure.