This is a Budget that is focused on prioritising capital expenditure as a key lever for growth, which we endorse as an approach given the multiplier effect of many of these investments. In that sense, the budget augurs well for the economy and the continuing decline in revenue expenditure as a share of total expenditure towards capital expenditure improves quality of expenditure. To put it in context, the 35% increase in capital expenditure, 55% increase in Road sector allocation and 17% increase in railways are significant numbers. On top of this is support to state governments towards capex. Of course, execution of projects in these areas and in urban infrastructure is key towards enjoying the full benefits of this expenditure. The other point to note is that a larger share of defense capital expenditure is targeted to domestic procurement that could also have second order implications for R&D and multiplier effects in the economy.
The Budget is extremely future-oriented. Emphasis on digitisation of government processes, incentives for startups enabling flow of capital (lower capital gains for venture investments), clean energy enablers for fundraising and PLI, categorising data centres and energy storage systems as infrastructure, recognising gaming as an area of potential, and a general focus on sunrise sectors is evidence of this. Impact of this will be felt over the next decades and not in the short term. The taxation on cryptocurrency while at the same time talking about a digital rupee indicates the government recognition of block chain as an important future technology to enable.
The gross market borrowing through G-secs for 22-23 at Rs 14.95 lakh crs is higher than the amount expected by the market and has led to sharp increase in G-Sec yields. However, tax buoyancy is very high and could well surprise on the upside thereby leading to lower fiscal deficit in the current and coming year than forecasted. However what quantum of issuance would be issued as sovereign green bonds and whether it shall be issued to a new set of investors (viz Foreign Institutions) is a key part we can watch out for. Overall, the credibility of numbers is very high as is evident in the tax growth rates and PSU divestment numbers being very moderate. Indicative of an intent to under promise and over deliver.