Monday

28


February , 2022
Editorial
23:13 pm

Dr. H. P. Kanoria


FINAL EDIT : MARCH - 01-31-2022

Dear Readers,

 

 

As usual wealth creators, job creators and protectors have hailed the Budget of 2022 presented by honourable Finance Minister Nirmala Sitharaman. However, middle class and farmers are not happy.

Prime Minister Narendra Modi said that the Union Budget is people friendly; progressive, full of opportunities and infrastructure, investment, growth and jobs. It also ensures a bright future for the youth and aims to provide the economically weaker segments of the society with pucca houses, toilets, tap water and gas connection. MSME sectors will be greatly benefitted by the reservation of 68% of the defence capital budget for the domestic industry. `7.5 trillion worth of public investment will give new push to the economy.

Agriculture : Agriculture and services provide daal-roti to the people. It has contributed greatly to the national income. Industry contributes about 28.2%, services provide 53% and agriculture 18.8% to the economy. Agriculture’s share was 44.5% in 1969. 70.50% of India’s consumption expenditure is on food, clothing and housing.

Infrastructure : The total expenditure on the Ministry of Road Transport and Highways for 2022-23 is estimated at ` 2 lakh crore. It is a doubt that so much money will be spent. Except very few large contractors, other contractors will not dare to take up the job taking the debts. Lenders will also be shy to lend money in infrastructure. There is a defective bidding criterion. Delay in projects has led to huge time and cost overruns. As many as 439 infrastructure projects, each entailing investment of `150 crore or more, have been hit by cost overruns totalling more than `4.38 lakh crore, according to the Ministry of Statistics and Programme Implementation. How this overrun cost will be met with? Infra projects are is expected to route through PM Gati Shakti’s Network Planning Group after April 1st. Gati Shakti Network Planning Group should cover land procurement, getting of manifold  approvals beforehand, timely payments, dispute settlement and others.

Power : Power sector, especially new renewed green power companies  have been affected due to non-finalization of purchase rates and payment in time by the public electricity distribution companies (DISCOMS). Discoms owed a total of ` 1,22,226 crore to power generation firms in February 2021, according to portal PRAAPTI (payment ratification and analysis in power procurement for bringing transparency in invoicing of generators). Total outstanding dues
owed by DISCOMS to power producers dipped 5.1% year-on-year to
` 1,15,972 crore in February 2022, as per latest data. Power producers give 45 days of credit to DISCOMs. This is the position despite government’s decision almost two years ago to infuse ` 90,000 crore liquidity to the ailing DISCOMs through Power Finance Corporation (PFC) and Rural Electrification Corporation (REC).

Real Estate/Housing : Allocation of `48,000 crore for affordable housing in the budget will also benefit the real estate. In rural India people are living in pathetic houses made up of straw, hay, cow dung, mud, wood chips, etc. Government should undertake to build houses under some scheme which will boost the economy and demand of local materials. It is more essential than allocating a large sum in the budget for infrastructure. ` 7.5 trillion capital expenditure allocation does not include rural housing problem. Real estate developers said that the budget has not really touched upon many long pending demands. An allocation of ` 60,000 crore has been made in the budget to provide tap water connections to 3.8 crore households.

FM said that sustainable recovery is the key objective of the budget. Budget aims to stabilize the economy. It provides a vision for India for the next 25 years. She emphasized that infrastructure spending, disinvestment, privatization, ease of doing business and adapting technology are the key instruments for India to grow in the next 25 years. Capital expenditure and revenue expenditure will create higher multiplier effect in the economy.

Privatization through disinvestment will be critical as a few wealth creators will only be interested in disinvestment in public units at a throw away prices as they do not want to take undue risk of higher debts.

Taking into account the surge of the Omicron variant across the world, IMF has downgraded global growth to 4.4% for 2022. Union Budget 2022-23 has strengthened the direction set for Indian economy. Budget has targeted a nominal GDP growth at 11.1%. According to the FM, India’s economic growth, estimated at 9.2% for 2021-22, will be the highest amongst all the large economies.

Finance Minister Nirmala Sitharaman exhorted India Inc. to step up capex quickly. Wealth creators should not lose this opportunity provided in the budget. However, all are reducing debts from the funds generated by them, even selling and diluting their stakes in the company to reduce the debts. The way the definition of the so-called Related Party Transactions is being interpreted, it is emerging as a severe impediment and is restraining to the investment. From the profit making companies investments can be made. It requires better control for those investments. Acquisition of enterprises does not tantamount to investment as it does not create new jobs until and unless acquisition is for the purpose of expansion of the said enterprise and / or giving finance to the sick companies. De-criminalization of several Acts and Rules need to be done. FM mentioned that the reduction of 25000 compliances and repealing of 1486 union laws have fast-tracked business processes significantly.

Corporate India is worried about the new norms on related party transactions (RPTs). The rules have already been very harsh and are now worse. Such rules are nowhere in the world. These will only slow the business decisions and investments further.

Wealth creators and job creators have not lost their appetite for risk taking, but are fearsome of more than 26000 Indian laws for imprisonment. Doing business in India is challenging. Good will built over centuries of hard work, dedication and sacrifice are put at stake. Excessive criminalization affects social justice, integrity and timely execution of the projects. Decriminalization of excessive business laws, rules and regulations and rationalization are urgently required for creation of wealth and job.

 

Add new comment

Filtered HTML

  • Web page addresses and e-mail addresses turn into links automatically.
  • Allowed HTML tags: <a> <em> <strong> <cite> <blockquote> <code> <ul> <ol> <li> <dl> <dt> <dd>
  • Lines and paragraphs break automatically.

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.