BUDGET AIMS TO GIVE PUSH FOR CAPEX TO REVIVE DEMAND, CREATE JOBS

First, on the Personal Income Tax front – there’s been no change at all in 2022-23 union budget presented by finance minister Nirmala Sitharaman in the Lok Sabha yesterday. While she left personal income tax rates untouched, she increased tax deductions for investments in national pension schemes for govt employees, from 10 to 14 per cent.

As India emerges from the shadow of the Covid-19 pandemic with an ebbing third wave, Sitharaman’s economic recovery strategy hinges on a sharp step-up in govt spending which, in due course, is expected to spur private investment that has so far remained stalled.

This exclusive focus on capital spending is, in effect, a continuation of the previous year’s Budget but devoid of its high decibel reform push — asset monetization and privatisation of state-owned banks and insurance companies — which the govt projected to position India in the post-pandemic world.

In a way, Sitharaman has continued with the NDA govt’s economic philosophy of fiscal rectitude, without any mention of privatization, disinvestment and asset monetization in her 90-minute speech. Despite an unprecedent economic distress which many surveys showed hurt the poor the hardest, the Budget persisted with govt interventions on the supply side.

For 2022-23, Sitharaman has sharply hiked the capital expenditure budget by 24.47 per cent to Rs 7.5 lakh crore (compared with the Revised Estimate for 2021-22 at Rs 6,02,711 crore), which is almost 2.9 per cent of the GDP. Together with grants in aid for creation of capital assets (including MNREGA works), the effective capital expenditure for the next year is budgeted at Rs 10.67 lakh crore, 27 per cent more than the RE of 2021-22 at Rs 8.40 lakh crore.

This expenditure boost comes along with an increase in the state borrowing limit to 4 per cent of the GSDP. Sitharaman also allowed states to borrow up to Rs 1 lakh crore through 50-year interest-free loans to make capital investments. In 2021-22, the Centre had allowed states an additional Rs 15,000 crore for capital investment under a similar window.

This is classical Keynesian economics at play – at a time when the private sector is reluctant or averse to invest given poor demand conditions, the govt is weighing in, and borrowing more to spend more.

Over the course of the next 12 months, such govt spending is expected to crowd in private sector investment and help create jobs.

Despite providing a fillip to the economy through higher capital spending, Sitharaman has kept the fisc under control, a key metric that foreign investors and markets assess the Budget on. Not only did she ensure that the fiscal deficit target for the current year was more or less met (6.9 per cent of GDP against 6.8 per cent assumed in Budget 2021-22), she stayed on course, bringing it down by 0.5 percentage points in the next financial year.

The Budget also provided clarity on key new economy sectors – for cryptocurrencies, it said income from transfer of digital assets would be taxed at 30 per cent and further proposed a 1 per cent TDS on transfer of payment; it announced a battery swapping policy that would enthuse the EV (electric vehicles) segment; and provided a roadmap for 5G rollout that would boost the technology and start-up ecosystem. Sitharaman clarified that taxing does not confer legitimacy on cryptocurrencies.

Sitharaman also extended the ECLGS (Emergency Credit Line Guarantee Scheme), a facility to provide collateral-free loans to small and medium enterprises, by another year and enhanced the credit line by Rs 50,000 crore to Rs 5 lakh crore. Unlike big companies which could borrow easily, MSMEs banked on this scheme during the pandemic, when the national lockdown and subsequent demand collapse, almost wiped them out of business.

DIVIDING THE RUPEE – INCOMES AND EXPENSES

For every rupee in the govt coffer, 58 paise will come from direct and indirect taxes, 35 paise from borrowings and other liabilities, 5 paise from non-tax revenue like disinvestment and 2 paise from non-debt capital receipts, according to the Budget documents for 2022-23.

According to the Union Budget 2022-23 presented in Parliament by Finance Minister Nirmala Sitharaman on Tuesday, goods and services tax will contribute 16 paise in every rupee revenue, while corporation tax will contribute 15 paise to each rupee earned.

The govt is also looking to earn 7 paise for every rupee from Union excise duty and 5 paise from customs duty. Income tax will yield 15 paise to every rupee collection.

On the expenditure side, the biggest outlay component is interest payments at 20 paise for every rupee, followed by the states’ share of taxes and duties at 17 paise. Allocation for the defence stood at 8 paise. Expenditure on central sector schemes will be 15 paise, while the allocation for centrally-sponsored schemes will be 9 paise. The expenditure on the ‘Finance Commission and other transfers’ is pegged at 10 paise. Subsidies and pension will account for 8 paise and 4 paise, respectively, in each rupee spending. The govt will spend 9 paise in every rupee on ‘other expenditures’.

BUDGET IS BETRAYAL OF SALARIED, MIDDLE CLASSES, NOTHING FOR FARMERS AND YOUTH: CONGRESS

The Congress accused Union Finance Minister Nirmala Sitharaman and Prime Minister Minister Narendra Modi of betraying the country's salaried and middle classes by not announcing any relief measures for them in the Union Budget.

Congress general secretary and chief spokesperson Randeep Surjewala said the salaried and the middle classes had been affected due to pay cuts and high inflation.

Terming the document a "Nothing budget", he said in a Twitter post in Hindi that it has nothing for the poor, the salaried and the middle classes as well as farmers and the youth “whose pockets are empty”. There is nothing, he added, to increase spending and to promote small scale industry.

In his comments soon after the finance minister presented the budget for 2022-23 in Parliament, Surjewala also asked how the govt was imposing tax on profit from crypto currencies when it is not clear if it is legal. "And Ms Finance Minister, please do tell the Nation - Is Crypto Currency now legal, without bringing the Crypto Currency Bill, as you tax the crypto currency? "What about its regulator? What about regulation of Crypto Exchanges? What about investor protection? #Budget2022," the Congress spokesperson said in another tweet.

Congress leader Manickam Tagore added that it is a "pro-corporate" and "pro-rich" budget with nothing for the middle class and farmers. "...Nothing for a jobless youth, Nothing for farmers.. Nothing for middle class.. Again Nirmala madam Fails... #Budget2022," Tagore, who is the Congress whip in the Lok Sabha, said on Twitter.

COVID DASHBOARD – INDIA

As of 0800 IST /Feb 2

from mohfw.gov.in ,

New Cases on Tuesday 1,61,386

Active Cases 16,21,603 (-1,21,456)

Total Deaths (Deaths Yesterday) 4,97,975 (670)

Total Vaccination: 167.29 Crores (+57,42,659)

INTERNATIONAL AFFAIRS

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RUSSIAN ENVOY THANKS INDIA FOR 'WITHSTANDING US PRESSURE' ON UKRAINE

As India, Kenya, Gabon abstained and China voted against a procedural vote in the United Nations Security Council ahead of a meeting on the Ukraine situation, a Russian diplomat at the UN thanked the four nations for being 'brave' to 'withstand US hand-twisting before the vote'.

India abstained on the procedural vote taken in the Security Council ahead of a meeting to discuss the tense situation on the Ukraine border.

'US diplomacy at its worst. Thanks to 4 our colleagues China, India, Gabon and Kenya who were brave to withstand US hand-twisting before the vote,' First Deputy Permanent Representative of Russia to the UN Dmitry Polyanskiy said in a tweet on Monday made in response to a tweet by the US Ambassador to the UN Linda Thomas-Greenfield.

Thomas-Greenfield said, 'Russia's aggression not only threatens Ukraine and Europe, but the international order the @UN Security Council is charged with upholding. What would it mean for the world if former empires had license to start reclaiming territory by force? This would set us down a dangerous path. We've brought this issue to the UNSC to prevent a crisis before it is upon us. The test of Russia's good faith is whether they will come to the negotiating table and stay until we reach an understanding. If they refuse to do so, the world will know why, and who is responsible.'

India's Permanent Representative to the UN Ambassador T S Tirumurti said in the Council that New Delhi has been closely following the evolving developments relating to Ukraine, including through ongoing high-level security talks between Russia and the United States, as well as under the Normandy format in Paris. 'India's interest is in finding a solution that can provide for immediate de-escalation of tensions taking into account the legitimate security interests of all countries and aimed towards securing long term peace and stability in the region and beyond,' Tirumurti said.

Tirumurti also told the Council that more than 20,000 Indian students and nationals live and study in different parts of Ukraine, including in its border areas. 'The well-being of Indian nationals is of priority to us,' he said. India reiterated its call for the 'peaceful resolution of the situation by sincere and sustained diplomatic efforts to ensure that concerns of all sides are resolved through constructive dialogue'.

COVID NOT BEATEN YET, SAYS WHO AS DANES LIFT CURBS

The WHO chief warned on Tuesday that it is too early for countries to declare victory over Covid-19. “It is premature for any country to either surrender or to declare victory,” WHO chief Tedros Adhanom Ghebreyesus told reporters. “This virus is dangerous, and it continues to evolve before our very eyes. ”

His comment came as Denmark on Tuesday became the first EU country to lift all of its domestic Covid curbs despite record numbers of cases. A number of other countries are eyeing similar moves.

“We’re concerned that a narrative has taken hold in some countries that because of vaccines and because of Omicron’s high transmissibility and lower severity, preventing transmission is no longer possible, and no longer necessary,” Tedros said. “Nothing could be further from the truth. More transmission means more deaths.”

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'AMRIT KAAL WILL USHER IN EASE OF LIVING’

Referring to the next 25 years of the country leading to the 100th anniversary of independence as Amrit Kaal, finance minister Nirmala Sitharaman laid emphasis on what she called a switch in approach to provide a more ‘trust-based governance’, with a futuristic and inclusive vision.

“This new phase will be guided by an active involvement of the states, digitisation of manual processes and interventions, integration of the central and state level systems through IT bridges, a single point access for all citizen-centric services, and a standardisation and removal of overlapping compliances,” she said.

Saying that the govt has in recent years reduced over 25,000 compliances and repealed 1,486 Union laws, the finance minister said for ‘Ease of Living’, states will be encouraged to adopt Unique Land Parcel Identification Number (ULPIN) to facilitate IT-based management of records and a facility for transliteration of land records across any of the Schedule VIII languages will be rolled out. ULPIN is a 14-digit identification number that is issued to every plot of land in the country.

Sitharaman alsoannounced the launch of India's own digital currency by the RBI next year that will be based on Blockchain technology.

She also gave a one-time window to taxpayers to correct any discrepancy or omissions in their ITRs within two years of filing, subject to payment of taxes. Sher said this is an "affirmative step in the direction of voluntary tax compliance". Currently, if the I-T department finds out that some income has been missed out by the assessee, it goes through a lengthy process of adjudication, and the new proposal would repose trust in the taxpayer.

She has proposed to cap the surcharge on long-term capital gains arising on transfer of any type of assets at 15 per cent. This step will give a boost to the startup community, she said. Currently, the long-term capital gains on listed equity shares, units, etc are liable to maximum surcharge (over and above the tax rate) of 15 per cent, while other long-term capital gains are subjected to a graded surcharge, which goes up to 37 per cent.

The Centre will promote tech-savvy methods like drones, chemical-free natural farming along Ganga and public-private partnerships for delivery of digital and high-tech services to help farmers grow diverse farm products as well as capital procurement for farm-based start-ups.

INDUCTION OF WOMEN FIGHTER PILOTS INTO IAF MADE PERMANENT SCHEME

The defence ministry has decided to convert the experimental scheme for induction of women fighter pilots in the Indian Air Force into a permanent one.

Defence Minister Rajnath Singh said on Tuesday that the decision is a testimony to the capability of India’s ‘Nari Shakti’ (women power) and the commitment of Prime Minister Narendra Modi towards women empowerment.

“The MoD has decided to convert the Experimental Scheme for Induction of Women Fighter Pilots in the Indian Air Force into a permanent scheme,” he said on Twitter.

The decision came months after the Supreme Court paved the way for the entry of women into the prestigious NDA, which has been a male bastion, for recruitment into the three services.

COURT IN ITALY DISMISSES INVESTIGATION AGAINST MARINES OVER MURDER OF KERALA FISHERMEN

Over seven months after the Supreme Court closed all proceedings pending in the country against two Italian marines accused of gunning down two fishermen off the coast of Kerala in February 2012, a Rome judge on Monday dismissed the murder investigation against the two, following an assessment by prosecutors last month that there was not enough evidence for a trial.

In June, 2021, the Supreme Court of India had quashed the FIR registered in connection with the case and discharged the bail bonds of the two marines. The bench gave the judgment after taking into account the fact that the Arbitral Tribunal constituted under the United Nations Convention on the Law of the Sea (UNCLOS), 1982, – of which India is a party – had delivered its award on May 21, 2020, under which the Republic of Italy agreed to pay Rs 10 crore in compensation, over and above the ex gratia amount already paid (Rs 2.17 crore) and also that the tribunal had duly recorded Italy’s commitment that it will resume its criminal investigation into the incident.

COVID CASES DECLINING, MUMBAI EASES RESTRICTIONS

The order by the Mumbai civic body also directed that marriages may have guests up to 25 per cent of the capacity of ground or banquet halls or 200 whichever is lower. With Covid-19 cases declining on a steady basis, the Mumbai administration on Tuesday decided to lift night curfew and ease a few other restrictions.

As per an order issued by the Municipal Corporation of Greater Mumbai, restaurants, theatres can now operate again at 50 per cent capacity. “There shall be no restrictions on movement during night hours of 11.00 p.m. to 5.00 a.m.,” the order said.

“Beaches, gardens, parks to remain open as per normal timing before, while amusement and theme parks to remain operational with 50 per cent of operational capacity,” it said.

“Local tourist spots to remain open as per normal timing. Weekly Bazaars to remain open as per normal timing,” the order read.

The order by the civic body also directed that marriages may have guests up to 25 per cent of the capacity of ground or banquet halls or 200 whichever is lower.

AMAZON-FUTURE DISPUTE: SC SETS ASIDE DELHI HC ORDERS

In a major relief to Future group, the Supreme Court on Tuesday set aside three Delhi High Court orders, including the refusal to stay the final arbitral award which had restrained Future Retail Ltd from going ahead with its Rs 24,731 crore merger deal with Reliance Retail and ordered a fresh adjudication.

A Bench led by Chief Justice of Indian NV Ramana quashed the October 29, 2021 HC order declining to stay an arbitration tribunal decision refusing to interfere with the Emergency Award (EA) of the Singapore International Arbitration Centre (SIAC). The EA had restrained FRL from going ahead with the merger deal.

The top court remanded the pleas of Future group companies relating to arbitral award on the merger deal with Reliance Retail back to the Delhi High Court for a fresh and speedy adjudication on merits uninfluenced by the observations made by it.

Amazon has been opposing the Future group decision to go ahead with the merger deal of FRL with Reliance Retail. Amazon got the EA of SIAC in its favour which restrained Future group from going ahead with the merger deal. The EA award was upheld in the final arbitral award of October, 2021.

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THOUGHT FOR THE DAY

A man's ethical behavior should be based effectually on sympathy, education, and social ties; no religious basis is necessary. Man would indeed be in a poor way if he had to be restrained by fear of punishment and hope of reward after death. - Albert Einstein

OFF TRACK

A little boy is leaving school at the end of the day. As he strolls along the sidewalk,  a car pulls up to the curb,  and a man winds down the window. "Hey, kid, I've got some chocolates. Hop in and I'll give it to you," he says.

"No. I'm not going to," Says the boy walks on.

Further down the road, the car pulls over again. "Hey there kid, if you get in my car, I'll give you all these chocolates, and a big bottle of coke. How about it?"

"No way!  Now leave me alone!" The boy walks on, quickening his pace.

The car again pulls over beside him. "Look, kid, I've got a puppy at home you'd love to see. Get in and I'll take you there. You can have all the chocolates,  and  a big  bottle of coke on the way. What do you say to that?"

The boy is getting agitated. He stops walking, and leans down to the car window. "Look, I don't care what you promise me, Dad.  I'm NOT riding in this Maruti 800!"