Recently, the Finance Minister presented the Union Budget 2022-23 which has brought up numerous significant aspects related to our country’s financial development. Among these areas, one of the prominent focus is on ‘Financing of Investments.’
Details on the Budget Allocated for Financing of Investments
For the upcoming fiscal year 2022-23, the outlay for public capital expenditure has seen a significant increase of 35.4% to Rs. 7.50 lakh crore in comparison to the present year. This outlay will account for approximately 2.9% of the GDP. Moreover, the ‘Effective Capital Expenditure’ of the Central Government for 2022-23 is projected at Rs. 10.68 lakh crore, equating to 4.1% of the GDP.
Capital expenditure comprises amounts spent by the government on developing machinery, buildings, health facilities, education, etc. It also covers expenses for acquiring valuable assets like land and investments by the government that will yield future profits or dividends.
The Inclusion of Green Bonds
The budget for 2022-23 includes the issuance of sovereign Green Bonds as part of government’s overall market borrowings. These bonds will play a significant role in harnessing resources for green infrastructure.
Developments in GIFT-IFSC
Progress in the Gujarat International Finance Tec-City (GIFT City) has been noted with foreign universities and institutions now being permitted to offer courses in Financial Management, FinTech, Science, Technology, Engineering, and Mathematics. Furthermore, an International Arbitration Centre will be established within the GIFT City aimed at efficient dispute settlements under international jurisprudence.
Enhancements in Infrastructure Status
Data Centres and Energy Storage Systems, including dense charging infrastructure and grid-scale battery systems, will be included in the harmonized list of infrastructure.
Encouraging Venture Capital and Private Equity Investment
The government is taking strides to encourage venture capital and private equity investments by forming an expert panel. Last year, these types of investments contributed more than 5.5 lakh crore, creating one of the largest startup and growth ecosystems.
Blended Finance for Sunrise Sectors
Government is planning to endorse thematic funds for blended finance to foster growth in crucial sunrise sectors such as Climate Action, Deep-Tech, Digital Economy, Pharma, and Agri-Tech.
Introduction of Digital Rupee
In the fiscal year 2022-23, the government will roll out a Digital Rupee which will harness blockchain and other technologies. The Reserve Bank of India will issue it starting from the same year.
Financial Assistance to States for Capital Investment
The budget for the ‘Scheme for Financial Assistance to States for Capital Investment’ is being enhanced from Rs. 10,000 crore in Budget Estimates 2021-22 to Rs. 15,000 crore in Revised Estimates 2021-22. And for 2022-23, the allocation is 1 lakh crore to assist the states in catalyzing overall investments in the economy.
These fifty-year interest-free loans are over and above normal borrowings allowed to the states and will be used for productive capital investment of the states including PM GatiShakti related and other projects. It will also include components for supplemental funding for priority segments of PM Gram Sadak Yojana, digitization of the economy, and reforms related to building byelaws, town planning schemes, transit-oriented development, and transferable development rights.
State Fiscal Deficit Allocation
In accordance with the 15th Finance Commission’s recommendations, states will be permitted a fiscal deficit of 4% of GSDP (Gross State Domestic Product) for the fiscal year 2022-23. Of this percentage, 0.5% will be tied to power sector reforms.
