Budget2022 seeks to envision the Honorable PM’s dream of doubling the farmers income through a multi-pronged approach centred around access to finance, access to the market place and access to new age technology and better farming practices related to organic farming, drone technology etc.  Financial inclusion has been enabled through multiple levers including Rs 2.37 lakh cr direct payment of MSP value to farmers, a new NABARD fund to finance start-ups for agri and rural enterprises, linking of bank accounts and post office accounts, financial support to promote agro forestry, Rs 45,000 cr allocation for promoting scientific organic farming in north-east states. 

Further, enhancing rural infrastructure and connectivity to markets will support farmers in having better access to the marketplace, enabling them to increase their opportunities and command a better price for their produce. Deployment of ‘Kisan Drones’ to promote crop assessment, digitization of land records, spraying of insecticides, and nutrients, will greatly benefit the farmers Access to new age technology will be made available under a Public Private Partnership Scheme and packages alongwith State Governments will enable digital and hi-tech services to farmers and promote adoption of suitable production and harvesting techniques for varieties of fruits and vegetables respectively.  Access to latest farming best practices to be enabled by encouraging States to revise the syllabi of agricultural universities to include organic farming and modern day farming.  Reduction in AMT for co-operatives will propel organised farming. All the aforesaid reforms providing the much needed access to finance, market connectivity, knowledge and new-age technology are much welcomed by the agriculture industry and farmer community.

- Aashish Kasad, EY India National Leader - Chemicals and Agriculture sector; India Region Diversity & Inclusiveness Business Sponsor

• While we await the policy details on Battery Swapping & Land allocation for public charging systems, the announcement and focus of the Government to promote Zero Emission mobility will definitely benefit sectors like MaaS, E-Commerce, Food delivery who are focused on optimizing last mile delivery in India.

- Vinay Raghunath, Partner and Automotive sector leader, EY India

• The Budget 2022 will have long-term benefits for the Auto sector in light of increased investment in infrastructure & capital expenditure and Government’s vision to improve overall mobility and connectivity through the framework of PM GatiShakti and multimodal logistics are steps in the right direction. New policy on battery swapping and interoperability standards will spur adoption of EVs especially in the two-wheeler segment and is in line with government’s on-going agenda on clean and sustainable mobility. Additional year to commence manufacturing by 31 March 2024 for new manufacturing companies availing concessional tax rate of 15% will encourage new investments and is in sync with the Auto PLI Scheme announced earlier. Overall a growth oriented Budget.

- Pramod Achuthan, Partner and Automotive Tax Leader, EY India

• The amendment made in the customs rate notification clarifying that import of Electric Vehicle in an SKD form even when some of the parts / sub-assemblies are inter-connected would attract the concessional rate of BCD of 25%/ 30% (depending on vehicle type) is a welcome change for the industry.  This clarificatory amendment would help in resolving the long standing ambiguity in the EV industry and would help in reducing the litigations in near future.

- Saurabh Agarwal, Automotive tax Partner, EY India

In 2022-23, the RBI will usher the rupee into its digital avatar, ‘powered by blockchain’. It will be interesting to understand, what problem will be solved by this Indian CBDC. Our consumer payment system (including UPI) is already world class and many transactions have  moved away from cash to mobile payments. Our fintech ecosystem continues to innovate with new use cases to meet changing consumer needs. Our interbank payment systems have national reach. It is not easy to see how a CBDC can increase financial inclusion – beyond current modes enabled with Jan Dhan, Aadhar and mobile payments. In fact any blockchain based system will need to solve for the classic trade-offs between decentralization, security and scalability. A CBDC could potentially provide an impetus to stable coins in the crypto world. This is where the thinking behind the digital rupee needs to be closely linked to our posture with regulation of crypto and Web3.  

- Mahesh Makhija EY India Technology Consulting Leader

It’s a Budget high on invest in India, spurring GDP growth, broad-based development themes across healthcare, education, Fin-tech, infrastructure, agriculture, etc., and continuing to strengthen the “Atma-nirbhar” Bharat vision. Progressive announcements include tele-mental health (including an open platform for the National Digital Health Ecosystem), setting up of Digital University and 200 TV Channels for supporting supplementary education, a much-needed booster shot for EV Start-ups that a battery swapping policy would be laid-out that and more charging stations would be set-up to promote the use of EVs in the country, the governmental announcements around Kisan Drones are expected to drive technology adoption in the agri-sector, setting-up of an ACGC task force to help build domestic capacity and to meet global demand. Introduction of the Digital Rupee by FY 2022-23 is a strong initiative that will continue to spur the growth of the digital economy and enable an efficient settlement process with potentially lower transaction costs.

In the constant deliberation on onshore v/s offshore capitalized structures and of topical relevance to our fast-growing Start-up ecosystem, it would have been critical to have announcements enabling direct offshore listing by our Indian start-ups. While a committee set-up for the PE / VC space may be a welcome move, what is needed is quicker resolution to long-standing issues of the industry such as very high tax rates for short-term assets (as compared to domestic investors), clarity on the taxability of “carry” structures, enabling taxability of ESOP to liquidity events for all Start-ups and aligning the holding period for long-term asset classification to 12 months, etc.

- Ankur Pahwa, E-commerce and Consumer Internet Leader, Transactions Diligence Partner, EY India

On expected lines the Budget has given a significant impetus to EV and batteries by incentivising private sector and promoting battery swapping will go a long way. Battery as a Service coupled with battery swapping will facilitate adoption of EVs.

- Somesh Kumar, EY India Power & Utilities Leader

Taking over from Prime Minister Modi's forward-looking Net Zero ambition, the Budget has shown true intent to leapfrog India through Energy transition - specifically on EV and Solar, alongside upcoming Hydrogen Mission. Quick ground-level initiatives could push India over the 'inflexion point' faster than expected. Alongside, renewed focus on fossil fuels - Oil, Gas and Coal continue to be necessary as they remain mainstay towards our Net Zero journey as a progressive nation, contributing 'above its weight' towards a green future for the world.

- Gaurav Moda, EY India Energy Sector Leader

For Health Sciences, in Budget 2022 the government has reinvigorated its conviction for digital health ecosystem, universal access to health facilities and making pharma participate in the Sunrise sector.  A lot of schemes for creation of ground level infrastructure was announced in last budget and given that most health spend budgets of the central Government are in the growing direction – the Government is focused on getting those set up.  Overall a neutral budget from a Healthcare sector perspective.

– Hitesh Sharma, Tax Leader – Pharma and Life Sciences, EY India

The budget 2022 has a major focus on the creation of infrastructure through PPP which can be seen from Gati Shakti implementation based on 7 growth engines and digital highway for data transfers between various modes. The announcements such as 25,000 km of highways, 4 multi-modal logistics parks on PPP, 100 Gati Shakti cargo terminals, 400 Vande Bharat trains, a string of ropeway projects in hilly areas, a high priority for Ken-Betwa river link project and 60,000 crores for ‘Har Ghar Nal Se Jal’ lay the overall vision of the government. The overall budget CAPEX increase by 35% gives a clear message to the nation that infrastructure remains key agenda. The focus on PPP with balanced risk allocation with the help of multilateral banks indicates that government is keen to mainstream PPPs for additional resources and project implementation. Additional 1 lac crore interest free support to the states for implementation of Gati Shakti and rural roads will lead acceleration of local economy and is right step towards 5 trillion economy.

- Abhaya K Agarwal, National Leader, Government and Public sector Infrastructure, EY India  

Government's plans to transition to a carbon neutral economy by announcing projects for coal gasification and conversion of coal into chemicals as well as increase in capital expenditure budgets likely to open up new opportunities for Metal & Mining players. Further, extension of customs duty exemption on import of steel scrap by another year and revocation of anti – dumping & countervailing duty on specified steel products may push for increased production, as it will optimize overall cost.

- Raju Kumar, Partner and Energy Tax Leader – EY India

Budget 2022 serves well the cause of macroeconomics to support the growth momentum in our economy. Individual tax payers seeking increase in personal disposable income may be disappointed as there is no change in personal income tax rates/ slabs and no additional / enhancement in deductions. Rationalisation of surcharge by capping it at 15% on long term capital gains across all categories of assets is a step in the right direction. Given the intense activity in trading of crypto currency, non fungible tokens (NFTs), the Government has proposed to tax the income from transfer of such assets by introduction of a strict non nonsense tax regime of  @30 %  rate of tax with no deductions save the cost of acquisition of such virtual digital asset. The Government has also offered a window for conditional voluntary tax compliance  for unreported income where such compliance results in additional tax being paid.  

Over all – a sensible budget with promise of a bright future for the country and its citizens but for now it may leave the common man cold and untouched!

- Sonu Iyer, EY India Partner and Regional Leader, People Advisory Services - Tax

The #Budget2022 announcement to set up an expert panel to examine ‘appropriate measures’ for scaling up investments by PE/ VC funds is a very welcome step. We expect this expert panel to further smoothen the process  of fund deployment by the alternative investment industry across asset classes and aid in the growth of the Indian PE/VC industry, an important pillar to the Indian economy.

- Vivek Soni, EY India Private Equity Leader

From a sector perspective, increased allocation to PM Awas Yojana, allocation of guarantee cover to the hospitality sector and proposed legislation to replace the SEZ Act are welcome steps. However, there have been no significant tax breaks announced for the real estate sector which was otherwise expected for sustaining the growth of the sector.

- Gaurav Karnik, EY India Real Estate National Leader and Tax Partner

Overall, high focus on “growth” and “capex spending” across, is a positive step in right direction. For “multiplier effect” which consumer retail sector looks out for, Budget 2023 seems to have strategically chosen to address the “supply” side, instead of giving a “direct booster” to demand side for increasing disposable income. There may be some potential inflationary gravities in short term; however in medium to long term, Budget 2023 seems to be aiming to give a good push to huge employment creation and improving disposable income putting “more money in pockets of consumer” via strong infrastructure push almost in all sectors.

Rationalization of import duties as part of “Make in India” initiative, also is likely to, in medium to long term, give a strong impetus to consumption bringing sustainable growth for consumer, e commerce and retail sector. Fintech and Digital push under “Amrit Kaal” vision, is line with the Digital E-commerce and start up revolution being witnessed in India. Also, Budget 2023, by proposing to extend tax holiday eligibility timelines, has recognized the Start-up sector contribution, though expectations around ESOP taxation rationalization seems unaddressed.

- Paresh Parekh, National Leader – Consumer & Retail Sector, Tax

• In this budget, the government has taken climate change aspects very seriously. There are provisions on renewable energy in several sectors. On the infrastructure side, sovereign Green Bonds will be issued for mobilizing resources for green infrastructure. Overall, as a country we are trying to move towards a green economy as this budget aims to make India cleaner and greener.

- Chaitanya Kalia, Partner and National Leader, Climate Change & Sustainability Services (CCaSS), EY India

• Budget 2022 ushers in a new dawn for sustainable development in India. In line of our commitment in COP 26 we have strengthened the financial infrastructure through provisions in clean energy transition, battery swapping policy and circular economy. This will in turn give impetus to private and public sector and in term common masses to go for more responsible choices. The new budget has been in the direction to ensure India acts responsibly to create the right impact.

- Shailesh Tyagi, Partner, Climate Change & Sustainability Services (CCaSS), EY India

• The increase in capex for infrastructure growth along with incentives for battery swapping help chart the low carbon path. An additional allocation of Rs 19,500 crore for PLI (Production Linked Incentive) for manufacture of high efficiency modules will boost the solar power growth. The policy steer towards ‘Circular Economy transition’ with action plans for ten sectors such as electronic waste, end-of-life vehicles, used oil waste, and toxic & hazardous industrial waste should be set in motion at the earliest.

- Damandeep Singh, Associate Partner, Climate Change & Sustainability Services (CCaSS), EY India

Indian start-ups have been a celebrated story during the past 2 years with record numbers hitting the unicorn status over the last 24 months. One could see the shift in the narrative in Budget 2022 with start ups, focus on capital mobilition, new technology themes like fintech, drone as a services, EV and battery swapping technology, edtech etc finding its due mention in the Budget speech.  While we will need to see how some of the initiatives like EV battery swapping, committee formation on VC/PE related measures are formulated and implemented, the tax related sops especially on treating long term capital gains on unlisted shares on par with listed shares by reducing surcharge from 37% to max of 15% will go a long way in boosting capital formation and kicking off a virtuous cycle for growth in the start-up ecosystem.

The effective reduction in the rates on LTCG by 4% from 28.5 % to 23.92% will enable capital deployers including resident investors, funds etc to redeploy capital into areas with a long gestation period. The relaxation in start-up tax holiday with new start-ups formed before 31 March 2023 extending the tax holiday will help in the setup of new ventures.  While start-ups were keen on additional measures in the form of clarity on overseas listing, tax exemption for swap of shares, relaxation in ESOP taxation, given the renewed focus on start-ups, one could hope that these reforms are also around the corner.

- K.T. Chandy, Partner and Leader- Private Tax, EY India

The Budget proposes to provide clarity on taxability to digital assets. This was something which was expected. Interestingly the rate of tax is proposed to be 30% similar to what one would have paid on short term capital gains.

- Keyur Shah, Tax Leader-Financial Services, EY India

The budget is inspirational and will further accelerate India’s digital transformation through its focus on key initiatives such as Bharat Net, Digital Rupee and Drone Shakti. By providing a boost to the deep-tech, start-up ecosystem and spurring innovation in emerging technologies such as blockchain and artificial intelligence, these programmes can go a long way in furthering the country’s economic development.

- Nitin Bhatt, EY India Technology Sector Leader

Technology is at the core of a host of policy measures announced in this Budget and it is proposed to leverage information technology for e-learning, e-passport, promotion of drone usage, fintech innovation and delivery of digital and hi-tech services to farmers. 

The replacement of the Special Economic Zones Act with a new legislation that will enable the states to become partners in ‘Development of Enterprise and Service Hubs’ is a welcome step for increasing exports from the IT/ITES sector which constitute 67% of the SEZ units operating in the country. In a bid to boost the Data Centres and Energy Storage Systems, the Government has granted it infrastructure status. This grant would help build world class data centre ecosystem by attracting investments from domestic and global players and would nurture localisation of Data centre industry. This decision would also enable data centre companies to access funds at a cheaper rate and consequently benefit the economy in the long run.

Focus on R&D and commercialization of technologies and solutions in the telecom, defence, agriculture and financial services sector will continue to be a growth accelerator for the IT-BPM sector. 

- Vishal Malhotra, Tax Leader - Technology, Media and Entertainment, and Telecommunications, EY India

• IT is at the core of a host of policy measures announced in this Budget and it is proposed to leverage information technology for e-learning, e-passport, promotion of drone usage, fintech innovation and delivery of digital and hi-tech services to farmers.

The replacement of the Special Economic Zones Act with a new legislation that will enable the states to become partners in ‘Development of Enterprise and Service Hubs’ is a welcome step for increasing exports from the IT/ ITES sector which constitute 67% of the SEZ units operating in the country. In a bid to boost the Data Centres and Energy Storage Systems, the Government has granted it infrastructure status. This grant would help build world class data centre ecosystem by attracting investments from domestic and global players and would nurture localisation of Data centre industry. This decision would also enable data centre companies to access funds at a cheaper rate and consequently benefit the economy in the long run.

Focus on R&D and commercialization of technologies and solutions in the telecom, defence, agriculture and financial services sector will continue to be a growth accelerator for the IT-BPM sector.

- Vishal Malhotra, Tax Leader - Technology, Media and Entertainment, and Telecommunications, EY India

• The Union Budget has re-emphasized the importance of USOF, with approximately INR591b (48.5% of total USOF) available for disbursement. Allocating 5% of annual USOF collection will significantly bolster rural connectivity in India. Strengthening of the BharatNet infrastructure through PPP model will enhance the connectivity backbone of an increasingly digital nation. Globally, 200 telcos in 78 countries have already launched commercial 5G services. A clear focus on 5G spectrum auctions and rollout will help India to catch-up with the rest of the world. The Budget announcement has given much-needed push for 5G acceleration. Moreover, the Government’s move to launch a design-led manufacturing scheme as part of PLI will help to position India as a hub for 5G equipment manufacturing and exports. In the next 3-4 years, global 5G capex is expected to reach US$550b cumulatively. It presents potential opportunity for stakeholders. Indigenous manufacturing of 5G devices would also help to develop globally recognized Intellectual Property Rights (IPRs) in India.

- Prashant Singhal, EY Emerging Markets Technology, Media & Entertainment and Telecommunications (TMT) Sector Leader