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Major changes the government can make in the union budget 2022

The budget should emphasise how India encourages ESG throughout its corporate organisations and the country as a whole.

Major changes the government can make in the union budget 2022
What to expect in this year’s budget that could excite the market?

Today our trade, private investment, agriculture, and government spending are all higher than pre-pandemic levels from the market point of view. While consumption, which is the biggest driver of the economy, is below pre-pandemic levels. This indicates that the budget needs to support consumption, especially at the bottom end of the pyramid. MNREGA has done wonders in the rural economy. A replication of MNREGA in the urban landscape can help the people who have been devastated by the pandemic.

The second thing to do will be to give a tax incentive or some sort of encouragement to the housing sector. The housing sector employs the largest number of people and is the least import-dependent. A poke can create a multiplier effect in the economy

In today’s world if we do not speak about the environment, society and governance then it becomes difficult to maintain premium valuations. The budget should stress how India is encouraging ESG across its corporate entities and the country. India is the only country in the world that has achieved its Paris Score Target of 40% renewable power. 

The final thing will be Jan Nivesh Yojana. This is similar to Jan Dhan Yojana. Jan Dhan Yojana guarantees that Indians that do not have access to banking systems have bank accounts. Now the focus will shift from accounts to investment. 

Indians have imported $443 billion of gold in just 21 years of this century. This number is given by net imports after assuming exports of gold jewelry. There has been an outflow of savings from India as this $443 billion has been paid in foreign exchange. This amount surpasses the amount we have received as foreign direct investment or foreign portfolio investment in the last 21 years. 

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There is a need to shift people from buying gold to buying financial products to make investments in our own country. This can be done by purchasing financial products as easily as the purchase of gold. Therefore people need to be educated about other savings and investment solutions other than gold. Financial products from mutual funds to insurance companies to bank deposits are such other solutions. 

If the government can create a budget that is pro-growth and supports consumption, encourages domestic savings to fund domestic investments, and talks about environmental, social, and governance initiatives of the government then it will help to maintain the premium valuation.

What are the ways in which the budget can push consumption further?

MNREGA has been supplying food grains to 80 crore families. If an urban MNREGA scheme is created that targets bus operators, people in the film and entertainment industry, employees in the restaurant and hotel industry then it will increase consumption and give breathing space to these people. They will also be able to get adjusted to the mainstream economy. 

The government can use surplus labor to build urban infrastructure. This will support consumption. The government can also support and encourage industries like textiles, automobiles, housing, and construction which employ a large number of people. This will create a virtuous cycle. 

Housing and construction have the least import dependency and will create a virtuous cycle where there will be more demand for houses if this industry is encouraged. More demand for houses will mean more employment and hence more consumption expenditure. This combo of giving money to the people at the bottom of the pyramid as well as creating more and more employment will surely take consumption levels above the pre-pandemic level. 

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Written By

Sneha Bhattacharjee is currently enrolled as a postgraduate student at Rabindra Bharati University and specializes in Economics. She is keenly interested in learning and exploring real-world scenarios. With her critical thinking and writing skills, she wants to solve real-world complexes by writing articles and blogs. Apart from academics and work, Sneha enjoys painting but can also be found hiking in the hilly countryside.

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