Union Budget 2022 – Announcements and Impact on Various Sectors in India

  • Published | 04 February 2022

Union Budget 2022On February 1, 2022, the Union Finance Minister Nirmala Sitharaman presented the Budget 2022.  The Finance Minister defined the budget with a vision “Amrit Kaal - The 25-year-long lead up to India@100.” The main objective as defined by the Finance Minister is to combine over the next quarter of a century with a focus on growth and ‘all-inclusive welfare’. Few of the major announcements have made it clear that the government’s priorities lie in long term growth and sustainability rather than short term focus, with apparent absence of a sense of urgency in the budget.

Smt. Sitharaman announced that the government has estimated India’ growth rate at 9.2% in FY2022, highest among all the large economies around the world. The Finance Minister further announced that the government aims to achieve the vision of the Prime Minister outlined in his Independence Day address, which included:


  • Complementing the macro-economic level growth focus with a micro-economic level all-inclusive welfare focus  
  • Promoting digital economy & fintech, technology enabled development, energy transition, and climate action
  • Relying on virtuous cycle starting from private investment with public capital investment helping to crowd-in private investment

In line with these focus areas, one of the key takeaways of the budget was higher emphasis on digital education, the creation of a digital university, job creation, agricultural universities, skill development of programmers, etc. Broader impact of the budget announcements on various industries is described below.


  1. Education Sector

The budgetary allocation to the education sector in the latest Budget stands at INR 1,04,278 crore (US$ 13.94 billion), which is INR 11,054 crore or nearly 12% higher from the previous year. According to the National Education Policy, 2020 (NEP), the public investment in India’s education sector should be close to 6% of the GDP to improve the infrastructure, provide quality education, and improve the condition of school & colleges across the country. However, the Union Budget of India has never touched this magical figure. The largest allocation for the education sector is around 3.1% of the GDP and to meet the figure of the 6% of GDP criteria, the budget should have been almost double of what was allocated. Though the country is still far from the targeted allocation to the education sectors, but we can witness that the margin between the ideal target and real allocation continues to narrow, which is a move in the right direction.

The broader areas of budgetary allocation in the education sector are as under:

  • Department of School Education and Literacy - INR 63,449.37 crore (US$ 8.48 billion)
  • Department of Higher Education -  INR 40,810.34 crore (US$ 5.46 billion)

Scheme wise, the details about allocation are given in the below table.


Budget Allocated

Samagra Shiksha Abhiyan

INR 37,383.36 crore

Exemplar Schools

INR 1,800 crore

Teachers Training, Adult Education

INR 127 crore

Padhna Likhna Abhiyaan

No Funds Allocated

National Means cum Merit scholarship

INR 350 crore

National Scheme for Incentive to Girls

No Funds Allocated

Kendriya Vidyalaya Sangathan

INR 7,650 crore

Navodaya Vidyalaya Samiti

INR 4,115 crore

PM Poshan

INR 10,233.75 crore

Strengthening Teaching-Learning and Results for States (STARS)

INR 550 crore


The pandemic has led to a boom in the digital education sector and it did not escape from the eyes of the government. As a result, the government announced some major plans for boosting the country’s digital education sector, with the key announcements being:

  • Development of a Digital University to provide access to students for world-class quality education complying with ISTE standards
  • Smt. Sitharaman said, “The best public universities and institutions in the country will collaborate as a network of hub-spokes”
  • Improvement in digital infrastructure in rural areas, especially through the announcement of Vibrant Villages Program under which DTH access will be provided to Doordarshan and educational channels for villages in the northern border areas
  • Proposals like the Bharatnet project for optical fibre network and 5G spectrum auction


Some of the major announcements related to the skill development field were:

  • The Skill Hub Initiative of MoE and MSDE will be launched in 5,000 skill centers during the next year
  • Courses on skilling to start in ITIs across the country
  • Launch of the Digital Ecosystem for Skilling and Livelihood DESH-Stack e-portal
  • Alignment of the National Skill Qualification Framework (NSQF) with the dynamic industry needs
  • 750 virtual labs in science and mathematics
  • 75 skilling e-labs for simulated learning environments

Additionally, the government has also announced programs for E-learning in regional languages. Smt. Sitharaman announced that the government is targeting creation of 6 million jobs in 14 sectors through PM Gati Shakti and the Production Linked Incentive (PLI) Scheme, with focus on specialized learning in higher education, and student mental health, which was clear by way of the announcement of the National Tele Mental Health program in Budget 2022.


  1. Power & Energy Sector

The government has tried to speed-up the transformation of India’s power sector with an attempt to make States more disciplined in reducing losses in the power sector. The Finance Minister Nirmala Sitharaman said, “In 2022-23, as per the recommendations of the 15th Finance Commission, the states will be allowed a fiscal deficit of 4% of GSDP, of which, 0.5% will be tied to Power Sector Reforms.”

The power companies were left wanting more from the government as their wish for including electricity under the purview of the goods and services tax (GST) was not acknowledged. India’s power & energy industry has been demanding the inclusion of electricity in GST to reduce the cost of the electricity. However, inclusion of electricity in GST would also mean tax revenue reduction for both the central and the state government and therefore, the government did not consider this in the latest budget.

The renewable energy companies have been demanding the inclusion of electricity under GST for a long time; however, the voices gained some steam after the Central Board of Indirect Taxes and Customs notified in October, 2021 that the GST rate on renewable energy equipment like solar panels and modules, biogas plants, solar power generators, windmills, solar lamps, tidal wave energy devices or plants and their parts has been increased from 5% to 12%.

Smt. Sitharaman announced in the latest budget that the funding under the production linked investment (PLI) scheme for domestic solar cell and module manufacturing will be increased to INR 24,000 crore (US$ 3.21 billion) from the existing INR 4,500 crore (US$ 600 million) that could help India emerge as an exporter of solar cells and modules. The latest announced in the budget for PLI scheme also bodes well for India’s target of installing 500 gigawatts (GW) of non-fossil energy capacity by 2030.

The latest budget also provided INR 3,365 crore for the solar power sector, an increase of 29% from the INR 2,606 crore from the previous year. The budget allocated to wind project stands at INR 1,050 crore, down 4.7% from INR 1,102 crore from the previous financial year.

The finance minister also announced that the government would provide enhanced financial support for setting up of Distributed Renewable Energy projects in border villages under a “Vibrant Village Program.”

Smt. Sitharaman also announced the launch of the SAMARTH (Sustainable Agrarian Mission on use of Agro Residue in Thermal Power Plants) scheme to promote the use of biomass in coal-fired thermal power plants, a step that will curb stubble burning and air pollution in years to come. In her speech, the Finance Minister said, “5-7% biomass pellets will be used in thermal power plants, resulting in CO2 saving of 38 MMT annually. This will also provide extra income to farmers, give job opportunities to locals and help avoid stubble burning in agricultural fields.” The SAMARTH scheme has already taken off in about 40 of the 180 coal-fired power plants in the country and the ministry data showed that 50% of thermal power plants have already launched the co-firing process for biomass pellets along with coal in the National Capital Region (NCR).


  1. Banking Sector

The latest budget further highlights the focus of the Indian government to push towards developing a robust digital economy. The Finance Minister has announced that the government will introduce a new digital currency or Cryptocurrency using Blockchain and other related technologies. The new digital currency will be issued by the Reserve Bank of India (RBI) starting 2022-23 for creating more efficient and cheaper currency management system. The government further announced a 30% tax on income generated from the transfer of any digital asset. However, the finance minister was quick to add that the Government of India is yet to recognize the cryptocurrency despite announcing the launch of a new digital currency.

The budget further had the credit guarantee fund trust for micro and small enterprises (CGTMSE) to help micro, small and medium enterprises (MSMEs) impacted by the pandemic. The budget included an additional funds of INR 2 trillion.

Another major announcement in the budget was that the post offices will start providing core banking services very soon. This announcement will mean that around 150,000 post offices around the country would fall under core banking, with more than 350 million post office deposit accounts coming into the mainline banking and payments system. Moreover, the proposal of 75 digital banking units in 75 districts is another small step, but a definite push towards boosting digital banking.


  1. Telecommunication Sector

The latest budget has also had several major announcements for the telecommunication (telecom) industry, with the Finance Minister announcing 5G roll out, enhanced broadband services in rural areas, and higher focus on boosting local manufacturing under the productivity-linked incentive scheme.

The funds allocated to the state-run Bharat Sanchar Nigam (BSNL) have surged to INR 44,720 crore for 4G spectrum, technology upgradation, and restructuring related expenses, an increase of more than 300% YoY. BSNL has been allocated a further INR 6,850 crore for GST and VRS related payments. In total, BSNL alone has received more than 50% of the Department of Telecommunications' allocation of INR 84,586 crore.

The Finance Minister, Nirmala Sitharaman also announced that the government will conduct auction for 5G spectrum to facilitate commercial service rollout by private firms in FY23. She said, “A scheme for design-led manufacturing will be launched to build a strong ecosystem for 5G as part of the Production Linked Incentive Scheme. To enable affordable broadband and mobile service proliferation in rural and remote areas, 5% of annual collections under the Universal Service Obligation Fund will be allocated.”

Contracts for laying optical fibers in all villages through public-private partnership in FY23 were also announced in the budget.

Commenting on the budget and its allocations and announcements related to the telecom industry, Director General of Cellular Operators Association of India said, “The Budget is pro-growth with emphasis on providing further impetus to the Digital India initiative. However, we are a bit disappointed that our long standing demands remain unaddressed. We look forward to continued and constructive engagement with the government for reduction of levies on the sector.”


  1. Infrastructure & Real Estate Sector

In the budget, the Finance Minister announced the PM Gati Shakti National Master Plan with a target of making logistics connectivity seamless across the country. She announced that the national highways network will be expanded by 25,000 km, with an outlay of INR 20,000 crore. Formulation of a scheme for expressways, development of new products and logistics services for small farmers, and small and medium enterprises by Railway was also announced in the budget.

The Finance Minister has also announced INR 48,000 crore allocation under the Pradhan Mantri Awas Yojana. She announced that approximately 8 million houses are expected to be completed by 2023 across the country in order to provide affordable housing to Indian people.


  1. Automotive Sector

The budget had a new battery swap policy to encourage electric vehicle (EV) adoption in the country as it would help in reducing the upfront cost of the electric vehicle. This announcement is also expected to propel the growth of “Battery or Energy as a Service’ business model in the future. Additionally, the announcement of the concessional Income tax regime of 15% for new domestic manufacturing facility setup, up to 31 March 2024, would also help attracting new investments in the country’s electric vehicle sector. The Finance Minister also announced that defense research and development (R&D) for private players will be opened for auto component development in the country.


  1. Healthcare & Pharmaceutical Sector

Nirmala Sitharaman also announced Ayushman Bharat Digital Mission in Budget 2022-23. The scheme is to ensure universal access to healthcare facilities to all Indian citizens in the long run. The government has extended concessional tax regime for manufacturing companies and has considered pharmaceutical industry as one of the sectors that will benefit from supportive policy framework.

Apart from these sectors, the government also announced initiatives aimed at modernization of Indian armed forces, extension of tax benefit for start-ups by another year i.e. till 31 March 2023, fund to finance start-ups for agriculture and rural enterprise relevant for the farm produce value chain, focus on encouraging start-ups to foray in “Drone Shakti” and “Drone-As-A-Service (DrAAS)” initiatives, four pilot projects for coal gasification and conversion of coal into chemicals, extension of emergency credit guarantee scheme for micro, small and medium enterprises (MSMEs) for one more year, and an additional differential excise duty of INR 2 per lit. from 1 October 2022 on unblended fuel were some of the other key takeaways. The Finance Minister also announced a gradual phase out of concessional tariff rates offered for capital goods and project imports, predominantly aimed at further pushing the ‘Make in India’ initiative.

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