Budget 2022-23: Rural stimulus need of the hour amid Covid-19 pandemic

Consumption, which was impacted during the pandemic, is expected to improve as the rate of vaccinations rises to cover the entirety of the country’s eligible population. Corporate taxation, which was reduced in 2019, is also expected to remain untouched in FY23.

Among key measures, the Budget is expected to hike allocation to the Mahatma Gandhi National Rural Employment Guarantee Scheme and other agricultural schemes, which will increase consumption.

Brokerages say any stimulus will positively impact rural and urban income levels, and increase consumption. Besides, such measures will improve consumer sentiment, according to Morgan Stanley, and that’s what’s needed from the Budget. What needs to be seen is the quantum of the stimulus and whether it will be in the form of a direct transfer or relief in terms of taxes. Axis Securities also said investments in digital infrastructure, skill upgradation, job creation, and development of MSMEs are expected to indirectly revive and boost consumption spending.

The brokerage said increased investment in agricultural infrastructure — such as establishing cold chains, warehousing, logistics, and irrigation, reducing post-harvest losses, and improving rural connectivity — may boost consumption demand further in rural areas. Most brokerages feel the Budget will build on the measures announced earlier to boost income levels.

Edelweiss Securities says it expects the Budget to build on previous iterations and focus on giving more money in the hands of rural and low-income households, which will be positive for overall consumption, especially for companies with higher rural exposure. However, it expects a tax hike on cigarettes as there haven’t been any increases over the past two years.