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Farm-loan waiver, tax cuts, fiscal prudence: Expectations from Budget 2022

With five state elections in the coming months - Uttar Pradesh and Punjab being the major ones - some populist measures are also not ruled out, analysts said.

Budget 2022 | Union Budget | Crude Oil Price

Puneet Wadhwa  |  New Delhi 

Budget 2022
Budget 2022

The for fiscal 2022-23 (FY23) slated to be unveiled on February 01 comes at a time when the is facing multiple challenges in the form rising crude oil prices and sticky inflation that can put a strain on government coffers in the months ahead. Sporadic lockdowns in the backdrop of the Omicron Covid variant have already impacted business sentiment in select sectors.

In this backdrop, analysts feel trade, hospitality & travel, auto and logistics sectors that have been significantly impacted over the past few months may get special attention in the upcoming budget. With five state elections in the coming months – Uttar Pradesh and Punjab being the major ones – some populist measures are also not ruled out.

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“We expect higher allocation to the MNREGA, PM-Kisan scheme and farm loan waivers to please the rural people and higher standard deduction for personal tax for the middle class,” wrote Amnish Aggarwal, head of research at Prabhudas Lilladher in a recent coauthored note with Anushka Chhajed.

Here's what leading brokerages expect.


Tobacco tax may be tweaked as WHO recommendations of taking taxes up to 75 per cent of retail prices are under government's consideration. Around 20-25 per cent rise in budget spends particularly in the road and rail sectors, higher allocation to Hydrogen Mission and further thoughts on monetisation of roads/rail/power assets. Progress on refinancing window for NBFCs and digital banks, limited / nil funding for PSU banks. Funding for booster dose and push for more 'Jan Aushadhi' centers. Renewed push for / disinvestment.


Morgan Stanley

Budget is likely to focus on gradual fiscal consolidation, continuing to favour investment-driven growth with a push for both public and private capex, and raise additional resources through strategic divestments and asset monetisation. Look for clarity for Indian bonds to be included into global bond indices. The overall focus of the government should be to utilise all revenue levers effectively to sustainably improve the health of the public sector balance-sheet.

Factors that will likely have maximum impact on the equity include a credible fiscal deficit target, the government's spending plans versus fiscal consolidation, changes to long-term capital gains tax, lower taxes for the services sector, resolution of tax issues for FAR bonds, and the timing and quantum of asset sales.

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We expect the government to meet its 6.8 per cent of GDP fiscal deficit target in FY22 and set a target of 6.4 per cent of GDP for FY23. Do not expect major changes in corporate/personal income tax rates; expect a strong 25 per cent increase in capex, with a focus on infrastructure; tax changes that pave the way for India's inclusion in global bond indices in FY23; support for the farm sector, housing sector sops and the manufacturing sector (PLI scheme).

BofA Securities

We see scope for demand stimulus, continued capex push, glide path for fiscal deficit, continued efforts to improve budget transparency and potential for tax reforms. Demand stimulus could be a short-term positive for consumer stocks, though for CY22, we prefer Investment theme over Consumption. Rationalising tax rates is one of the key measures to provide demand stimulus. It could ease compliance and widen tax net, which can offset some part of revenue losses.

Motilal Oswal Securities

Besides macro numbers, we will closely track announcements in three areas: 1) some self-liquidating temporary personal job/income supporting measures to boost private consumption in the immediate future, 2) some measures to support the rural economy, amid its weakening and the impending state elections, and 3) any measures to revive the Residential Real Estate sector would be welcome.

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Emkay Global

are understandably obsessed with the headline target to gauge the fiscal policy stance. The policy perception of cost of trade-off between growth and possible market stability amid tighter global financial conditions would decide whether the fiscal stance will be pro-cyclical or counter-cyclical in nature. The government is unlikely to target an ambitious fiscal consolidation next fiscal. Sectors to watch: Infrastructure, Auto and ancillaries, Residential real estate and Financials.

Edelweiss Securities

Policy focus could favour rural spending, but infra spend would call for extra-budgetary resources. For manufacturing, PLI expansion and more sops for MSMEs are likely. Limited room for large tax cuts. From markets’ standpoint, the budget may not be a big mover given the more challenging backdrop. Earnings, financial conditions, etc. would be the bigger medium-term drivers.

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First Published: Mon, January 24 2022. 09:26 IST