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Indian budget lays focus on infrastructure, digitalization

February 1, 2022

India's budget 2022 plans to ramp up infrastructure spending to support the economy's post-pandemic recovery. Key announcements include a state-backed "digital rupee" and tax on gains from digital currencies.

Indian Finance Minister Nirmala Sitharaman holds up a folder with the government of India’s logo as she leaves her office to present the federal budget in Parliament
Budget 2022: Nirmala Sitharaman said the central bank would introduce a "digital rupee"Image: Anushree Fadnavis/REUTERS

Indian Finance Minister Nirmala Sitharaman on Tuesday unveiled the federal budget for the coming fiscal year, targeting higher infrastructure spending as the economy recovers from the coronavirus pandemic.

"The economy has shown resilience to come out of the pandemic. We need to sustain the level of growth," Sitharaman said.

The government proposed spending 39.5 trillion rupees ($530 billion, €470 billion) in the fiscal year beginning April 1. This is 4.6% more than the current year.

The larger budget is aimed at spurring growth in Asia's third-largest economy through public investment.

The government announced plans to step up investment in highways and affordable housing.

The finance minister announced spending of 200 billion rupees ($2.67 billion, €2.37 billion) for a highway expansion program and said 400 new energy-efficient trains would be manufactured over the next three years.

Her budget further called for spending 480 billion rupees on housing for the poor, and also included spending on new roads and airports.

"The touchstone of the master plan will be world-class modern infrastructure and logistics synergy among different modes of movement of both people and goods and location of projects," Sitharaman said.

Digital currency and crypto-tax

The government also announced plans to introduce a new digital rupee issued by the central bank in the next fiscal year using blockchain and other supporting technology.

"Introduction of a central bank digital currency will give a big boost to the digital economy. A digital currency will also lead to a more efficient and cheaper currency management system," the finance minister said.

The government also announced a 30% tax on gains from the transfer of digital assets such as cryptocurrency and nonfungible tokens.

The Narendra Modi-led government has previously expressed reservations about private cryptocurrencies.

In November, the government announced plans to "prohibit all private cryptocurrencies in India," barring some exceptions.

The Reserve Bank of India said they posed a threat to India's macroeconomic and financial stability.

India's craze for cryptocurrency

Among other digital initiatives was the government's announcement to hold spectrum auctions for 5G mobile, with services being rolled out within the next financial year.

The government also said e-passports with embedded chips would be issued in the coming fiscal year to make passport services more convenient for citizens.

adi/msh (Reuters)