With the Indian economy projected to retain the tag of fastest growing major economy, despite the pandemic, the industry draws comfort from the Union Budget 2022-23 which has prioritised long-term growth by boosting consumption. It has taken a commendable and bold step in significantly increasing capital expenditure by 35.4%.
The economic survey had indicated a smaller economic impact of ‘second wave’, even as the damage on the health front was severe. With activity in most sectors regaining pre-pandemic levels, it pegged FY22 GDP growth at 9.2%.
Housing loans, the largest constituent of personal loans, had registered an annual growth of 8% in November 2021. Bank lending to commercial real estate also increased by 0.4%. Overall, the survey indicated that Indian economy was well placed to witness GDP growth of 8.0-8.5% in FY23.
No quick-fixes
The budget speech by the Finance Minister, one of the shortest among her four speeches, clearly focussed on creating broad-based platforms for the longer run rather than immediate quick-fixes. Infrastructure development, along with further boost to manufacturing remained at the heart of the Budget. Considerable impetus has been given to the Gati Shakti masterplan with focus on expressways, cargo terminals and multi-modal national logistic parks to boost long-term investment and development. Digitisation of payment infrastructure including a proposal to issue a central bank backed blockchain currency were critical new economy focus areas.
Moreover, the reiteration of commitment to circular economy, incentives for solar panel manufacturing, policy focus on EVs, incentives for private firms to partner in defence sector R&D, etc., highlight the approach of creating avenues which will eventually benefit the economy as well as open investments in industrial and commercial real estate. This is also in alignment with the proposal to connect villages through digital networks.
New homes
The direct announcements in real estate came for data centres which will be accorded infrastructure status, and for housing which received an allocation of ₹48,000 crores for 80-lakh new homes; in addition to urban development focus.
The other key announcements include the change in SEZ law which now includes participation from the states, much desired digitisation of land records and formation of expert groups for urban capacity building.
The latter is an important step as the focus was stated to be for tier-II & III towns in addition to largest cities. Granting of ‘infrastructure status’ to data centres with ongoing revolution in digital consumption and focus on data localisation laws, is expected to draw significant investor interest and wider access of funds.
This is expected to attract a large section of large tech firms which have been evaluating India as a viable base for data centres.
A special task force on the AVGC sector will further enhance India’s capability to deliver at the global level — we believe global AVGC firms will be keen to tap into the Indian talent.
IT companies will be keeping a close tab on the new legislation, which will replace the Special Economic Zones Act. The new legislation will be enacted in partnership with various states, with an aim to enhance the competitiveness of exports.
The high-level committee for urban planners and economists for recommendations on urban capacity building, planning implementation, and governance will create expanded avenues for development and investment, as working-from-home during the pandemic has led a large part of workforce to tier-II & III locations. States are being incentivised to implement such measures by being given interest-free loans from the Centre.
The extension of Emergency Credit Linked Guarantee Scheme up to March 2023 and additional allocation of ₹50,000 crores is a positive step that is expected to benefit the MSME sector, especially the beleaguered hospitality subsegment.
Domestic manufacturing and warehousing are poised to benefit from the additional allocation under the Production Linked Incentive (PLI) Scheme for solar PV modules. A scheme for design-led manufacturing will also be launched to build a strong ecosystem for 5G as part of the PLI Scheme.
Overall, the Budget has stayed true to the long-term goal of complementing macro-growth with focus on infrastructure digital economy and fintech, tech-enabled development, energy transition and climate action.
The writer is CEO, Savills India.
