Union Budget 2022 - 23 highlights | ICICI Prudential Mutual Fund

Get detailed insights on the Economic Survey and Sectoral impact of the Key Union Budget 2022- 23 announcements. Check the presentation to find out more.

1. 2022-23

2. Economic Survey (2022) Highlights
Source -https://www.indiabudget.gov.in/economicsurvey. GDP –Gross Domestic Product
Indiaseesa8-8.5%GDPgrowthinFY23.Projected2021-22realGDP
growthat9.2%
Increased capital formation in the economy lifting the Investment to GDP
ratio to 29.6% in 2021-22(highest in 7years)
During current Pandemic, emphasis more on supply-side reforms rather than a
total reliance on demandmanagement
Important to look at India’s macro-economic stability indicators & their ability to
provide a buffer againstEconomic crisis

3. Economic Survey (2022) Highlights
Source -https://www.indiabudget.gov.in/economicsurvey. GDP –Gross Domestic Product
MACRO STABILITY -Comparison of India’s Macro Economic Indicators during
Global Financial Crisis (GFC), TaperTantrum& COVID-19
MacroeconomicIndicators
Global Financial
Crisis(2008-09)
Taper Tantrum
(2012-13)
COVID-19
(2021-22)
CPIInflation(%) 9.1 9.4 5.2(Apr-Dec21)
India'sGrossFiscalDeficitas%ofGDP 8.3 6.9 10.2(FY2021-22BE)
CurrentAccountBalanceas%ofGDP -2.3 -4.8 -0.2(Apr-Sep21)
ExternalDebtas%ofGDP 20.7 22.4 20.2(June2021)
ForexReserves(US$Bn) 252 292 634(31-Dec-21)
TotalFDIInflows(US$Bn) 8.3 34 48.4(Apr-Oct21)
Govt.BondYields10-Yr 7.3 8 6.4(11-Jan-22)

4. Economic Survey (2022) Highlights
Source -https://www.indiabudget.gov.in/economicsurvey. GDP –Gross Domestic Product
KEYSUPPLYSIDEREFORMS
ProductionLinked
IncentiveScheme
approved for13sectors
Banking sector reforms:
deposit insurance,
introduction of interim
payments, etc.
National Monetization
pipeline, privatization of
Public Sector Enterprises
Retrospective tax repealed
to promote tax certainty
& foreign investment

5. Key Budget Announcements
Source -https://www.indiabudget.gov. Capex –Capital Expenditure, PM –Pradhan Mantri, RBI –Reserve Bank of India
The Economic Survey & Union Budget presented for FY 2022-23 highlighted the Govt.’s pro-growth
stance & structural reforms taken/to be taken in that direction
AFFORDABLEHOUSING
Rise in allocation to PM Awas Yojana -
Rs.480BninFY23fromRs.275BninFY22
TRANSPORT
100 new cargo terminals to be established
underPMGatiShaktiin3years
CAPEX
IncreaseinCapexfromRs.5.54Tnin
FY22toRs7.5TninFY23(35%rise)
ROADS
Highwaynetworkexpansionof25kkms
(Rs.200Bnallocated)
ECLGSEXTENSION
EmergencyCreditLineGuaranteeScheme
extension till Mar’23, Rs. 500bn expansion
whichisreservedforhospitalitysector
CURRENCY
RBItointroduceownDigitalcurrency
usingBlockchaintechnology

6. Capex Push & Fiscal Deficit
Source -https://www.indiabudget.gov. Capex –Capital Expenditure, A –Actual, RE –Revised Estimate, BE –Budgeted Estimate
The strong Capex push has resulted in a dent in Fiscal Deficit numbers in last few years.
However, such structural reforms often tend to prove beneficial for the economy in long run
3.93.53.53.4
4.6
9.2
6.9
6.4
0
2
4
6
8
10
FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
FY 22 RE FY 23 BE
Fiscal Deficit as a % of GDP
% of GDP Long Term Average (%)
3077
3357
4263
6027
7502
0
2000
4000
6000
8000
FY19 (A) FY20 (A) FY21 (A)
FY22 (RE)
FY 23 (BE)
Capex (Rs. Bn)

7. Key Budget Announcements & Sector Impact
Source -https://www.indiabudget.gov.in
Sector Announcement Impact
Banks
Rise in Capex(up 35% in FY23 to Rs. 7.5 Lakh Crs)
to boost growth
POSITIVE
Auto
To come up withBattery Swapping Policy to give
impetus to Electric Vehicle Industry
POSITIVE
Telecom
5G Spectrum auctions to be conductedin 2022.
Scheme for design-led manufacturing for 5G will be
a part of PLI (Production Linked Incentive)
NEUTRAL (as Capex will have
to be made by companies this year)

8. Key Budget Announcements & Sector Impact
Source -https://www.indiabudget.gov.in. OMC –Oil Marketing Companies
Sector Announcement Impact
Capital Goods &
Infrastructure
•Large Infra spend push (+25% yoy)
•Road Capex(+55%)
POSITIVE
Housing &
Housing Finance
Rise in allocation to PM AwasYojanato Rs.480
Bn from Rs. 275 Bn in FY22
POSITIVE
Oil OMCs
Unblended petrol to attract Rs. 2/ ltrof additional
excise dutyfrom Oct-22
NEGATIVE

9. Our Equity Outlook
*Please click on following link for detailed outlook 2022 document –Annual Outlook 2022
•TheUnionBudgetprovidedamuchneededthrusttoinfrastructurebyincreasingCapexacross
segments,re-iteratingGovt.’semphasisonstructuralreforms
•Withmultiplepro-growthmeasuresandsupplysidereforms,webelievethatthelongterm
Growthstoryremainsintact
•ThebudgetresonateswithourviewmentionedinOutlook2022
*
,wherewehighlightedthat
domesticeconomyisexpectedtodowellduetoGovt.effortstoboostGrowth&strong
fundamentals
•WecontinuetoremainpositiveonsectorswhicharecloselylinkedtoeconomylikeBanks,
CapitalGoods,Infrastructure,etc.
•However,GlobalMarketsmayremainvolatileasinvestorswillwatchoutforUSFedReserve’s
ratehiketrajectory
•WecontinuetopreferschemeswhichhavetheflexibilitytoinvestacrossdifferentAsset
classes,Marketcap&Themes

10. Our Fixed Income Outlook
•TheFY23GrossborrowingfigurestandsatINR15LkCr.Thehigherborrowingprogramnumber
resultedinyieldsmovingupwards.The10YrGSecmovedhigherby15-20bps
•WeexpectFY23GrossborrowingtobelowerandmaybeintherangeofINR12-13LkCr
•Thismaybedueto–1.Conservativerevenueestimates,2.Highersmallsavingsinflow,3.Lower
thanexpectedfiscaldeficitinFY22
•However,therewouldbesomevolatilityduetohigherborrowinginthefirsthalfofFY22-23
•Havingsaidthat,thespikeinratesmainlyinthelongerendhadmadethetermpremiumattractive
•Thelongerendcarryappearsreasonablewithriskadequatelypriced-in
•Wecontinuetoexpectnormalizationofmonetarystimulus&interestrateriseandhence
recommendexposuretowardsfloatingrateinstruments
•Inthecurrentphase,morenimbleandactivedurationmanagementapproachisrecommended
•Wealsorecommendinvestinginspreadassetswithanaimtobenefitfromhighercarry

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