Being the first after the Coronavirus rattled the economy, Union Budget 2021 – 22 has called for everyone’s special attention. This budget is being seen very much unlike the ones which have been presented in the past. Let us do a quick analysis.
Our Honourable Finance Minister Nirmala Sitaraman presented the Union Budget for the year 2021-22 in the Lok Sabha on Feb 1, 2021. Being the first after the Coronavirus rattled the economy, this one has called for everyone’s special attention.
This budget is being seen very much unlike the ones presented in the past. One, the budget was presented in a paperless form for the first time. Second, this budget is being looked upon as a budget of health, hope and growth, with all the major sectors of the economy having something good to take home.
So, how does the government intend to repair, restore and rebuild India’s finances, especially in a Covid stricken scenario? Let us do a quick analysis.
The key announcements made in this year’s budget are outlined below.
Health and Sanitation
- INR 35000 crores have been set aside for the Corona Virus vaccine
- Budget allocation of over INR 2,00,000 crore for health and well-being in 2021-22
- PM Atma Nirbhar Swasthya Bharat Yojna aimed at developing primary, secondary & tertiary healthcare
- Poshan 2.0 to improve the nutritional outcomes
- New public health units to be set up at the points of entry
- Modernization of existing health care units at airports, seaports and landports
- Jal Jeevan Mission Urban for better water supply nationwide
- Urban Swachh Bharat Mission to be strengthened
Education
- 100 Sainik schools to be newly set up
- 750 Eklavya schools to be newly set up in tribal areas
- Central University in Ladakh
Infrastructure
- Vehicle scrapping policy with the objective of phasing out old and unfit vehicles in a time-bound manner
- Vehicle fitness test for personal vehicles after 20 years and commercial vehicles after 15 years
- Highway and road works in Kerala, Tamil Nadu, West Bengal and Assam
- National Monetizing Pipeline to monitor asset monetization process
- National Rail Plan to have a future-ready railway system by 2030
- Future dedicated Freight Corridor Projects to be initiated
- 100% electrification to be achieved by 2023
- Metro services in 27 cities with budget allocation for next phases of existing metros in specified locations
- National Hydrogen Mission aimed at generating hydrogen for green power sources
- Recycling capacity of ports to be doubled by 2024
- Gas pipeline project in J&K
- Pradhan Mantri Ujjwala Yojna (LPG Scheme) to cover additional 1 crore beneficiaries
Taxation
- No Income Tax filing for people above 75 years having only pension and interest income
- Reopening for Income Tax assessment cases timeline reduced from 6 years to 3 years with an extension for serious tax evasion cases (INR 50 lakhs or more) up to 10 years
- Faceless Income Tax Appellate Tribunal
- Affordable housing projects be given a one year tax holiday
- Ease in compliances for small trusts (with annual receipts not exceeding INR 5 crores)
- Copper scrap duty reduced to 2.5%
- Gold and silver custom duty to be rationalized
- Naphtha duty reduced to 2.5%
- Solar inverters duty raised to 20% and Solar lanterns duty raised to 15%
- Nylon products custom duty of 5%
- Tunnel boring machines custom duty of 7%
- Cotton custom duty of 10%
- Agriculture infrastructure and development cess proposed on urea, apples, crude soybean and sunflower oil
Economy & Finance
- Unified Securities Market Code to be set up with a view to consolidating SEBI Act, Depositories Act and 2 more laws into one
- Increase in FDI Limit to 74%
- Asset reconstruction company to take over stressed loans
- Deposit insurance raised to INR 5 lakhs for bank depositors
- Decriminalize LLP (Limited Liability Partnership) Act
- Divestment of two PSBs and one general insurance firm
- LIC IPO to be announced this year
- Strategic sale of BPCL, IDBI Bank and Air India to be completed
Agriculture
- Agriculture Infrastructure Fund to be set up for APMCs to augment their infrastructure
- E-NAM market integration of 1000 additional mandis
- 5 major fishing hubs to be developed
- Seaweed park to be set up in Tamil Nadu
Employment
- Portal for gig and construction workers
- Social security for gig and platform workers
- Loans via Start-up India margin capital reduced to 15% for SC, ST and women
This budget doesn’t seem to be a populist one, with fewer new schemes being announced and also fewer marginal allocations to please people.
Rather, even after the fiscal deficit scaling up multiple times from what was envisaged last year, the budget has still been presented in a very sober and sedate manner. While the finance minister has not given any massive tax breaks but at the same time, she has also not imposed any new taxes to cover up for the government’s shortfall.
In light of limited resources available with the government, priorities seem to have been laid out very thoughtfully and carefully with healthcare taking up the prime position. The other big winner has been education and that too for the marginalized section in particular. However, the pharmaceuticals and Information Technology sector seem to be left out on any significant parameters.
Further, the focus of spending for the forthcoming year is predominantly been charted out as capital in nature. Capital expenditures as against revenue expenditures, lead to the creation of productive assets, with its multiplier effect expected on the growth potential of the economy as a result of better infrastructure, more employment opportunities, etc.
It has been admitted that the financial stress is expected to continue for years to come but the need to adopt a judicious approach is also loud and clear. Divestment announcements are to be seen as a strong move, but much called for in tough times as we are going through today. Also, a lot of asset monetization has been signaled in times to come.
In the nutshell, this year’s budget would be tested for its robustness against the financial challenges that Covid has laid before the economy, both for the people of the country and the government alike.
Trust the magic of new beginnings !