A first ever paperless budget prominently focused on revival of all the sector post pandemic drew a happy and healthy response, which could have given more importance to digital education reforms as well as apprenticeship model to boost skill development, however, opening up 100 Sainik schools is the innovative idea. Finance Minister Nirmala Sitharaman presented India’s annual budget for a huge expenditure provisions considering the health of population and battered economy during pandemic period that pressed countries in the world including India into almost economic recession.
The Budget buoyed market sentiments with the BSE Sensex posting a gain of 5% — witnessed as the sharpest surge on a Budget day in more than two decades. FM included protective measures for the domestic industry by levying customs duty on a range of products including electronic items, compressors for refrigerators and ACs, automobile parts such as electric motors and relays, etc. As a result consumers could see many goods becoming expensive.
Focus on infrastructure and wealth creation
Prime Minister Narendra Modi said, the budget was aimed at creating “wealth and wellness” in a country that is battling the world’s second highest coronavirus caseload after the United States. “It carries the vision of Atmanirbharta…The government gave proper attention towards fiscal sustainability while increasing the size of the Budget,” he added.
Budget proposals for 2021-22 rests on six pillars.
- Health and Wellbeing
- Physical & Financial Capital, and Infrastructure
- Inclusive Development for Aspirational India
- Reinvigorating Human Capital
- Innovation and R&D
- Minimum Government and Maximum Governance.
Innovation need of the hour: India’s gross domestic expenditure on R&D at 0.65% of GDP much lower than that of the top 10 economies (1.5-3% of GDP). Indian residents contributed only 36% of total patents filed in India; 62% on average in top 10 economies. India must ramp up investment in R&D, that needs major thrust by business sector. Moreover, to strengthen the overall research ecosystem of the country, the Budget FY 2021-22 announced a slew of new initiatives to boost Innovation and R&D in the country.
Key highlights and industry comments
A large number of used items, including refrigerators, air conditioners, LED lights and mobile phones, will become more expensive due to hike in customs duty on imported parts. The Budget announced a 2.5% customs duty on certain mobile phone parts and power banks, while that on gold and silver will be rationalized. For agriculture sector Ensured MSP at minimum 1.5 times the cost of production across all commodities. And, five major fishing harbours – Kochi, Chennai, Visakhapatnam, Paradip, and Petuaghat to be developed as hubs of economic activity.
Capital expenditure
- 5.54 lakh crore capital expenditure in BE 2021-22 – sharp increase of 34.5% over Rs. 4.12 lakh crore allocated in BE 2020-21.
- Over Rs. 2 lakh crore to States and Autonomous Bodies for their Capital Expenditure.
- Over Rs. 44,000 crore for the Department of Economic Affairs to provide for projects/programmes/departments exhibiting good progress on Capital Expenditure.
Custom duty for various industries
Iron and Steel: Customs duty reduced uniformly to 7.5% on semis, flat, and long products of non-alloy, alloy, and stainless steels and duty on steel scrap exempted up to 31st March, 2022 also, duty on copper scrap reduced from 5% to 2.5%.
MSME Products: Duty on steel screws and plastic builder wares increased to 15% and Prawn feed to attract customs duty of 15% from earlier rate of 5%. However, Rs. 15,700 crore budget allocation to MSME Sector is proposed.
Textiles: Basic Customs Duty on caprolactam, nylon chips and nylon fiber & yarn reduced to 5% and seven textiles park to be established.
Chemicals:Calibrated customs duty rates on chemicals to encourage domestic value addition and to remove inversions and duty on Naptha reduced to 2.5%.
Education, Banking and financial
Housing for All: Additional deduction of interest, up to Rs. 1.5 lakh, for loan taken to buy an affordable house extended for loans taken till March 2022 and Tax holiday for Affordable Housing projects extended till March 2022.
- 100 new Sainik Schools to be set up in partnership with NGOs/private schools/states
- Gross borrowing from the market for the next year to be around 12 lakh crore.
- Capital gains exemption for investment in start-ups extended till 31st March, 2022
- Exemption from filing tax returns for senior citizens over 75 years of age and having only pension and interest income; tax to be deducted by paying bank.
- Proposed sale by government in public sector companies and financial institutions, including two Public sector banks and one insurance company, is a healthy move.
- To increase the permissible FDI limit from 49% to 74% and allow foreign ownership and control with safeguards in insurance sector.
Infrastructure financing – Development Financial Institution
A sum of Rs. 20,000 crore has been provisioned in the Union Budget to capitalise Development Financial Institution (DFI). The Minister informed that a Bill will be introduced to set up DFI which will act as a provider, enabler and catalyst for infrastructure financing. The ambition is to have a lending portfolio of at least Rs. 5 lakh crore for this DFI in three years time, the Minister added.
Roads and Highway Infrastructure
Highest ever outlay of Rs. 1,18,101 crore for ministry of Road transport and Highways has been allocated. More than 13,000 km length of roads, at a cost of ` 3.3 lakh crore, has already been awarded under the ` 5.35 lakh crore Bharatmala Pariyojana project of which 3,800 kms have been constructed. By March 2022, another 8,500 kms would be awarded and an additional 11,000 kms of national highway corridor would be completed.
Planned economic corridors: 3,500 km of NH in Tamil Nadu at an investment of Rs. 1.03 lakh crore; 1,100 km of NH in Kerala at an investment of Rs. 65,000 crore ; 675 km of NH in West Bengal at a cost of Rs. 25,000 crore. And, NH of around Rs. 19,000 crore are currently in progress in Assam.
Railway Infrastructure
The focus is on National Rail Plan for India (2030): to create a ‘future ready’ Railway system by 2030.An allocation is made for Rs. 1,10,055 crore for Railways of which Rs. 1,07,100 crore is for capital expenditure.
- 100% electrification of Broad-Gauge routes to be completed by December, 2023.
- Broad Gauge Route Kilometers (RKM) electrification to reach 46,000 RKM, i.e. 72% by end of 2021.
- Western Dedicated Freight Corridor (DFC) and Eastern DFC to be commissioned by June 2022, to bring down the logistic costs – enabling Make in India strategy.
Urban Infrastructure
The budget aims to boost automobile sector, provide fillip to economic growth, create employment opportunities for our youth. It proposes raising the share of public transport in urban areas by expansion of metro rail network. ‘MetroLite’ and ‘MetroNeo’ technologies are slated to provide metro rail systems at much lesser costs with similar experience in Tier-2 cities and peripheral areas of Tier-1 cities. The augmentation of city bus service with Rs. 18,000 crore for a new scheme will augment public bus transport. Also, announced was ‘Innovative PPP models’ to run more than 20,000 buses.
Power Infrastructure
The consumer has alternatives to choose the Distribution Company for enhancing competitiveness. Rs. 3,05,984 crore over 5 years for a revamped, reforms-based and result-linked new power distribution sector scheme, concerning over the viability of power distribution companies.
A provision for capital infusion of Rs. 1,000 crore to Solar Energy Corporation of India and Rs. 1,500 crore to Indian Renewable Energy Development Agency. (139 Giga Watts of installed capacity and 1.41 lakh circuit km of transmission lines added, and additional 2.8 crore households connected in past 6 years).
A comprehensive National Hydrogen Energy Mission 2021-22 to be launched. For a green and sustainable future, the FM also proposed to launch a comprehensive National Hydrogen Energy Mission in 2021-22 for generating Hydrogen from green power sources fulfilling the announcement made by Prime Minister in November 2020.
Ports, Shipping and Waterways
- Seven projects worth more than Rs 2,000 crore will be offered by the major ports on Public private partnership mode in FY21-22.
- Rs 1,624 Crore subsidy support to indian shipping companies to promote flagging of merchant ships in India.
- To double the ship recycling capacity of around 4.5 Million Light Displacement Tonne (LDT) by 2024. She said that efforts will be made to bring more ships to India from Europe and Japan, as around 90 ship recycling yards at Alang in Gujarat have already achieved HKC (Hong Kong International convention) compliant certificates. This is expected to generate additional 1.5 lakh jobs for the youth of the country.
Petroleum & Natural Gas sector
To add 100 more districts to the City Gas Distribution network in next 3 years and Gas pipeline project to be taken up in J&K, also Independent gas transport system operator to be set up.
Universal Coverage of Water Supply
Rs. 2,87,000 crore over 5 years for Jal Jeevan Mission (Urban) – to be launched with an aim to provide:2.86 crore household tap connections; universal water supply in all 4,378 Urban Local Bodies and liquid waste management in 500 AMRUT cities.
Swachch Bharat, Swasth Bharat
Budget provisions focus toward water supply across the urban local bodies, sustainable water, sludge management and wastewater management with a contribution of 1,41,678 crore for Urban Swachh Bharat Mission 2.0. Besides effectively, source segregation of garbage and reduction in single-use plastic, the mission focuses upon reduction in air pollution by effectively managing waste from construction-and-demolition activities as well as Bio-remediation of all legacy dump sites.
Aatmanirbhar Bharat vision
AtmaNirbhar Bharat is an expression of 130 crore Indians who have full confidence in their capabilities and skills. AatmaNirbharta – not a new idea – ancient India was self-reliant and a business epicentre of the world. Dr. Niranjan Hiranandani, President ASSOCHAM said, “Government’s continuous support and the new announcements under the Aatmanirbhar Bharat Yojana 3.0 will make the road to recovery post-pandemic stronger and facilitate and incentivize job creation, and provide much relief and impetus to housing and infrastructure sector.”
The vision entails to create and nurture manufacturing global champions for an Aatmanirbhar Bharat and to help manufacturing companies become an integral part of global supply chains, possess core competence and cutting-edge technology.
Industry voices its views reacting to the budget …
“Budget 2021 is a progressive statement of intent and action that aims to both stimulate and sustain growth following an unprecedented year. The significant increase in overall allocation towards capital expenditure has been complemented with comprehensive measures to catalyse multiple levers- focus on rural, infrastructure investment, impetus to manufacturing, social welfare, entrepreneurship and digital – to enable overall holistic development.
For the automobile sector, which is a significant contributor to India’s GDP, there are multiple welcome announcements including a voluntary vehicle scrapping policy to phase out old and unfit vehicles, augmenting public transport system in urban areas, continuing focus on adoption of cleaner fuels, and enhancing outlays for developing road infrastructure and expanding the Swachh Bharat Mission.”
“I am neutral or slightly ok with this 2021 Budget announcement. Relaxations like senior citizens of above 75years not required to file an income tax return with pension income is appreciable. Also, now the government has increased the limit of auditing in the case digitized transactions from 5 crore to 10 crores is impactful for those who were in the bracket. The reduction of assessment time period from 6 years to 3 years will drastically lower the paper handling so it is far better now from the previous rule.
Nothing much has been introduced in the taxation industry but we have gathered strength from the previous budget so there is not much issue, however, some of the clients from healthcare & infrastructure have told us that they are happy as of now and we have equally responded to them. It is to be seen the impact of Budget in the coming days for a clear picture ahead.”
“We expected more from the Union budget 2021-22. While the focus has been on infrastructure, FM has allocated Rs 93,400 Crores for roads only, no allocation has been made for development of Smart Cities. Though FM talked about double digit growth of the manufacturing sector for India to become $5 Trillion economy, no roadmap has been laid out for the same. We also need more clarity on how Rs 2217 Crores allocated for setting up 42 Urban centres to tackle pollution problem will be used. Change in definition of Small companies may benefit some Small-scale companies, provided more support for Small scale companies are announced.”
