India’s Union Budget 2021-2022-A Global Transition To Growth

Minister of Finance Nirmala Sitharaman presented the Union Budget of India for 2021-2022 on 1st February 2021 in the Lok Sabha. Most people waited for this budget with bated breath. It is the first digital Union Budget and was paperless due to the ongoing Covid pandemic.

To achieve a real India GDP growth rate of 10% to 15% in the coming year, the Government will be spending large sums on infrastructure and healthcare. The infrastructure spending will have a multiplier effect, leading to the growth of the Indian economy, and job creation.

Challenges to the Government

The chief challenges before the Finance Minister were a high fiscal deficit, low market demand, and a high unemployment rate. Due to the pandemic, the Government’s targeted fiscal deficit of 3.5% is pegged to jump to 9.5% for FY-21-a nearly three-fold hike. The Government is aiming to reduce the fiscal deficit by increasing the tax revenue and monetising assets like PSU and land.

The 6 pillars of the Union Budget 2021-2022 are:(1) Health and WellBeing, (2) Inclusive Development for Aspirational India, (3) Physical and Financial Capital, and Infrastructure, (4) Innovation and R&D, (5) Reinvigorating Human Capital, and (6) Minimum Government and Maximum Governance.

The Government’s proposed capital expenditure for 2021-2022 is Rs 5.54 lakh crore, which is 35% more than last year’s estimate.

Highlights of Union Budget 2021

Union budget 2021 was built around health, hope, and growth. The Sensex responded positively to the Finance Minister’s speech by climbing 1165 points to 47451. Here are some of the key features of Union Budget 2021:

1. Health and Sanitation

The big mover in this budget was health with the Finance Minister allocating Rs 283,000 crores to the healthcare and wellness sectors. Some of the major schemes are:

1. A new scheme titled PM Atmanirbhar Swasthya Bharat Yojana is to be launched to develop primary, secondary, and tertiary healthcare.
2. Mission Poshan 2.0 to help in improving nutrition across 112 districts.
3. 17 new public health units to be set up, mainly in rural areas.

2. Infrastructure

Infrastructure was a primary area of focus for the Government in Budget 2021. Some of the main proposals are:

1. National Infrastructure Pipeline (NIP) expanded to cover 7400 projects.
2. Highway and roadworks were announced in Kerala, Tamil Nadu, West Bengal, and Assam. The Government will allocate Rs 1.03 lakh crore for highway projects in Tamil Nadu, and Rs 65,000 crore for Kerala.
3. Rs 20,000 crore is being allocated to set up a Development Financial Institution (DFI). It will act as a catalyst for infrastructure financing. Rs 5 lakh crore has been earmarked for lending.
4. A total outlay of Rs 110,055 crore has been allocated to the railways, and a National Rail Plan was created.
5. 100 percent electrification to be completed by 2023.
6. New Metro services were announced for 27 cities. There will be additional allocations for the further development of Chennai Metro Phase 2, Bengaluru Phase 2A and B, Kochi Metro, Nashik and Nagpur Metros, etc.
7. National Hydrogen Mission to be launched for generating hydrogen from green power sources.
8. There is a plan to double the recycling capacity of ports by 2024.
9. A gas pipeline project to be set up in Jammu and Kashmir.

3. Physical and Financial Capital

• Rs. 1.97 lakh crore allocated in next 5 years for Production Linked Incentive (PLI) schemes in 13 sectors.
• Pradhan Mantri Ujjwala Yojana (LPG scheme) will benefit more than one crore more people.
• To create and nurture local manufacturing companies for an Atmanirbhar Bharat.

4. Textiles

• Mega Investment Textiles Park (MITRA) scheme.
• 7 textiles parks to be established over 3 years to increase exports.

5. Direct Tax

1. No IT Filing for people above 75 years who rely on only pension or interest on savings.
2. The maximum tenure for reopening IT assessment cases has been reduced from 6 to 3 years. However, it can be extended to 10 years in case of serious tax evasion cases, where the amount is Rs 50 lakh or more.
3. No change in income tax rates for individuals and corporations.
4. Affordable housing projects and start-ups to get a tax holiday for one year.
5. The Government has extended the benefits of additional deduction of Rs 1.5 lakh for affordable housing in case of loans taken, till 31 March of next year.
6. Compliance burden of small trusts whose annual receipts does not exceed Rs 5 crores, to be eased.
7. Exemption from audit-Businesses which do 95% of their transactions digitally, and whose turnover is less than Rs 5 crores, are exempted from keeping audited books.
8. The number of income tax filers has increased from 3.48 crores in 2014 to 6.48 crores now. Ms. Sitharaman has announced the setting up of a dispute resolution mechanism for small taxpayers, to ensure accountability, efficiency, and transparency.

6. Indirect Tax

• Customs related procedures have been changed to include a timeline of two years for completion of proceedings.

7. Automobiles

1. Old and unfit vehicles to be phased out under the Vehicle Scrapping Policy.
2. All vehicles undergo fitness tests in automated fitness centers. All personal vehicles should be checked every 20 years, and commercial vehicles every 15 years.

8. Agriculture

• 1000 more mandis are to be linked to the e-national agriculture market (e-NAM).
• Agricultural credit to be increased from Rs 15 lakh crore last year to Rs 16.5 lakh crore in FY2021-22.
• APMCs can borrow from Agriculture Infrastructure Fund to strengthen their infrastructure.

9. Finance

• The FDI limit in the insurance sector will be raised to 74% from 49%. The aim is to get further foreign investments and increase insurance penetration in the country.
• The Government will set up an Asset Reconstruction Company to take over stressed loans.
• The Limited Liability Partnership Act of 2008 can be scrapped.
• Two PSU banks and one general insurance firm to be disinvested in FY22. Disinvestment of Air India, BPCL, IDBI Bank, and Pawan Hans will also be done this fiscal year.
• For MSMEs, alternative methods of debt resolution, and special frameworks will be introduced.
• Dividend payment to InvIT/REIT to be exempted from TDS.

10. Changes in custom duty

• Custom duty on silver and gold to be revised.
• Duty on solar inverters raised from 5% to 20%, and on solar lanterns, from 5% to 15%.
• All nylon products charged with 5% customs duty.
• Duty of naphtha and copper scrap has been reduced to 2.5%.
• A duty of 7% levied on tunnel boring machines.
• Customs duty on cotton raised from 0% to 10%.
• The duty has also been increased on auto and mobile parts, and raw silk.
• In the Union Budget for FY 2021-2022, the Government has imposed an anti-dumping and countervailing duty on certain steel products. But customs duty was reduced to 7.5% on many raw materials used to make steel, and 0% on steel scraps. Many small-scale industries are demanding that the customs duty should be brought down to below 3%.

Union Budget 2021 was a balanced budget that ensured that almost all major sectors of the economy had something good to take home. As per Prime Minister Narendra Modi, the Union Budget 2021 is aimed at creating ‘wealth and wellness’ in a country that, at the time of writing this article, is facing the brunt of the pandemic. In a major relief to salaried and professional people, there was no increase in taxes. Despite the fiscal problems, the Government’s spending on healthcare and infrastructure should spur growth in the economy.

Also Read:

1) All About Union Budget 2021
2) Budgeting Tips for Managing Your Money in 2021
3) How To Decide A Startup Budget For Your Business?
4) How to Start a Wine Business? Investment, Tips & More

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FAQs

Q. What is the minimum amount that the DFI will disburse for infrastructure projects?

Ans. The DFI can lend a minimum of Rs 5 lakhs for recognised infrastructure projects.

Q. Who are the winners and losers in this year’s budget?

Ans. The major winners are hospitals, real estate companies, and steelmakers. Among the losers, we can consider bonds, exporters, and farmers/rural India.

Q. Which are the core infrastructure assets that are to be privatised under the Asset Monetisation Program?

Ans. These are:

• AAI airports in Tier 2 and Tier 3 cities.
• Oil and gas pipelines of companies like GAIL, HPCL, and IOCL.
• Railway infrastructure assets.

Q. What is the major change in customs procedures?

Ans. To streamline the customs process, a definite timeline of two years has been drawn for the completion of any procedure.

Q. What has the Government done to promote digital modes of payment in Budget 2021?

Ans. The Government will spend Rs 1500 crores as financial incentives for digital payments.