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The third speech of Finance Minister Nirmala Sitharaman was clearly an expansionary Budget without worrying about fiscal deficit in the current pandemic times so as to provide relief to the Covid-19-hit common man. Besides sharp hikes in capital outlays on health, Railways and infrastructure — both urban and rural — the Budget has rolled out reform initiatives in infrastructure sectors such as power, ports, oil and gas, aviation sectors. A scrappage policy was also announced for the automobile sector.
The speech, which lasted for 110 minutes (much lower than 160 minutes last year) and was a digital Budget (paperless) delivered out of a Made in India tablet, has gone in for a 137 per cent increase in outlays for health — a key ask on the government in a Covid-19-ravaged economy — to ₹2.24-lakh crore (₹0.94-lakh crore), including launch of a PM Aatma Nirbhar Swastha Bharat Yojana for ₹64,180 crore, which will be in addition to the National Health Mission. The Budget has committed to provide ₹35,000 crore for #COVID19 vaccine in the year 2021-22, and will provide more funds, if required.
Also read: India’s health budget to go up by 137% to over ₹2.2 lakh crore
The Budget brought lot of cheer for the capital markets (the Sensex went up by 1,556 points and Nifty by 450 points) as it had several market and financial sector-friendly measures, besides heavy dose of privatisation plans for 2021-22.
While projecting a disinvestment target of ₹1.75-lakh crore for 2021-22, the Budget promised to introduce a new mechanism for privatisation of loss-making state-run companies. The government has also asked the Niti Aayog to recommend A new list of companies for disinvestment. Besides, asset monetisation the Centre will also privatise two public sector banks and one general insurance company in 2021-22. Sitharaman also said that disinvestment in BPCL, Air India, IDBI Bank and Pawan Hans will be completed next financial year.
On the financial sector, Sitharaman announced increase in foreign direct investment for insurance from 49 per cent to 74 per cent. She also announced that the much-awaited initial public offering of LIC of India would take place in 2021-22. Public sector banks will be recapitalised to the tune of ₹20,000 crore next fiscal, Sitharaman said.
The government will go in for consolidation of different securities market legislations, including SEBI Act and Depositories Act into a Single Securities Markets Code, besides creating a new institutional framework to address the non-performing assets problem of public sector banks. An asset management company would be set up to take up existing stressed debt of banks.
The government will also set up a long-term financing development financial institution (with capital of ₹20,000 crore).
Fiscal deficit
Throwing out concerns of impact of high fiscal deficit on sovereign credit rating — as advised by the Economic Survey, the Budget has pegged the revised fiscal deficit for the current fiscal at 9.5 per cent of gross domestic product (GDP), much higher than the 3.5 per cent targeted in last year’s Budget.
For fiscal 2021-22, Sitharaman has pegged the fiscal deficit target at 6.8 per cent of GDP and announced gross government borrowing of ₹12-lakh crore.
Asserting that the government was committed to fiscal consolidation in the years to come, she said efforts would be made to bring down the fiscal deficit as a proportion of GDP to 4.5 per cent in 2025-26. On the deviation in FRBM for the current fiscal, Sitharaman said that a separate statement was being placed in Parliament and attributed the deviation to the Covid-19 pandemic.
On the Finance Commission’s recommendations, Sitharaman said that the government has accepted the recommendations of the 15th Finance Commission and retained the vertical share of devolution to States at 41 per cent.
Committed to the welfare of farmers, she rolled out various proposals. She also announced a levy of agriculture infrastructure cess.
While easing the direct tax administration in favour of the common citizen, she announced reduction in compliance burden on senior citizens who only have pension and interest income. The Budget proposes that they be exempted from filing income tax returns.
She has also proposed revision of custom duty structure for specific sectors. The Budget proposes sops for affordable housing projects and individuals taking such affordable housing loans.
As regards power sector, the Budget promises to empower the consumer more in selection of Discoms. A revamped reforms-based, result-linked power distribution sector will be launched, she said.
Here are the Budget 2021 documents:
Implementations of Budget announcements 2021
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