Budget 2021

Welcome focus on cutting logistics cost

R Dinesh MD, TVS Supply Chain Solutions | Updated on February 01, 2021

The Budget has used the Covid crisis as an opportunity to bring in the necessary focus on infrastructure investments and building capabilities. It is laudable that the earlier initiatives have been continued at the same time. It is clear that the Finance Minister has heard, assimilated and chosen to find solutions for most of the points brought to her notice. Each of the six themes have clear budgetary allocations made for the same, which will help in execution.

The Finance Minister has allowed the fiscal deficit to increase and provided for earlier off-budget provisions fully (the Ministry pegs FY21 fiscal deficit at 9.5 per cent and FY22 deficit at 6.8 per cent of GDP) while relying on disinvestments and tax revenues to help bring the deficit down to 4.5 per cent only, by 2026, which allows enough head room to continue to make necessary investments going forward as well.

Health sector push

The Budget takes off on the various Covid related schemes announced by the Finance Minister during the course of last year and is focusing on the infrastructure spend to spur growth and create demand. The Budget outlay of ₹2,23,846 crore for FY22 with a sharp focus on the health sector. Well-being and the continued focus on important initiatives such as the Swachh Bharat Abhiyaan and the Atmanirbhar Bharat scheme are to be commended.

In order to make Atmanirbhar Bharat successful, the Finance Minister has rightly pointed out that logistics costs need to be brought down. Focusing on multi-modal transport, with railways simultaneously working together with the road network, is essential to make this happen. The budgetary allocation of ₹1,10,055 crore for the Eastern and Western dedicated freight corridor, which will be operational by June, 2022, as also the new corridors on East coast, East-North Corridor and the North-South Corridor to be initiated, is a very welcome move.

The logistics sector will be further enthused by the outsourcing of port operations in tier-2 ports. The continuous upgradation of the highway infrastructure (boosted by the allocation of ₹1,18,101 crore for Ministry of Road Transport and Highways) will further bring down the transportation and logistics cost and provide the necessary fillip to the PLI schemes announced by the government. The transport community will have to use the scrappage policy (will have to await the full details) to prepare themselves for the future requirements of the hub-and-spoke model.

Logistics sector

The ₹3,000 crore being spent for continuing the apprenticeship scheme will enable the logistics sector significantly increase employment.

The Finance Minister is aware of the impact of logistics and supply chain sectors and their importance to make the Atmanirbhar Bharat scheme focus on manufacturing successful. The fact that some of the infrastructure creation is going to be funded by the partial sale of such assets should ensure that they will be maintained going forward also. I am sure, in order to utilise these assets better, the country will look at an outsourcing policy which will increase the utilisation level of the created infrastructure in the future.

This Budget will accelerate the growth achieved in the last few months and provide the necessary impetus for private sector investments to support the government focus and infrastructure spend. With this, we should be looking at double-digit growth not only in 2022, but also in the next few years.

A big thanks to the Finance Minister for walking the talk and executing her promise.

Published on February 01, 2021

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

This article is closed for comments.
Please Email the Editor

You May Also Like