Understanding Union Budget 2021

2021 is the year of important milestones for our history. 75th year of Independence, 60 years of Goa’s accession to India, 50 years of the 1971 India-Pakistan War. This is the year for our Chandrayaan-3 Mission, and the year of bounce back from what we had seen in previous year. According to FM this budget is the continuation of announcements under ANB 1.0, ANB 2.0 and ANB 3.0 Total financial impact of all AtmaNirbhar Bharat packages including measures taken by RBI was estimated to about 27.1 lakh crores which amounts to more than 13% of GDP.

The Budget proposals for 2021-2022 rest on 6 pillars.

1. Health and Wellbeing
2. Physical & Financial Capital, and Infrastructure
3. Inclusive Development for Aspirational India
4. Reinvigorating Human Capital
5. Innovation and R&D
6. Minimum Government and Maximum Governance

Part of PM Modi's legacy should be that India will be best prepared for any such disease in the future. Keeping that in mind, this budget is highly focused on health.

This will develop capacities of primary, secondary, and tertiary care Health Systems, strengthen existing national institutions, and create new institutions, to cater to detection and cure of new and emerging diseases, support for health and wellness centers, setting up integrated public health labs, strengthening NCDC, Setting up of a national institution for One Health (a Regional Research Platform for WHO South East Asia Region, 9 Bio-Safety Level III laboratories and 4 regional National Institutes for Virology.

Govt decided to merge the Supplementary Nutrition Programme and the Poshan Abhiyan and launch the Mission Poshan 2.0 to strengthen nutritional content, delivery, outreach, and outcome.

It aims at universal water supply in all 4,378 Urban Local Bodies with 2.86 crores household tap connections, as well as liquid waste management in 500 AMRUT cities.

This aims to focus on complete faecal sludge management and waste water treatment, source segregation of garbage, reduction in single-use plastic, reduction in air pollution by effectively managing waste from construction-and-demolition activities and bio-remediation of all legacy dump sites.

This aims to tackle the problem of air pollution

This is a voluntary vehicle scrapping policy to encourage fuel- efficient, environment friendly vehicles. Vehicles would undergo fitness tests in automated fitness centres after 20 years in case of personal vehicles, and after 15 years in case of commercial vehicles. This is the first of its kind policy in India and very helpful to phase out inefficient and polluting vehicles.

Amid the situation we are in, it definitely calls for higher investment in health. The increased allocation along with the emphasize on nutrition, clean water, air and sanitation is a good step. This will promote the proactive and preventive care instead of reactive care.

PLI scheme witnessed a huge success in mobile manufacturing and successful in attracting companies like wistorn and pegatron. Considering this success, scheme is expanded to 13 sectors. Manufacturing sector has to play a key role in our dream of achieving USD 5 trillion economy. PLI scheme intends to create manufacturing global champions for ANB.

Govt will launch a scheme of Mega Investment Textiles Parks (MITRA) to create world class infrastructure with plug and play facilities to enable create global champions in exports. Textile industry plays a significant role by providing direct employment to more than 45 million people and contributing nearly 3% to GDP. So this is a huge boost for textile industry.

Number of projects under NIP increased to 7400 and total worth will be more than USD 1800 billion. It will require a major increase in funding both from the government and the financial sector. This will be done in three ways. First is DFI -

Second is monetizing the assets. For example Railways will start to monetize Dedicated Freight Corridors. And third is sharp increase in capital budget. Capital budget means allocating money for the creation or maintenance of fixed assets such as land, buildings, roads, etc.

To further augment road infrastructure, more economic corridors are also being planned in the state of TamilNadu, Kerala, WB and Assam. Here you can easily see the effect of state elections. Although NE getting the attraction is really good.

Indian Railways have prepared a National Rail Plan for India – 2030. The Plan is to create a ‘future ready’ Railway system by 2030. We have to work on the logistic costs. If transporting the goods from lets say UP to JNP is costly and time consuming no company will like to setup its plant. Role of railway is very critical in reducing this cost. Dedicated Freight Corridors are game changers here. It will largely reduce cost and time as only freight trains will run on these tracks.

This scheme will enable private sector players to finance, acquire, operate and maintain over 20,000 buses. This scheme will not only helps the public transport but a huge boost to automobile sector. Two new technologies i.e., ‘MetroLite’ and ‘MetroNeo’ will be deployed to provide metro rail systems at much lesser cost with same experience, convenience and safety in Tier-2 cities and peripheral areas of Tier-1 cities. Public transport is always a major concern. Innovative ideas through PPP model can change this.

Soon, you will ge a option to choose the electricity provider in your area. The distribution companies across the country are monopolies, either government or private. Competition will help the consumers to get the best at lower cost.

This will provide assistance to DISCOMS for Infrastructure creation including pre-paid smart metering and feeder separation, upgradation of systems, etc. Govt had also announced plans to launch a comprehensive National Hydrogen Energy Mission. Abundant supply of hydrogen is available in nature. But govt alone will not be able to do this. Adn for that matter no one company nor an industry can pull this off. It needs a collaboration between different private players, industry and govt.

Another important announcement is to increase the permissible FDI limit from 49% to 74% in Insurance Companies and allow foreign ownership and control with safeguards. This is also important step because COVID-19 pandemic has shown that further penetration of insurance in India is needed. Life insurance penetration in the country is only 3.6% of the GDP, way below to global average of 7.13% For general insurance, it is even worse at 0.94% of GDP, as against the world average of 2.88%.

Increase in the Deposit Insurance cover from 1 lakh to 5 lakhs for bank customers is now moved to amendments to the DICGC Act, 1961. That means if a bank is unable to fulfil its obligations, the depositors of such a bank can get easy and time-bound access to their deposits upto Rs 5 Lakh. This is required for boosting the confidence of customers in banks.

Definition of small companies revised from “not exceeding 50 Lakh” to “not exceeding 2 Crore”and turnover from “not exceeding 2 Crore” to “not exceeding 20 Crore”. This will help more than 2 Lakh companies in easing their compliance requirements.

Earlier in the announcements of ANB, govt decided that there will be at least one and at most 4 PSUs in strategic sectors and will take exit from non strategic sectors. In this budget govt has identified the strategic sectors as follows

1. Atomic energy, Space and Defence
2. Transport and Telecommunications
3. Power, Petroleum, Coal and other minerals
4. Banking, Insurance and financial services

Govt. estimated Rs 1,75,000 crores as receipts from disinvestment this FY.

This will cover Agriculture and Allied sectors, farmers welfare and rural India, migrant workers and labour, and financial inclusion.

The MSP regime has undergone a sea change to assure price that is at least 1.5 times the cost of production across all commodities.

ne Nation, One Ration Card is already under implementation by 32 states and UTs, reaching about 69 crores beneficiaries.

100 new Sainik Schools will be set up in partnership with NGOs/ private schools/states. Another target of establishing 750 Eklavya model residential schools in our tribal areas is also made.

For accessible higher education in Ladakh. Central University will be established in Leh. This will ensure proper higher education access to the city of Ladakh and important for the development of UT. Other important announcements according to NEP, you can read in the budget document under the Education and Skilling section.

This year will also mark the most important and proud moment in the history of ISRO and for all of us. As part of the Gaganyaan mission activities. The first unmanned launch is slated for December 2021.

This section mainly highlights the steps that are taken and will be taken for ease of doing business, speedy delivery of justice, etc.

This covers all the 6 pillars mentioned in budget.

Major steps are taken to improve the tax filing system. Senior citizens who are 75 years of age and above, who only have pension and interest income are exempted from filing tax returns. Faceless systems will be promoted. Currently, an assessment can be re-opened up to 6 years and in serious tax fraud cases for up to 10 years, this will be reduced to 3 years. And in serious tax evasion cases involving more than 50 Lakh can the assessment be re-opened up to 10 years. This is a step to reduce the fear from the mind of tax payers. Transparent system will encourage more and more people to file their returns.

This time govt had used custom duty as a tool to promote domestic manufacturing and helping India get onto global value chain. Custom duty on MSME products, solar cells, textile, mobile equipments, cotton, silk is increased.

Budget covers lot of things in very detail. But I feel there are some important things budget missed.

Allocation on education sector is reduced to around 93,000 crores from 99,000 crores in previous FY. To move forward with NEP 2020 and situations that pandemic created education is another sector with health that requires a major allocation from govt. Fiscal deficit in FY 2020-21 according to revised estimate will stand at 9.5% of GDP, this is bound to happen due to pandemic. In next FY govt plans to bring it down to 6.8%. But the situation is definitely worrisome for the govt. If any of the credit rating agency will downgrade the ratings of India, it will be very difficult for govt to raise money from the market. Another area which govt could also pay attention to is Border Tourism. The pace at which China is building border infra is of matter of concern for India. We are at the disadvantage of being surrounded by countries like Pakistan and China with large border. We can not have soldier at every corner of the border to keep eye, in this situation the people living in the border area, tourists can work as eyes. Govt can provide basic amenities and incentives and build tourist attraction in these areas.

There are definitely some negative points in the budget but Special focus on health sector, North-Eastern part, J&K, Ladakh are most welcomed steps. This will help to create more employment opportunities in the area. Along with this National Hydrogen Mission, National Infrastructure Pipeline, Construction of metros in tier 2 cities will boost the growth. Budget focused on research too by setting up NRF, Deep Ocean Mission and National Hydrogen Mission. Setting up 7 mega textile park under MITRA will breathe new life into the industry.