Script: G.Srinivasan, Senior Journalist
A budget replete with relief and incentives for the real sectors of the economy to revive growth impulses in the post-pandemic phase, focusing mostly on health and well-being, building up physical infrastructure including roadways, railways and domestic shipping for the next fiscal has been unveiled on Monday.
Presenting the budget for 2021-22 in Parliament, the Union Finance Minister Nirmala Sitharaman did not tinker with the existing tax system but introduced a spate of incentives for taxpayers by intensifying faceless interface with tax authorities, easing compliance and reducing litigation.
In order to help domestic manufacturers to take part meaningfully in global supply chains and enhance exports, customs duty on raw material and intermediate goods have been reduced, while in a few cases the import duty has been modestly increased to give the requisite protection to the domestic industry. The only notable levy is Agriculture Infrastructure Development Cess on 14 items including petrol and diesel to mop up 30,000 crore of rupees by way of resource mobilization. But, Sitaraman asserted that the basic excise duty and special additional excise duty rates have been reduced on most of the new cess items so that the consumer does not bear any additional burden. It is also proposed to get revenues out of disinvestment of public sector units both in strategic and non-strategic category to raise 1.75 lakh crore of rupees next fiscal.
As the economy is still contending with adverse consequences of Covid-19, fiscal support for vaccination and healthcare assumed crucial importance as a stimulus The budgetary allocation for the health sector is a massive 2.84 lakh crore of rupees, a jump of 137 per cent. Out of this 5,000 crores of rupees is earmarked for Covid-19 vaccines since a swift vaccination rollout will help the revival of hospitality, tourism and formal retail sectors, thereby restoring employment to millions of unemployed due to the pandemic.
The substantial budgetary allocation for capital expenditure at 5.54 lakh crore of rupees (about 2.5 % of GDP),- a hefty increase of 34.5 per cent compared to this fiscal is bound to kick-start activities on the ground immediately even as infrastructure projects have a long gestation span for completion. The budget provides a spur to national infrastructure pipeline by apportioning Rs 1.10 lakh crore for expansion of Railways and 1.18 lakh crore of rupees for road networks. Allocation for rural infrastructure fund has been increased to 40,000 crore of rupees.
For the private sector to raise funds for big projects, FM proposed a 20,000 crore rupee Development Finance Institution (DFI) with a view to mobilizing up to Rs 5 lakh crore to help the financing of projects in the capital-starved infrastructure sector over the next five years.
In order to enable the foreign direct investment (FDI) in the insurance sector, the FDI limit is proposed to be raised from 49 to 74 per cent and the Life Insurance Corporation of India (LIC) would go for stake sale through Initial public offerings (IPO) in next fiscal.
In the financial sector, reform-oriented measures include the proposal to privatize two public sector banks and one general; insurance company to limit the government’s presence in a bid to give a larger role to the private sector. To further release capital for growth and bolster the banking system, a National Asset Management Company is being proposed, and the Asset Reconstruction and Management Company will help banks to unlock stuck capital in the form of non-performing assets (NPAs) and convert them to more productive purposes. This coupled with the move to recapitalize Public Sector Banks by 20,000 crore rupees would prepare them well to meet the credit requirements of the real sectors.
With all the positive measures to stoke demand and rev up activities in Covid-hit economy, the fiscal deficit which is estimated at 9.5 per cent of GDP this fiscal would be cut down to 6.8 per cent next fiscal. The budget has unveiled a deft glide path for deficit management by bringing it down to 4.5 per cent in the medium term. In fine, the budget resolutely eschewed populism and instead plumped for bringing lives and livelihoods concerns of Bharath back on track in its onward push to recovery.