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Budget 20-21: Pushing For Growth

The first budget of the new decade goes for a big push in government spending, privatisation of PSUs, disinvestment and strategic sale and lays a much greater emphasis on health, education, skilling and select structural reforms. For the salaried class, there are no sweeteners though

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By the time you are reading this all the noise and excitement around the Budget may have waned, nonetheless, the Union Budget’s impact are felt all through the year. And that alone should be a sufficient reason for a recap of the nuances of the Budget and its impact. For the people at large, a number of items have become expensive after rejig of customs duty was announced in the budget. Most electronic items, mobile phones, imported leather items, silk and cot­ton clothing, pulses, apples, some cooking oils and alcoholic beverages, among other things, are going to cost more. On the other hand, items like gold and silver, shoes, clothing made from nylon, and agricultural equipment will become cheaper. But not by much.

The Budget was significant for less tangible reasons as well. The first Budget of this new decade was also the first ‘digi­tal or paperless Budget’, which meant no printed copies, zero cost of printing and zero cost of security measures that the Budget making exercise each year entails. 

In a post-pandemic year, there was much anticipation around the Budget. And when it came, it produced a col­lective wow for its big push on govern­ment spending, persistent priority to infrastructure creation, substantial allocations towards transport, health, drinking water, education, skilling measures to strengthen the financial institutions and renewed push for lo­calisation. Its message of ‘privatiza­tion’ of a large number of public sec­tor undertakings, select banks, roads, ports, airports, stadiums, among oth­ers, did surprise many though. And then the onus of mobilising funds in FY22 were linked to the disinvestment programme. 

Here are some quick numbers to take note before we proceed.


The government proposes to spend Rs 34.83 lakh crore in FY-22 (1 April 2021-31 March 2022). In the current fiscal (April 2020-March 2021), it will end up spending Rs 34.50 lakh crore. So there is not much difference be­tween the spending in a year-on-year comparison. On the receipts expecta­tion for FY-22 (minus the borrowings) — the figure is kept at around Rs 19.76 lakh crore (as per Budget estimates which we will explain in a moment). This figure will be up from Rs 17.52 lakh crore (actual or audited numbers) for FY20. Borrowings are estimated at Rs 15.06 lakh crore (BE), a 27 per cent jump over FY20 actual numbers.

In FY22, the government’s ‘Capital Expenditure’ is estimated at Rs 5.54 lakh crore (annual increase of 29 per cent over FY20). And the ‘Revenue Ex­penditure’ is estimated to be Rs 29.29 lakh crore (annual increase of 12 per cent over FY20). So, what are capital and revenue expenditure? Expenses which effect a change to the govern­ment’s assets or liabilities are called capital expenditure. For example: con­struction of a toll road or repayment of loans. All other expenses are termed as revenue expenditure (for example, payment of salaries, etc.). In simpler terms, the central government is tar­geting expenditure of Rs 5.54 lakh crore in FY22. More spending means more economic activities which means more jobs can get created which can fuel consumption and demand there­by helping the economy grow. 

Before proceeding, one must un­derstand the terminologies often as­sociated with the Budget. These are Budgeted Estimates (BE) and Re­vised Estimates (RE). BE are alloca­tions announced at the beginning of each financial year whereas RE are estimates of projected amounts of re­ceipts and expenditure until the end of the financial year. Actual amounts are the audited accounts of expenditure and receipts in a year. Change from actuals in 2019-20 to BE in 2021-22 represents the compounded annual growth rate (CAGR) for the period as mentioned above.

The Covid Challenge

On 25 March 2020, the 3-week pan-India lockdown was announced to tackle the spread of the coronavirus. And within 48-hours of declaring a three-week complete lockdown, the Prime Minister announced the Prad­han Mantri Garib Kalyan Yojana val­ued at Rs 2.76 lakh crore -- this pro­vided free food grain to 800 million people, free cooking gas for 80 million families for months, and cash directly to over 400 million farmers, women, elderly, the poor and the needy. The

central government also announced three special packages under the head Atmanirbhar Bharat. Total financial impact of all Atmanirbhar Bharat packages including measures taken by RBI, was estimated at about Rs 27.1 lakh crore or more than 13 per cent of GDP. 

There were more spending too. Against the BE expenditure of Rs 30.42 lakh crore for FY21, the RE are Rs 34.50 lakh crore.

In the current fiscal, as per the fi­nance minister, the fiscal deficit is pegged at 9.5 per cent of GDP, which is estimated to come down to 6.8 per cent of GDP in FY22. That is the intent of the government. The FM announced the govern­ment would be borrowing Rs 12 lakh crore in FY22. “We hope to achieve the consolidation first by in­creasing the buoyancy of tax revenue through im­proved compliance, and second through increased receipts from monetisation of assets, includ­ing Public Sector Enterprises PSE) and land,” the FM said in her Budget speech. 

Jaideep Ghosh, COO, Shardul Am­archand Mangaldas & Co terms the Budget as comprehensive, focused on healthcare, human resources, infra­structure, disinvestment and technol­ogy. “The calibrated steady fiscal con­solidation plan proposed over the next few years is appropriate in these chal­lenging times. With all-round growth and with an enhanced self-reliance as the need of the hour, this budget seems to cover the relevant areas. As always, implementation is critical,” Ghosh says. 

Industry associations too have welcomed the budget. CII President Uday Kotak has praised the budget terming it as a “budget for growth with next-generation reforms”. “The Budget ticked all the right boxes which would strengthen the path of recov­ery of the economy. This is a budget catering to all aspects of lives, liveli­hoods and growth,” Kotak says. FICCI President Uday Shankar has termed it as an “outstanding, clear-headed and growth-oriented budget”, saying, “It lays a strong foundation for an At­manirbhar Bharat.” 

Amit Kapur, Joint Managing Part­ner, J Sagar Associates, a leading law firm, says, “The budget speech ex­pectedly has given a strong signal for infrastructure development focusing on actualising the ambitious national infrastructure pipeline targeting an investment of Rs 111 lakh crore over next five years.” 

What’s in it for Salaried Class? 

For the salaried class and the senior citizens, the Budget has some key takeaways. The fact that the income tax slabs have been kept untouched is a big positive even though the ex­pectations were of more exemptions. Then a one-year extension has been provided on Rs 1.5 lakh deduction on payment of interest for affordable housing. This measure will help the salaried class residing in smaller towns and cities whereby on loans taken for a property valued at Rs 45 lakhs or less, a 1.5 lakh tax rebate can be availed. “As per ANA­ROCK Research, afford­able housing already accounts for more than 35 per cent of the supply across the top seven cit­ies in the country. As anticipated, af­fordable housing and rental housing have got a big boost with the govern­ment extending the period for an ex­tra deduction of Rs 1.5 lakh available for loans up to 31st March 2022. This will keep demand buoyant for afford­able housing in 2021 as well,” says Anuj Puri, Chairman, ANAROCK Property Consultants. 

For the senior citizens, the FM has proposed an exemption from filing their Income Tax Returns (ITR) if they are over 75 years of age and their only earnings are pension and interest from savings. In their case, the banks will automatically deduct the taxes without the need for them to file an ITR. In order to reduce harassment of taxpayers, the FM has also announced a reduction in the timeframe for reo­pening of income-tax assessment cases from 6 years currently to 3 years. 

There were some missed oppor­tunities as well, especially in view of work-from-home situation post pan­demic. Rajat Johar, Country Head, Skootr, India’s premium managed office space provider, points out that the office spaces, which have been the most impacted sector due to the work from home scenario, could have been recognized in this budget. “A reduc­tion in stamp duty for commercial real estate, single-window clearance and reduced GST on leasing would have helped in the market recovery,” he says.

How Money Will be Raised

The FM has laid down an ambitious asset monetisation plan for public in­frastructure to help the government raise revenue going forward. “Mon­etising operating public infrastructure assets is a very important financing option for new infrastructure con­struction. A National Monetisation Pipeline of potential brownfield in­frastructure assets will be launched,” Sitharaman said in her speech. Un­der this, all operational toll roads of NHAI, the transmission assets of PowerGrid, oil and gas pipelines of GAIL, Indian Oil and Hindustan Pe­troleum, the airports under Airports Authority of India in tier-II and tier-III cities, warehousing assets of cen­tral public sector enterprises will be brought under the asset monetisation programme. The aim is to bring the fiscal deficit to below 4.5 per cent of GDP by 2025-26. The government is aiming to mop up Rs 1.75 lakh crore from disinvestment in FY22.

The FM said that a number of transactions namely in BPCL, Air In­dia, Shipping Corporation of India, Container Corporation of India, IDBI Bank, BEML, Pawan Hans, Neelachal Ispat Nigam, among others, would be completed in FY22. Then there is a move to undertake the privatisation of two public sector banks, other than IDBI Bank, and one general insurance company in FY22. 

“In 2021-22 we would also bring the IPO of LIC for which I am bring­ing the requisite amendments in this Session itself,” the finance minister announced. This sounds good. Inci­dentally, in the current fiscal the dis­investment target of Rs 2.1 lakh crore had to be revised downward to Rs 32,000 crore due to an adverse mar­ket condition following the pandemic? Will the FY22 market conditions see a major shift compared to FY21? Only time will tell.