Budget 2021: India’s Step Towards Self-Reliance

Budget 2021 delivered by Finance Minister Nirmala Sitharaman was the first paperless budget ever delivered. Stock markets reacted positively with 4th highest jump ever recorded in the history of India after a budget, of 5% rise in Sensex, rising 2,315 points. The move to announce the selling of public sector banks and other public sector undertakings (PSUs) was expected and declaration of what was building up prior. FM predicted revenue of around ₹1.75 lakh crores expected from this move. Air India could be in line. Although the state would then be left at the behest of the private sector for energy sufficiency, this move would unburden the government of management tasks associated with running enterprises. It’s too early to weigh the impact. The state would, however, get a bounty of non-tax revenue.

FDI in Indian insurance under automatic route went up from 49% to 74%. LIC could be in for a farm-in. Some oil and gas PSUs are also set up for sale. The only concern would be our energy self-sufficiency, and prices of diesel and petrol for the common people.  However, the additional non-tax revenue may be the need of the hour. Some companies to be put up for farming in or total sale are Bharat Petroleum Corporation, Shipping Corporation of India, Container Corporation of India, IDBI Bank, BEML, Pawan Hans, Neelachal Ispat Nigam and others. The process is expected to be completed in FY 2021-22.

Covid has thrown our country into a recession and the budget is aimed smartly at making the most of a time when growth is hampered by force majeure. The best thing to do is spend and upgrade and that’s what is happening. A boost to the Indian manufacturing sector and ease of doing business were highlights of this budget, which was a simple one. Tax slabs remained unchanged. Senior citizens above the age of 75, with only pension income, will now be able to forego filing tax returns raising ease of living in India and give respite to many retired. Infrastructure such as roads and highways will see upgradation.

On the front of ease of doing business, there were some very positive takeaways. National Company Law Tribunal (NCLT) would now have e-courts with virtual hearings, for faster debt resolution process. There would also be alternative methods of doing the same introduced, as promised. During Covid times, this is how courts and tribunals have been dealing with cases, and this being a norm will save people time and effort while dealing with daily issues. Income Tax Appellate Tribunal (ITAT) will also see electronic communication, and personal hearings through video conferencing. This significantly reduces the pain of MSMEs to a large extent. Income Tax matters with income below ₹50 lakhs can now be assessed only 3 years in the past. All these are good signs as excessive regulatory interference has been bad for a business sentiment of India and towards India. With serious fraud cases of higher amounts, the time frame is 10 years and that too with the permission of the regulatory body’s highest authority.

Budget increases expenditure on rural infrastructure by 34% to ₹40,000 and 200% for irrigation. Majority of India’s spending power comes from farm yield and rural professions. This opens up FMCG to a large extent. There was a customs duty increase of 1% in refrigerators, air-conditioners and washing machines, a move to support local manufacturing. However, this is a marginal respite for local manufacturing. The Finance Minister declared the opening of 7 fully integrated textile parks in order to bolster quality manufacturing and make India a manufacturing unicorn for textiles, an industry where India already has an edge due to ample cotton supply. 5 major fishing harbours would also be set up and incentives are given to tea plantation workers in Assam. All this will increase Indians’ spending power as well as foster these sectors, where our share of export will benefit and we will become sustainably self-reliant. 

Governments fiscal deficit has increased due to borrowing, from 3.5% to 9.5% of our gross domestic product (GDP). It is still relatively low compared to other countries. The government proposed customs duty of 2.5% on some imported manufacturing parts of mobile phones which will affect prices from 0.3%-0.4%. Double taxation on NRIs took a positive turn which will in-turn foster growth in India.

All in all, a positive budget under strained times which will give the manufacturing sector and MSMEs a boost. Make in India will get a boost! Defence expenditure went up to ₹4.78 lakh crores, putting a dent in the capital available for different things, a price India pays due to land disputes with our neighbours China and Pakistan. This could also be due to India shooting for a permanent seat in the Security Council of the United Nations. One disappointment was the slash of allocation to Ministry of Tourism by 19%, from ₹2,500 crores to ₹2,026.77 crores, a sector which is envisaged to be weak in the coming year due to Covid but in the future after the pandemic can be India’s strength. This sector, too, should have received higher nurturing as this is the time.