The Union Budget of India for the financial year 2021-22 has been presented by the Finance Minister Nirmala Sitharaman on 1 Feb, 2021. This was a very crucial and much-awaited budget due to the current scenario of the country. The Covid-19 pandemic and the lockdowns induced the slowdown in the Indian Economy and brought the economic activities in the country to a near standstill leading it to the unprecedented recession. Along with that, the ongoing four months protest by the farmers due to the three farm laws introduced by the Government, put the pressure on the Government to look into and provide provisions for the same. So, the budget provided the best opportunity to the Government to lay down the solutions to revive the pandemic-hit economy and to meet the expectations of the farmers and other people of the country.
First time in the history of India, a Digital Budget (paperless) was presented. The Finance minister went to the Parliament with a Tablet wrapped in a Red Cloth and before going there, she went to meet the President of India which is not a general tradition.
The facts and the provisions of the budget are showing that it is an Expenditure Budget and the Finance Minister has found space for imparting a fiscal impulse in 2021-22 period. The expenditure by the Government increases burden on it, but in the current budget, as the Government increased the capital Expenditure by 34-46% to Rs. 5.54 lakh crore, this will bear returns to the Government and proves to be a good decision for both, the Government and the people. The capital expenditure is a quality one that will help the Government for interest payments and for keeping the inflation in control that is not possible through Revenue Expenditure.
The budget focused on the growth and avoided the populism. The government ended the binary of Growth V. Inequality and put its faith in the growth that can be seen clearly. Absence of any income tax relief, no increase in standard deduction and no raise in the tax slabs shows that the government has realised to focus on growth and to increase its revenue. Instead of impressing the voters by changing the tax rates, the government laid the path to grow our economy through this budget.
After going through such a bad phase of Covid-19, the government paid a huge attention on the ‘Health’ in the Budget. A new scheme, titled PM Atma Nirbhar Swasthya Bharat Yojana is announced for launching to develop primary, Secondary and tertiary healthcare. Mission POSHAN 2.0 was mentioned in the budget to improve nutritional outcomes across 112 aspirational districts. The expenditure on health has been raised 137% to Rs. 2,23,846 crores in 2021-22 as compared with estimates of Rs. 94,452crores in 2021-22. The capital expenditure in respect to healthcare has been set as Rs. 5540 crores which is 35% more than the previous year’s budget estimate. Rs 35,000 crore are mentioned to provide for the covid-19 vaccine and promise was given to provide further funds, if required.
One of the major reforms is the disinvestment by the Government in the two-public-sector banks and one state-owned general insurance company. This is going to be a big change as the first time in the history of India, the government talked of the Privatisation in the budget. Besides that, the Foreign Direct Investments (FDI) in insurance is mentioned to be hiked to 74% from the current rate of 49%.
The 2021-22 Budget has focused a lot to improve the Infrastructure in the country. For fulfilment of this, the Govt. introduced the Vehicle Scrapping Policy to phase out old and unfit vehicles. Under this, all vehicles will undergo fitness test in automated fitness centres every 20 years (personal vehicles) and every 15 years (commercial vehicles). Besides that, it is laid down to introduce Development Bank or Development Financial Institution (DBI) that will provide loans to long gestation projects. Generally, the long-gestation projects face difficulties to take loans but this will help them a lot. A new DFI with a capital investment of Rs. 20,000crore by the Government will be introduced. It will have statutory backing but will be professionally managed. It is stated that its lending portfolio will be of Rs. 5 lakh crores within three years.
National Asset Monetising Pipeline to be launched to monitor asset monetisation process. This will not only put the useless assets to some use, but will also increase the liquidity of the government that can be used for the productive works and the generation of infrastructure.
Highway and road works were announced in Kerala, Tamil Nadu, West Bengal and Assam. Metro Services has been announced in 27 cities. And a national Rail Plan is created to bring a future ready Railway System by 2030.
After the presentation of Budget, we see a huge spike in the share market. One of the reasons behind that is the mention of Privatisation by the government. NITI Aayog asked to short-list the non-core PSUs for strategic sale. The government estimated its disinvestment receipts at Rs.1,75,000 crores as compared to around Rs. 15,000 crores in 2020-21. This provision will not only decrease the expenditure of the government, but will also increase the profits of these units, ultimately leading to the development of the economy.
The biggest limitation in the budget is the rate of Fiscal Deficit. The Fiscal Deficit is estimated at 9.5% in 2021-22 compared to 6.8% in the previous year and there are estimations of 4.5% in 2026. This is a very serious issue as the high Fiscal Deficit will lead to borrowings and higher interest rates on it. For this, we need to have a proper GDP growth system in order to pay-off the debts, otherwise we will fall in the debt-trap that is a very dangerous situation. Besides that, the borrowing that is planned by the government to be of Rs. 12 lakh crores can lead to downgrading of India’s Rating.
According to the economists and the financial experts, the market is booming after the introduction of the Union Budget of 2021-22. No doubt, we have seen a great spike in the share market that is a clear result of the provisions of the Budget. The Budget 2021 represents the first clear shift in India’s political economy in 30 years when major reforms in the form of LPG (Liberalisation, Privatisation and Globalisation) were introduced in 1991. Reforms of that time lost its main stream after 18 months due to Harshad Mehta Scam Case, resistance in Congress and many more. Now, after 30 years, we are having reforms on such a huge scale. And this time, the Modi Government showed that their sole focus is on the Growth of the economy. This is a very appreciable step as if the government chooses inequality from the binary of Growth V. Inequality, then neither poor nor rich is benefitted.