Union Budget 2022: Key Highlights; will it propel post pandemic Economic Growth?

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MBAUniverse.com Editorial Desk | Updated on February 03, 2022

 

Finance Minister Nirmala Sitharaman presented the Union Budget 2022-23 in Parliament on February 1. There were a host of measures for a number of sectors, aimed at boosting growth amid high & rising inflation. There, however, were few changes to the personal income tax structure and Union Budget 2022 India saw no major populist giveaways. Given the importance of Union Budget and its impact on Indian Economy and Industry, Union Budget 2022 is an important GD Topic.
 

Union Budget 2022: Top Highlights
Here are the key Budget 2022 highlights as announced by the Finance Minister Nirmala Sitharaman

  1. The government's total expenditure has been increased by 4.8 per cent to ₹ 39.5 lakh crore.
  2. A 30 per cent tax will apply on income from the sale or acquisition of virtual and digital assets such as cryptocurrency.
  3. There is no change to Income Tax slabs.Taxpayers can file updated income tax returns within two years in one-time window.
  4. The surcharge on long-term capital gains has been capped at 15 per cent.
  5. A Gati Shakti Master Plan for expressways to facilitate faster movement of people and goods. A data centre and energy storage system will be given infrastructure status to provide easy financing to the sector.
  6. A digital rupee will be introduced by the Reserve Bank of India in 2022-23.
  7. 5G mobile services will be rolled out in the country within the next financial year.
  8. e-Passports with embedded chips will be launched next year for more convenience to the public. In a big boost to the electric vehicles sector, battery swapping will be introduced.

Before we progress, let’s understand the key terms and a bit about the history of Union Budget India. 

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What is Union Budget?
The Union Budget is the blueprint of the Government’s revenue and expenditure for a fiscal year, starting from 1st April of one year to 31st March of the following year. It is presented during the month of February so that it can be materialized before the start of a new financial year. According to Article 112 of the Indian Constitution, it is an extensive financial statement that presents the Government’s estimation of revenue sources and estimated expenses for the year. It is classified into two parts – revenue budget and capital budget. Revenue budget contains the government's revenue receipts and expenditure, while the Capital Budget comprises of the government's capital receipts and payments.

 

The first Union Budget of India, a concept introduced when the country was still under the British colonial rule, was presented on 7th April, 1860, by the then Finance Minister of India, James Wilson. The first Union Budget India of Independent Nation was presented on November 26, 1947, by Sir R.K. Shanmugham Chetty, the first Finance Minister of Independent India. 

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Now, let’s check key highlights of Union Budget 2022 on various sectors of India

 

Overall Economy
Top focus of the budget this year are PM Gati Shakti, Inclusive Development, Productivity Enhancement, Sunrise Opportunities, Energy Transition, Climate Action, Financing of investments

  • Capital Expenditure target expanded by 35.4 per cent — from Rs 5.54 lakh crore to Rs 7.50 lakh crore. FY23 effective capex seen at Rs 10.7 lakh crore.
  • Budget noted that Productivity-linked incentive schemes in 14 sectors have received excellent response; has received investment intentions worth Rs 30 lakh crore

Overall, economic recovery is benefitting from public investment and capital spending. This Budget will provide further impetus to growth.

 

Expenditure and deficit & other key numbers

  • Proposed fiscal deficit of 4.5% of GDP by 2025/26
  • Projected fiscal deficit of 6.4% of GDP in 2022/23
  • Revised fiscal deficit for 2021/22 at 6.9% of GDP
  • Receipt from disinvestment proceeds in next financial year pegged at Rs 65,000 crore, lower than the current year's mobilisation of Rs 78,000 crore.

Taxes

  • Government promises a stable and predictable tax regime
  • The government will tax income from digital asset transfers at 30%
  • Governmentto provide one-time window to correct omissions in ITRs filed, updated returns to be filed within 2 years
  • Gift of cryptocurrencies to be taxed at receiver's end

Duties on Industry

  • Import duty on certain chemicals being/to be cut
  • Customs duty exemption on steel scrap will be extended for another year for MSMEs
  • Will revoke customs duty on stainless steel, flat products, high steel bars
  • Beginning October 2022, unblended fuel to get additional duty of Rs 2/litre
  • Import duty on cut and polished diamonds and gemstones to be cut 5 per cent and on sawn diamond to nil
  • Customs duty concessions to be given to certain consumer electronic devices to promote manufacturing across wearables, hearables and specific mobile phone components

Jobs

  • Efforts of central, state governments leading to jobs, entrepreneurial opportunities
  • Digital ecosystem for skilling and livelihood to be launched.
  • This will aims to skill, reskill, upskill citizens through online training.
  • API based skill credentials, payment layers to find relevant jobs and opportunities

Infrastructure & manufacturing sector

  • A lot of focus on this sector
  • Four multi-modal national parks contracts will be awarded in FY23
  • PM Gatishakti masterplan for expressways will be formulated in next financial year
  • 100 PM Gati Shakti terminals to be set up in next three years
  • Focus on public investment to modernise infrastructure over the medium term, leveraging tech platform of Gati Shakti via a multi-modal approach
  • PM Gati Shakti will pull forward the economy and will lead to more jobs and opportunities for the youth

Digital Currency

  • Launch of blockchainbasedDigital Rupee starting 2022-23
  • To launch scheme for taxation of virtual digital assets
  • Income from virtual digital assets to be taxed at 30%

Housing, Urban Planning, Real Estate Sector

  • Rs 48,000 crore is allotted for PM AwasYojana
  • In 2022-23, 80 lakh houses will be completed for identified beneficiaries of PM AwasYojana; 60,000 houses will be identified as beneficiaries for PM AwasYojana in rural & urban areas
  • 60,000 crore allocated for providing access to tap water to 3.8 crore households
  • In 2022-23, 80 lakh households will be identified for the affordable housing scheme
  • Rs 60,000 cr allocated to provide tap water connections to 3.8 crore households in 2022-23
  • Modern building by-laws will be introduced
  • A high-level panel to be set up for urban planning
  • Govt to promote use of public transport in urban areas

Start-ups & MSMEs Sector

  • Rs 6,000 crore programme to rate MSMEs to be rolled out over 5 years
  • MSMEs such as Udyam, e-shram, NCS &Aseem portals will be inter-linked, their scope will be widened
  • PE/VC invested Rs 5.5 lakh crore in startup, expert committee will be set up to suggest measures to help attract investment
  • Existing tax benefits for startups, which were offered redemption of taxes for 3 consecutive years, to be extended by 1 more year

Agriculture Sector

  • 2022-23 has been announced as International Year of Millets
  • Government to pay Rs 2.37 lakh crore towards procurement of wheat and paddy under MSP operations
  • Railways will develop new products for small farmers and MSMEs
  • A rationalised scheme to increase domestic oilseed production will be brought in to cut down imports
  • Kisan Drones for crop assessment, land records, spraying of insecticides expected to drive a wave of technology in agro sector
  • Ken Betwariver linking project worth Rs 44,605 crore announced. Draft DPRs for 5 river links have been finalised.
  • Finance startups to be incentives to aid rural enterprises
  • Natural farming will be promoted along Ganga river corridor
  • Govt will promote chemical-free natural farming throughout the country to boost sustainable agricultural productivity and income of farmers
  • A completely paperless, e-bill system will be launched by ministries for procurement
  • Financial support will be provided to farmers to take up agro-forestry

Electric Vehicles (EV) Sector

Banking & Finance Sector

  • Digital Rupee to be rolled out by 2023
  • Rs 1 lakh crore financial assistance to states to be provided in 2022-23 to catalyse investments
  • Proposed to introduce Digital Rupee by RBI using blockchain technology, starting 2022-23
  • Measures will be taken to step up private capital in infra sector
  • 100% of 1.5 lakh post offices will come on the core banking system, enabling financial inclusion and access to accounts through net banking, mobile banking, ATMs, and also provide online transfer of funds between post office accounts and bank accounts
  • 75 digital banks in 75 districts will be set up by scheduled commercial banks to encourage digital payments
  • The use of surety bonds as a substitute for bank guarantee will be made acceptable in government procurements

Healthcare Sector

  • An open platform for the national digital health ecosystem will be rolled out
  • It will consist of digital registries of health providers and health facilities, unique health identity and universal access to health facilities
  • 95 per cent of 112 aspirational districts have made significant progress in health, infra
  • For mental health counselling, a National Tele Mental Health Program will be launched

Ease of Business &Living

  • 75,000 compliances have been eliminated and 1,486 union laws repealed to make it easier for businesses
  • India to launch the next phase of Ease of Doing Business EODB 2.0 and Ease of Living.
  • Voluntary exit for corporates to be cut down to 6 months from 2 years
  • Special Economic Zones Act to be replaced with new legislation

Defence Sector

  • Government committed to reduce import and promote self-reliance in defence sector
  • 68 per cent of capital for defence sector to be earmarked for local industry
  • Defense R&D will be opened up for industry with 25% of defence R&D budget
  • Private industry will be encouraged to take up the design and development of military platforms and equipment in collaboration with DRDO and other organizations.

Climate & Net Zero

  • Energy transition and action on climate to be major priority for govt
  • Risks of climate change are strongest externalities for the world
  • Funds will be used for projects that will help reduce carbon intensity of the economy
  • Sovereign green bonds to be launched to fund green infra, to be part of government’s borrowing programme in FY23
  • Proceeds to be deployed in public sector projects
  • 4 pilot projects for coal gasification to be set up
  • Rs 19,500 cr additional allocation for PLI for manufacturing high efficiency solar modules has been made
  • Low carbon development strategy opens up employment opportunity

Union Budget 2021: Key Highlights, Analysis, Pros & Cons – GD Topic

Union Budget of a year, also referred to as the annual financial statement, is a statement of the estimated receipts and expenditure of the government for that particular year. Union Budget is the account of the government's finances for the fiscal year that runs from 1st April to 31st March. Union Minister of Finance and Corporate Affairs Smt. Nirmala Sitharaman presented 2021 Budget on 1.2.2021. Given the impact of Budget on Society, Business and Economy, this becomes a very important GD, WAT, Extempore, Interview topic for MBA Admissions and other competitive exams. MBAUniverse.com presents a detailed analysis of Budget 2021.

 

What is 'Union Budget'
According to Article 112 of the Indian Constitution, the Union Budget of a year, also referred to as the annual financial statement, is a statement of the estimated receipts and expenditure of the government for that particular year. Union Budget is the account of the government's finances for the fiscal year that runs from 1st April to 31st March. Union Budget is classified into Revenue Budget and Capital Budget.  

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What is Revenue Budget and Capital Budget?
Let’s understand this basic and important difference. Revenue budget includes the government's revenue receipts and expenditure. There are two kinds of revenue receipts - tax and non-tax revenue. Revenue expenditure is the expenditure incurred on day to day functioning of the government and on various services offered to citizens. If revenue expenditure exceeds revenue receipts, the government incurs a revenue deficit. Capital Budget includes capital receipts and payments of the government. Loans from public, foreign governments and RBI form a major part of the government's capital receipts. Capital expenditure is the expenditure on development of machinery, equipment, building, health facilities, education etc. Fiscal deficit is incurred when the government's total expenditure exceeds its total revenue.

 

Sectoral Impact

Sectors

Budget proposals

Impact on sectors

Auto

  • Promote Use of clean mobility in Urban centres
  • Battery swapping policy will be brought with standard of inter-operability to be announced.
  • Private sector will be allowed to develop battery as a service business model. 
  • Higher allocation of roads, railways and Infrastructure
  • Extension of production date for new manufacturing companies by 1yr to March-24 is beneficial for new companies and start-ups in BEVs 
  • Custom duty reduction for Electric vehicle component like Electric Motor to 7.5% from 10%
  • Custom duty reduction on Rhodium from 12.5% to 2.5% will be helpful for OEMs margin as it is used in exhaust gas treatment of ICE vehicles
  • INR 29.1 billion allocation to FAME II for Electric Vehicles, which is an increase of 2.6x in FY23 over FY22
  • (revised estimates for FY22 is INR 8 bn)

Neutral: Some positive for Electric Vehicle segments and broadly neutral for all other segment players

 

Investment allocation increase in infrastructure will have positive indirect impact on Commercial Vehicle segment.

 

Banks / NBFCs /

HFCs

  • Extension of ECLGS scheme: ECLGS extended up to Mar'23 and guarantee cover expanded by Rs0.5tn
  • (Exclusively for hospitality and related industries)
  • Revamp of CGTMSE scheme: Revamp of credit guarantee scheme with infusion of additional fund would result in higher credit towards the MSME sector (to the tune of INR 2 lac crs) 
  • Housing for All scheme: Allocations increased under PMAY/Housing for ALL scheme - FY22 RE raised to Rs474bn (BE was Rs275bn) and FY23 BE kept higher at Rs480bn
  • Land record Management: States will be encouraged to adopt Unique Land Parcel Identification Number to facilitate IT-based management of records.
  • Digital payments: Financial support announced in last budget to continue in current budget as well 
  • Digital Rupee: Introduction of digital Rupee, using blockchain and other technologies. 
  • Insolvency and Bankruptcy Code: Necessary amendments in the Code will be carried out to enhance the efficacy of the resolution process and facilitate cross border insolvency resolution

Positive: Positive for banks & NBFC’s - as MSME sector (including Hospitality sector) was more impacted due to pandemic. The extension as well as higher allocation would ensure that the sector comes out of pandemic strongly 

Positive: Would not only support higher credit growth for the sector, but would also ensure stable asset quality for Banks & NBFC

Positive: For Banks & HFC’s

Positive: For Banks & HFC’s, as this would facilitates easy access to finance

Positive: For the sector, as digital adoption will increase

Positive: Digital adoption would not only provide boost to digital economy, but would also lead to more efficient and cheaper currency management

Positive: Resolution of NPA would expedite

Capital goods

  • Custom duty exemption (or concessional duty rates) on certain capital goods/ project imports is being phased out in a gradual manner. Such capital good items include Machinery for Textile Industry, High Voltage Power Transmission Project, Parts for off- shore Oil exploration, Project imports for Power, Coal, Gas, Iron ore, Water supply, etc. 

Positive: Removal of concessional custom duty and restoration of higher duty (7.5%) is positive for domestic manufacturers of these capital goods as imports become costlier. 

Cement and building materials

  • Increased allocation for capex across sectors
  • Continued support for Housing for all with allocation for PMAY scheme maintained 
  • Ken Betwa river linking projects execution to start;
  • Draft DPR for another 5 river linking projects finalized

Positive: This can aid demand from housing and infrastructure sector

Coal

  • Blending of 5-7% biomass in coal-based power plants
  • Four pilot projects to be set-up to evaluate the technical and financial feasibility of coal gasification and coal-to-chemicals

Positive: Biomass blending will impact demand of coal by the power sector. However, impact is likely to be limited to 5-7% of overall coal demand. Success in coal gasification and coal-tochemical will aid domestic coal demand.

Consumer

  • Cigarettes- No increase in National Calamity Contingent Duty (NCCD)
  • Cut and Polished diamonds/ natural gemstones- Basic Custom duty will come down from 7.5% to 5.0%. Including Agri Infra and Development cess of 2.5%, total custom duty to come down from 10.0% to 7.5% . 
  • Additional excise duty of Rs2/litre on unblended fuel from 1st Oct-22 (promoting ethanol blending of fuel). 
  • MGNREGA program outlay for FY23 is INR 730b vs FY22RE of INR 980 bn (FY22BE: INR 730 bn). PM Kisan FY23 budget outlay is flat compared to FY22 revised estimates.
  • Pan Masala containing tobacco- abatement as % of retail sale price has come down from 60% to 55% (effectively increasing excise duty and taxes). 

Positive: it will benefit Cigarette companies as this will help in cigarette volume recovery.  

Positive: It will benefit Jewellery companies as this will lead to lower retail prices and boost volume.

Negative: Negative for Spirits companies as this will be inflationary for ENA (extra neutral alcohol) prices in medium to long term.

Negative:  Negative for FMCG companies as FY23 outlay is lower for MGNREGA and flat for PM Kisan compared to the revised FY22 budget outlay. Government schemes like MGNREGA, PM Kisan help boost rural demand.  

Negative: Negative for companies selling Pan masala (containing tobacco) as effective duty/ taxes increase.  

Defense

  • Defence capital budget raised by 10% yoy to INR 1.52 tn on FY22 RE (+13% yoy FY22 BE). Also, 68% of capital budget will be earmarked for domestic industry in FY23, up from 58% in FY22.

Positive: Higher capital outlay, lower imports should lead to higher order book for Defence companies.

Fertilizers

  • Total fertiliser subsidy allocation reduced to INR 1.05 trillion for FY23 from revised allocation of INR 1.40 trillion in FY22 but higher than FY20/21 allocation of ~INR 0.7-0.8 trillion. 

Neutral: Budget allocation has decreased despite the prevailing high global fertilizer prices, likely on expectation of some moderation in global prices from peaks of FY22. If fertilizer prices remain elevated it is likely that the government will increase budget allocation as it did in FY22. 

Healthcare

  • Ayushman Bharat allocation up marginally by 5% to INR 79 bn compared to FY22. FY22 has been revised up from INR 64 bn, possibly due to spillover of Covid led elective surgeries deferment from FY21 to FY22.
  • Healthcare expenditure budget is flat YoY at INR 862 bn compared to FY22 revised estimate.
  • Allocated INR 2 bn for National Digital Health Mission (NDHRM), up from INR 750 mn FY22 revised estimate.

Neutral. Ayushman Bharat is making treatment available to the “bottom of the Pyramid”. However, no major increase should not have any material impact.

Neutral. No increase in budget will have a neutral impact for the healthcare sector, including pharmaceuticals.

Positive. NDHRM would boost tele-medicine and expand quality healthcare services into tier-II/III towns without commensurate need to build physical infrastructure.

Infrastructure

  • Overall capital outlay increased by 19% to INR 11.3 tn on FY22RE and includes INR 7.5 tn (+35%) capital outlay by various Ministries and INR 3.8 tn of ExtraBudgetary Resources. 
  • Roads: Total outlay increased from INR 1.86 tn to INR 1.88 tn (+8% on FY22 BE).  National Highways network to be expanded by 25,000 kms in FY23. 
  • Railways: Capex increased by 14% to INR 2.46 tn vs INR 2.15 tn in FY22 BE. 400 new-generation Vande-Bharat Trains with better energy efficiency and passenger riding experience will be developed, manufactured over next 3 years. 
  • River-linking projects: Implementation of Ken Betwa river linking project at cost of Rs446 bn will be taken up. Also, draft DPR of 5 river links including Damanganga-Pinjal, Par-Tapi- Narmada, GodavariKrishna, Krishna-Pennar and Pennar-Cauvery have been finalized. 
  • Har Ghar, Nal Se Jal (Drinking Water projects):  Allocation of Rs600 bn aimed to cover 38 mn households in FY23. 
  • Sovereign Green Bonds will be issued for mobilizing resources for green infrastructure and proceeds will be deployed in public sector projects which help in reducing the carbon intensity of economy.
  • Parvatmala: National Ropeways Development
  • Program. Contracts for 8 ropeway projects for a length of 60 km will be awarded in FY23—these projects will be taken on PPP mode. 
  • Housing for All. Government has allocated Rs480 bn for completion of 8 mn houses for beneficiaries of PM Awas Yojana. 

Positive: Higher capital spends will aid order inflows, revenue growth for Industrial and EPC companies. 

Positive: Good traction in road sector awarding to continue. 

Positive: Higher capex will aid demand for Industrial, EPC companies. Steel companies will benefit from higher demand for rails led by new lines, track renewals, new coaches. 

Positive: These River-linking projects can entail large capital outlay over next few years and aid revenues of EPC, Industrial companies. It will also aid demand for steel and cement companies.  

Positive: Higher capital lay will aid order inflows for EPC, Pipe, Steel companies, etc. 

Positive: Green Bonds will aid capex in clean energy infrastructure. This will aid order flows for EPC, Industrial companies.   

Positive: Higher capital lay will aid order inflows for EPC, Steel, Wire rope companies, etc. 

IT Services

  • No major announcement impacting the sector

No immediate impact but Medium-term Positives:

Higher borrowing target and fiscal deficit could mean a weaker INR over time. Rupee depreciation improves profitability in the near term and competitiveness in the medium term for the sector.

Focus on digitisation (such as National Digital Health Ecosystem, digitisation of land records, 100% availability of post offices on core banking platform etc) would provide tailwinds to IT Services spending. But, won’t have a meaningful impact on sector growth, as exports contribute to ~80% of revenues

Logistics

  • Contract for set-up of Multimodal Logistics Parks at four locations through PPP mode will be awarded in 2022-23
  • PM GatiShakti Master Plan for Expressways to be formulated in 2022-23. Govt to spend ₹200bn to expand the National Highways network by 25000kms
  • 100 Cargo Terminals for multimodal logistics facilities will be developed during the next three years

Positive: To facilitate multi-modal logistics in the country and help bring down the logistics costs

Sectors

  • Budget proposals

Impact on sectors

Metals

  • Exemption of Basic custom duty on steel scrap (earlier 2.5%) extended to March 31, 2023 from March 31, 2022. 

 

 

  • Anti-dumping duty permanently revoked on imports of certain steel products from China, Vietnam and Korea.  

 

 

Neutral: Extension of exemption of Basic custom duty on steel scrap will continue to aid lower production costs for long steel companies for another year.  

Neutral: Steel prices at present and for past few years are much higher than rates set for antidumping duty. While anti-dumping duty could have aided domestic prices in case of sharp fall in steel prices on imports from these regions in future, near-to-medium term impact is neutral given much higher steel prices at present.  

Oil & gas

  • LPG DBTL subsidy provision for FY22 at INR 34 bn and FY23 at INR 40bn
  • Additional differential excise duty of Rs2/litre on unblended fuel
  • Customs duty on certain chemicals like methanol, acetic acid and heavy feed stocks for petroleum refining are reduced by 2.5%
  • Customs duty on certain refining products like FO, VGO and VR are reduced from 5% to 2.5%
  • Concessional BCD Rate removal for certain units required in set-up of petroleum refining from 2022/2023 onwards
  • Concessional BCD removal for CNG conversion kits and its parts from 2022
  • Concessional BCD Rate removal for certain units required in set-up of petroleum refining from 2022/2023 onwards
  • Concessional BCD removal for CNG conversion kits and its parts from 2022

Negative: Budgetary provision could prove to be inadequate if prices are not increased in the scenario of oil prices remaining at $80/b 

Neutral: This is to encourage blending of ethanol/bio diesel into Petrol and Diesel.

Netural: Overall exposure to these is limited in the refining mix for most refiners

Mixed: Negative for FO producing refiners but positive for FO/VGO importing refiners

Negative: Refining capex for any new expansion will likely increase from 2023 onwards

Negative: Cost of conversion kits will increase marginally

Negative: Refining capex for any new expansion will likely increase from 2023 onwards

HPCL is likely to have installed these units before 2023 so should remain insulated from the same for its current ongoing capex program

Negative: Cost of conversion kits will increase by 7-8% but this is unlikely to impact conversion in any meaningful way

Pharmaceuticals

  • INR 50 bn allocation for Covid-19 vaccination, down from FY22 revised estimate of INR 390 bn.
  • Department of pharmaceuticals (under Ministry of Chemicals and Fertilisers) allocation of INR 22.4 bn up from FY22 of INR 8 bn mainly led by PLI schemes already announced.
  • Jan Aushadhi allocation increased by 10% to INR 720 mn.

Negative. Govt.’s curtailed procurement program will create oversupply situation for vaccine manufacturers.

Neutral. Already known, nothing incremental here.

Neutral. Jan Aushadhi is a small part of the market and do not pose a significant threat to the private players

Power

  • Promoting domestic solar manufacturing by increasing the PLI scheme allocation by INR 19,400cr and import duty w.e.f. April 2022 of 25% on solar cells and 40% on solar modules 
  • Increase in import duty on smart meters from 15% to 25% and PCB for smart meters from 10% to 20% to
  • promote local manufacturing

Positive: The budget proposals are in positive direction. Support to Make-in-India through PLI schemes and import duties will encourage manufacturing.

Real Estate

  • 8 mn houses to be completed in FY23 under the PM Awas Yojana
  • Allocation of INR 480bn for PMAY schemes represent continued support for the scheme
  • Rationalization of TDS on sale of immovable property having consideration of less than INR 5mn 
  • Data Centers to be included in harmonized list of Infrastructure which will facilitate credit availability
  • Central Government will work with the state governments for reduction of time required for all land and construction related approvals, for promoting affordable housing for middle class and
  • Economically Weaker Sections in urban areas

Neutral: Affordable housing and Housing for all remains focused area for government. Data Centers getting infrastructure sector to drive increased investment in the space.

Telecom

  • 5G Spectrum Auction in FY23; Receipt from communication services expected at INR528bn
  • PLI for 5G equipment, already announced earlier.
  • Digital connectivity for villages through implementation of BharatNet under PPP

Neutral: Auction timeline was widely expected. Also, there are expectation that reserve price for 5G spectrum will be lowered, govt budgeted receipt from the sector points to this possibility

Positive: If PLI gets interest from network equipment supplier, overall costs for the industry is likely to come down

Positive: Improved fibre connectivity to not only increase digital penetration but will also bring reduced backhaul costs for telecom operators

Source: HDFC Mutual Fund

Union Budget 2021

Union Minister of Finance and Corporate Affairs Smt. Nirmala Sitharaman presented 2021 Budget on 1.2.2021. She said that India’s fight against COVID-19 continues into 2021 and that this moment in history, when the political, economic, and strategic relations in the post-COVID world are changing, is the dawn of a new era – one in which India is well-poised to truly be the land of promise and hope.

The key highlights of the Union Budget 2021-22 are as follows:

 

6 pillars of the Union Budget 2021-22: 
Budget 2021 is based on six key 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 

Let us understand key proposals and initiatives for each of these.

 

1. Health and Wellbeing 
In the context of COVID 19, Health was the focus of Budget 2021.  Here are more details:

  • Massive Increase in Health Spending: Rs. 2,23,846 crore outlay for Health and Wellbeing in BE 2021-22 as against Rs. 94,452 crore in BE 2020-21 – an increase of 137%.
  • Focus on strengthening three areas: Preventive, Curative, and Wellbeing
  • Rs. 35,000 crore for COVID-19 vaccine in BE 2021-22
  • Rs. 64,180 crore outlay over 6 years for PM Aatma Nirbhar Swasth Bharat Yojana – a new centrally sponsored scheme to be launched, in addition to NHM
  • Mission Poshan 2.0 to be launched to strengthen nutritional content, delivery, outreach, and outcome.
  • Universal Coverage of Water Supply. Rs. 2,87,000 crore over 5 years for Jal Jeevan Mission (Urban) - to be launched with an aim to provide 2.86 crore household tap connections
  • Scrapping Policy announced. Voluntary vehicle scrapping policy to phase out old and unfit vehicles.

2. Physical and Financial Capital and Infrastructure 

  • Production Linked Incentive scheme (PLI). Rs. 1.97 lakh crore outlay in next 5 years for PLI schemes in 13 Sectors to create and nurture manufacturing global champions for an AatmaNirbhar Bharat. PLIs to help manufacturing companies become an integral part of global supply chains, possess core competence and cutting-edge technology.
  • Textiles: Mega Investment Textiles Parks (MITRA) scheme, in addition to PLI launched. 7 Textile Parks to be established over 3 years. Textile industry to become globally competitive, attract large investments and boost employment generation & exports.

Infrastructure: National Infrastructure Pipeline (NIP) expanded to 7,400 projects. Around 217 projects worth Rs. 1.10 lakh crore completed. Measures in three thrust areas to increase funding for NIP:

  1. Creation of  institutional structures
  2. Big thrust on monetizing assets
  3. Enhancing the share of capital expenditure

Big thrust on monetizing assets: National Monetization Pipeline to be launched. Important asset monetization measures to be taken:

  1. 5 operational toll roads worth Rs. 5,000 crore being transferred to the NHAIInvIT
  2. Transmission assets worth Rs. 7,000 crore to be transferred to the PGCILInvIT
  3. Dedicated Freight Corridor assets to be monetized by Railways, for operations and maintenance, after commissioning
  4. Next lot of Airports to be monetized for operations and management concession
  5. Other core infrastructure assets to be rolled out under the Asset Monetization Programme:
    • Oil and Gas Pipelines of GAIL, IOCL and HPCL
    • AAI Airports in Tier II and III cities
    • Other Railway Infrastructure Assets
    • Warehousing Assets of CPSEs such as Central Warehousing Corporation and NAFED
    • Sports Stadiums
  • Roads and Highways Infrastructure: Rs. 1,18,101 lakh crore, highest ever outlay, for Ministry of Road Transport and Highways – of which Rs. 1,08,230 crore is for capital.
  • Railway Infrastructure: Rs. 1,10,055 crore for Railways of which Rs. 1,07,100 crore is for capital expenditure.
  • Urban Infrastructure: Raising the share of public transport in urban areas by expansion of metro rail network and augmentation of city bus service.
  • Power Infrastructure: 139 Giga Watts of installed capacity and 1.41 lakh circuit km of transmission lines added, and additional 2.8 crore households connected in past 6 years. Consumers to have alternatives to choose the Distribution Company for enhancing competitiveness.
  • Petroleum & Natural Gas: Extention of Ujjwala Scheme to cover 1 crore more beneficiaries.
  • Financial Capital: A single Securities Markets Code to be evolved. Support for development of a world class Fin-Tech hub at the GIFT-IFSC.
  • Increasing FDI in Insurance Sector: To increase the permissible FDI limit from 49% to 74% and allow foreign ownership and control with safeguards.
  • Company Matters: Many important steps were announced. Like to decriminalize the Limited Liability Partnership (LLP) Act, 2008. Easing Compliance requirement of Small companies by revising their definition under Companies Act, 2013 by increasing their thresholds for Paid up capital from “not exceeding Rs. 50 Lakh” to “not exceeding Rs. 2 Crore” and turnover from “not exceeding Rs. 2 Crore” to “not exceeding Rs. 20 Cr”.

Disinvestment and Strategic Sale: This was another important aspect. Rs.  1,75,000 crore estimated receipts from disinvestment in BE 2020-21. Steps announced were:

  • Strategic disinvestment of BPCL, Air India, Shipping Corporation of India, Container Corporation of India, IDBI Bank, BEML, Pawan Hans, Neelachal Ispat Nigam limited etc. to be completed in 2021-22.
  • Other than IDBI Bank, two Public Sector Banks and one General Insurance company to be privatized
  • IPO of LIC in 2021-22
  • New policy for Strategic Disinvestment approved;  CPSEs except in four strategic areas to be privatized
  • NITI Aayog to work out on the next list of CPSEs to be taken up for strategic disinvestment
  • Incentivizing States for disinvestment of their Public Sector Companies, using central funds
  • Special Purpose Vehicle in the form of a company to monetize idle land
  • Introducing a revised mechanism for ensuring timely closure of sick or loss making CPSEs

3. Inclusive Development for Aspirational India
This was the third pillar of Budget 2021 and included Agriculture reforms. Lets note the key initiatives.  

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Agriculture:  

  • Ensured MSP at minimum 1.5 times the cost of production across all commodities.
  • With steady increase in the procurement, payment to farmers increased as under:                                                                                                    
 
2013-14 (in Rs. crore)
2019-20 (in Rs. crore)
2020-21 (in Rs. crore)
Wheat
Rs. 33,874
Rs. 62,802
Rs. 75,060
Rice
Rs. 63,928
Rs. 1,41,930
Rs. 172,752
Pulses
Rs. 236
Rs. 8,285
Rs. 10,530
  • SWAMITVA Scheme to be extended to all States/UTs,  1.80 lakh property-owners in 1,241 villages have already been provided cards Migrant Workers and Labourers: One Nation One Ration Card scheme for beneficiaries to claim rations anywhere in the country was announced. Migrant workers to benefit the most.

4. Reinvigorating Human Capital
Education sector was the fourth pillar of Union Budget 2021. Here are the key initiatives:

  • School Education: 15,000 schools to be strengthened by implementing all NEP components. Shall act as exemplar schools in their regions for mentoring others. 100 new Sainik Schools to be set up in partnership with NGOs/private schools/states.  
  • Higher Education: Legislation to be introduced to setup Higher Education Commission of India as an umbrella body with 4 separate vehicles for standard-setting, accreditation, regulation, and funding.
  • Skilling: Proposed amendment to Apprenticeship Act to enhance opportunities for youth was announced. Rs. 3000 crore for realignment of existing National Apprenticeship Training Scheme (NATS) towards post-education apprenticeship, training of graduates and diploma holders in Engineering was mentioned.

5. Innovation and R&D
Innovation and RD was the fifth pillar. · National Research Foundation (announced in July 2019) will have Rs. 50,000 crore outlay over 5 years to strengthen overall research ecosystem with focus on national-priority thrust areas.

 

6. Minimum Government, Maximum Governance
Finally, Governance was the last pillar. Rs. 3,768 crore allocated for first digital census in the history of India.

 

Tax Proposals
One of the highlights of Budget 2021 was that no new taxes were announced.  Budget noted following:

 

1. Direct Taxes
Achievements: 

  • Corporate tax rate slashed to make it among the lowest in the world
  • Burden of taxation on small taxpayers eased by increasing rebates
  • Return filers almost doubled to 6.48 crore in 2020 from 3.31 crore in 2014
  • Faceless Assessment and Faceless Appeal introduced

 Relief to Senior Citizens: 

  • Exemption from filing tax returns for senior citizens over 75 years of age and having only pension and interest income; tax to be deducted by paying bank Attracting Foreign Investment for Infrastructure:
  • Infrastructure Debt Funds made eligible to raise funds by issuing Zero Coupon Bonds
  • Relaxation of some conditions relating to prohibition on private funding, restriction on commercial activities, and direct investment

Supporting ‘Housing for All’:

  • Additional deduction of interest, up to Rs. 1.5 lakh, for loan taken to buy an affordable house extended for loans taken till March 2022
  • Tax holiday for Affordable Housing projects extended till March 2022
  • Tax exemption allowed for notified Affordable Rental Housing Projects

2. Indirect Taxes

 

GST: 
Measures taken till date:

  • Nil return through SMS
  • Quarterly return and monthly payment for small taxpayers
  • Electronic invoice system
  • Validated input tax statement
  • Pre-filled editable GST return
  • Staggering of returns filing
  • Enhancement of capacity of GSTN system
  • Use of deep analytics and AI to identify tax evaders

Electronic and Mobile Phone Industry:

  • Some exemptions on parts of chargers and sub-parts of mobiles withdrawn
  • Duty on some parts of mobiles revised to 2.5% from ‘nil’ rate

Achievements and Milestones during the COVID-19 pandemic
Budget noted following achievements by government during the COVID-19 pandemic:

  • Pradhan Mantri Garib Kalyan Yojana (PMGKY):
    • Valued at Rs. 2.76 lakh crore
    • Free food grain to 80 crore people
    • Free cooking gas for 8 crore families
    • Direct cash to over 40 crore farmers, women, elderly, the poor and the needy
  • AatmaNirbhar Bharat package (ANB 1.0):
    • Estimated at Rs. 23 lakh crore – more than 10% of GDP
  • PMGKY, three ANB packages (ANB 1.0, 2.0, and 3.0), and announcements made later were like 5 mini-budgets in themselves
  • Rs. 27.1 lakh crore worth of financial impact of all three ANB packages including RBI’s measures – amounting to more than 13% of GDP
  • Structural reforms:
    • One Nation One Ration Card
    • Agriculture and Labour Reforms
    • Redefinition of MSMEs
    • Commercialisation of the Mineral Sector
    • Privatisation of Public Sector Undertakings
    • Production Linked Incentive Schemes
  • Status of India’s fight against COVID-19:
    • 2 Made-in-India vaccines – medically safeguarding citizens of India and those of 100-plus countries against COVID-19
    • 2 or more new vaccines expected soon
    • Lowest death rate per million and the lowest active cases

Political & Industry Reactions to Budget 2021
Overall, Industry has liked and praised the Budget 2021. Stock Market was up nearly 5% on the Budget day! Opposition parties have of course criticized the budget. Here are some reactions:

 

Historic budget with growth as the centre piece: CII president
CII president Uday Kotak said: “Delivering on her promise of unveiling a ‘Budget Like No Other’, the Finance Minister announced a raft of prudent measures aimed at rejuvenating government spending towards critical areas of increasing allocation on infrastructure expansion, education, housing and health as India rolls out a vaccine drive to inoculate 1.3 billion people.”​

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Proposed tax relief bypasses tax paying working class, middle class: 

 

P. Chidambaram
According to Former Finance Minister P. Chidambaram, the proposed tax reliefs completely bypass the tax paying working class and tax paying middle class. "As expected, the FM has paid special attention to election bound states. She announced large capital outlays for Kerala, Tamil Nadu, West Bengal and Assam," he said.

 

A reassuring Budget: Biocon CEO KM Shaw
Kiran Mazumdar Shaw, executive chairperson, Biocon Ltd.: “Overall, a reassuring Budget with no negative surprises that has buoyed overall sentiment. Healthcare & well-being has received top priority in this Budget, with more than doubling of the outlay to ₹2,23,846 crore, including the allocation of ₹35,400 crore towards COVID-19 vaccination and ₹64,184 Cr for a new scheme to strengthen the country’s primary, secondary and tertiary health infrastructure.”

 

Budget justifiably focused on resetting the Indian economy: Cognizant India chairman
Rajesh Nambiar, chairman and managing director for India, Cognizant: “Coming as it does during an unprecedented global crisis, the Union Budget for 2021 is justifiably focused on resetting the Indian economy and enabling it to emerge from the shadows of a prolonged and unforeseen disruption.”

 

Given the impact of Budget on Society, Business and Economy, this becomes a very important GD, WAT, Extempore, Interview topic for MBA Admissions and other competitive exams. Hope you found this MBAUniverse.com detailed analysis of Budget 2021 useful. 

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