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

X

Register for CAT 2021 & MBA Admissions Updates

close

MBA/PGDM ADMISSION 2022 ALERT 
Check Admission Status of Top B-schools & Apply Now

B-school  Application Status Last Date
Great Lakes Chennai Open | Apply Now December 05
IMI New Delhi Open | Apply Now December 13
MICA Ahmedabad Open | Apply Now January 16
TAPMI Manipal Open | Apply Now December 11
GIM Goa Open | Apply Now December 06
LBSIM Delhi Open | Apply Now Closing soon
SDA Bocconi Asia Center Open | Apply Now Closing soon
K J Somaiya Mumbai Open | Apply Now January 31

Register now for latest MBA Exam & Admissions Updates

MBAUniverse.com Editorial Desk | Updated on February 02, 2021

 

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.  

MBA/PGDM Admissions 2022 Open | Apply Now
IMI New Delhi Admissions 2022 Last date Dec 13
LBSIM Delhi PGDM Admission 2022
BIMTECH Greater Noida PGDM Admissions

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.

 

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.  

MBA/PGDM Admissions 2022 Open | Apply Now
IMI New Delhi Admissions 2022 Last date Dec 13
LBSIM Delhi PGDM Admission 2022
BIMTECH Greater Noida PGDM Admissions

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.”​

BBA Admissions Open 2021 | Apply Now!
IFIM College Bangalore  BBA Admissions Open 2021 IPM/BBA/BMS Exam Join Crash Course by IMS Coaching
IMS Ghaziabad (University Courses Campus) BBA Admission JAGSOM BBA Admissions Open 2021

 

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. 

MBA/PGDM Admissions 2022 Open | Apply Now
IMI New Delhi Admissions 2022 Last date Dec 13
MICA PGP (PGDM-C/PGDM) Admissions 2022

 

Read More GD Topics

 

Also read: