The novel coronavirus pandemic-induced crisis resulted in a substantially disrupted Indian economy and left lasting impacts in every sector, including but not limited to health, nutrition, education, water and employment; thereby, affecting the marginalised sections of the country’s population most relentlessly. Notably, India has also been witnessing a pre-pandemic slowdown, and the current challenges have magnified pre-existing risks to the economic outlook.
Soaring demands on public-spending nudged the government to provide a fiscal stimulus package towards reviving services amidst the pandemic; however, the fiscal response has been weak, with a more formidable government support being needed.
Against this backdrop, the Union Budget would prove to be very crucial for the future of the Indian economy. On February 1, 2021, Union Finance Minister Nirmala Sitharaman presented the Union Budget 2021. Economists hailed the minister for a bold budget focused on fiscal expansion but flagged concerns over the proposals for not addressing the problems of inequitable growth, among others.
Highlights and Key Takeaways from the Union Budget 2021-22
Finance Minister Nirmala Sitharaman presented her third Union Budget in the Parliament and revised the expenditure target for FY 2021 at Rs 34.50 lakh crore. The Budget expects to focus on boosting spending on job creation and rural development, generous allocations for development schemes, placing more money in the hands of the average taxpayer, as well as easing rules to attract foreign investments.[1]
•Infrastructure:
The Union Budget has given a much-needed impetus to infrastructure development which might help ameliorate trade and transaction costs, and improve factor productivity. The focus area of the first-ever paperless Budget has pointed toward this sector.
1. There has been the announcement of a much-awaited voluntary vehicle scrapping policy to phase out old and polluting vehicles. All automobiles will undergo a fitness test in automated fitness centres every 20 years for personal vehicles and every 15 years for commercial ones.
2. The government declared a Rs 18,000 crore scheme to augment public transport in urban areas. A 100% electrification of broad gauge rail tracks is expected by December 2023. Alongside, a record Rs 1,10,055 crore will be provided for railways, of which Rs 1,07,100 crore will be for capital expenditure in 2021-22.
3. Pipelines of GAIL (India) Ltd, Indian Oil Corp (IOC) and HPCL will be monetised. A National Asset Monetising Pipeline was propelled to monitor asset monetisation process. Devising operating public infrastructure assets is a very crucial financing option for new infrastructure construction.
4. A National Hydrogen Mission, which aims at generating hydrogen from green power sources, was presented.
5. The existing free cooking gas LPG scheme will be extended to one crore more beneficiaries. Furthermore, the city gas distribution network of providing CNG to automobiles and piped cooking gas to households, will be expanded to 100 more districts.
• Agriculture:
An Agriculture infrastructure fund will be made available for APMCs (Agricultural Produce & Livestock Market Committee) to raise their infrastructure. Additionally, 1,000 more mandis are to be integrated into the E-NAM market place. Rs 16.5 lakh crore has been devoted to the growth of this sector.
• Employment:
A portal will be launched to maintain information on gig workers and construction workers, providing them with social security.
• Education:
100 new Sainik schools and 750 Eklavya schools to be set up in tribal areas.
• Health and Sanitation:
1. A new scheme, titled PM Atma Nirbhar Swasthya Bharat Yojana with an outlay of Rs 64,180 crore, is to be instituted to develop primary, secondary and tertiary healthcare.
2. Mission POSHAN 2.0 will try and improve nutritional outcomes across 112 aspirational districts.
3. A total of Rs 35,000 crore towards COVID-19 vaccination programme, is allocated in 2021.
4. The Budget disbursement for health and well-being is Rs 2.23 lakh crore in 2021-22 against the BE of Rs 94,452 crore and marks an increase of 137% compared to the previous fiscal year.
• Tax:
1. There will be no IT filing for people above 75 years who get pension and earn interest from the deposit.
2. There is an introduction of affordable housing projects to get a tax holiday for one year and a compliance burden of small trusts whose annual receipts do not exceed Rs. 5 crores to be eased.
3. Duty has been increased on various goods and items.
4. Agriculture infrastructure and development cess on certain items was levied.
5. In a boost to NRIs, Government to notify rules to eliminate double tax for NRIs on foreign retirement funds.
• Economy and Finance:
1. The government proposed a Rs 1,500 crore-scheme to promote digital payments in the country.
2. A Unified Securities Market Code is to be created, consolidating provisions on the Sebi Act, Depositories Act, and two other laws.
3. Deposit insurance was increased from Rs 1 lakh to Rs 5 lakh for bank depositors.
4. The strategic sale of BPCL, IDBI Bank, and Air India was authorised.
What It Fails to Address
While the budget covers some essential concerns of the economy and looks at an
Atmanirbhar Bharat, it fails to address some fundamental matters that affect most of the population. It does not adequately address concerns over inequitable growth which has been a worry across the globe due to the pandemic. There is no paramount attempt to redistribute incomes by boosting taxes on high-income groups. Furthermore, there has been no specific support for sectors stressed due to the pandemic, like the hospitality sector. As cesses and surcharges do not form a part of the divisible tax pool of central taxes, the union government’s increasing reliance on them has invited criticisms from several states in the recent past. The economic dislocations by the pandemic and their impact on tax collections have already meant a setback for the states on account of shortfalls in GST collections.[2] It further misses the opportunity to use fiscal measures to revive the feeble economy.
Conclusion
The 2021 Union Budget is holistic in approach. It concurs to a steadfast economic growth and heads in the direction of strong intent for reforms. In an attempt to provide a significant thrust to Aatmanirbhar Bharat, the government has chosen to increase its expenditure without imposing new taxes or cess on income. The combined stimulus from additional government spending without any additional taxation shows positive signs of a speedy economy. But we must note that only the correct implementation of the policies can guarantee a favourable result. All the more, significant concerns are yet to be answered, and with the steady mounting inequality among classes, the Budget does not show any signs of moving away from the unequal republic. So, the main question remains. Can the ailing economy power through the brink of a recession or does it need much more than what the 2021 Budget offers?
Article by-
Sakshi Puri,
Co-Editor, For The Record,
PES MUN Society, RR Campus
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