Highlights Of India’s Union Budget 2021-22
The year 2020 witnessed novel COVID-19 virus and the resultant pandemic which emerged as the biggest threat to humanity and economic growth in the century. Amidst the global health emergency experienced, the resolve of Indian government helped to find its way to ‘Saving Lives & Livelihoods’. The foresight of the collective vision to battle this pandemic became evident when policy insights and implementation at the Centre, State and local level converged to initiate a V-shaped economic recovery. India’s response stemmed from the humane principle that while GDP growth will recover from the temporary shock caused by an intense lockdown, human lives that are lost cannot be brought back. This strategy was also tailored to India’s unique vulnerabilities to the pandemic. While the lockdown resulted in a 23.9% contraction in GDP in Q1, the recovery has been V-shaped as seen in the 7.5% decline in Q2 and the recovery across all key economic indicators as mentioned in the Economic Survey 2020-21.
The V-shaped economic recovery is supported by the initiation of a mega vaccination drive with hopes of a robust recovery in the services sector. Together, prospects for robust growth in consumption and investment have been rekindled with the estimated real GDP growth for FY 2021-22 at 11%. On the supply side, GVA growth is pegged at -7.2% in 2020-21 as against 3.9% in 2019-20. Only Agriculture contributed to positive growth while Service and Industry contributed to the contraction in GDP.
Agriculture is set to cushion the shock of the COVID-19 pandemic on the Indian economy in 2020-21 with a growth of 3.4% – resulting in an increase in its share in GDP to 19.9% in 2020-21 from 17.8% in 2019-20. Industry and Services are estimated to contract by 9.6% and 8.8% during the year. Within Industry, Mining is estimated to contract by 12.4%, Manufacturing by 9.4% and construction by 12.6%. The utilities sector has shown a sharp recovery and is set to register positive growth of 2.7% in 2020-21. Within Services Sector, trade, hotels, transport & communication are estimated to contract by 21.4%.
Let us first understand from the Union Budget 2021-22 about how the money comes in and how it is utilized among the various sectors.
The sector-wise highlights and impact of the Union Budget 2021-22 are as follows:
- PM Atma Nirbhar Swasth Bharat Yojana to be launched with an outlay of INR 64,180 crore (INR 641.8 Billion) over 6 years.
- To merge the Supplementary Nutrition Programme and the Poshan Abhiyan and launch the Mission Poshan 2.0 in order to strengthen nutritional content.
- Jal Jeevan Mission (Urban) to be launched for universal water supply in all 4,378 Urban Local Bodies with 2.86 crore household tap connections, as well as liquid waste management in 500 AMRUT cities with an outlay of INR 2,87,000 crore (INR 2,870 Billion) over 5 years.
- Urban Swachh Bharat Mission 2.0 to be implemented with a total financial allocation of INR 1,41,678 crore (INR 1,416.78 Billion) over 5 years.
- Outlay of INR 2,217 crore (INR 22.17 Billion) for 42 urban centres to tackle the problem of air pollution.
- Separate announcement of voluntary vehicle scrapping policy, to phase out old and unfit vehicles to encourage fuel-efficient, environment-friendly vehicles, thereby reducing vehicular pollution.
- INR 35,000 crore (INR 350 Billion) for Covid-19 vaccine in Budget Estimates (BE) 2021-22.
- Total allocation to Health and Wellbeing to be INR 2,23,846 crore (INR 2,238.46 Billion) in BE 2021-22 as against the BE of 2020-21 of INR 94,452 crore (INR 944.52 Billion) an increase of 137%.
- Introduction of a Bill to set up a professionally managed DFI. Allocation of a sum of INR 20,000 crore (INR 200 Billion) to capitalize this institution with an ambition to have a lending portfolio of at least INR 5 lac crore (INR 5 Trillion) for this DFI in three years’ time.
- For FY 2021-22, increase in capital expenditure to INR 5.54 lac crore (INR 5.54 Trillion) which is 34.5% more than the BE of 2020-21.
- To augment road infrastructure, more economic corridors being planned with an enhanced outlay of INR 1,18,101 crore (INR 1,181.01 Billion) for the Ministry of Road Transport and Highways.
- Indian Railways have prepared a National Rail Plan for India – 2030. The Plan is to create a ‘future-ready’ Railway system by 2030 with a record sum of INR 1,10,055 crore (INR 1,100.55 Billion), for Railways of which INR 1,07,100 crore (INR 1071 Billion) is for capital expenditure.
- A new scheme to be launched at a cost of INR 18,000 crore (INR 180 Billion) to support the augmentation of public bus transport services. The scheme to facilitate deployment of innovative PPP models to enable private sector players to finance, acquire, operate and maintain over 20,000 buses.
- Two new technologies i.e., ‘MetroLite’ and ‘MetroNeo’ to be deployed to provide metro rail systems at a much lesser cost with the same experience, convenience and safety in Tier-2 cities and peripheral areas of Tier-1 cities.
- Central counterpart funding to be provided to a number of Metro Railway projects.
- A revamped reforms-based result-linked power distribution sector scheme to be launched with an outlay of INR 3,05,984 crore (INR 3,059.84 Billion) over 5 years to provide assistance to DISCOMS for Infrastructure creation.
- Hydrogen Energy Mission to be launched in 2021- 22 for generating hydrogen from green power sources.
- 7 projects worth more than INR 2,000 crore (INR 20 Billion) to be offered by the Major Ports on Public Private Partnership mode in FY21-22.
- A scheme to promote flagging of merchant ships in India to be launched by providing subsidy support to Indian shipping companies in global tenders floated by Ministries and CPSEs for which an amount of INR 1624 37%.
- Provisions of SEBI Act, 1992, Depositories Act, 1996, Securities Contracts (Regulation) Act, 1956 and Government Securities Act, 2007 to be consolidated into a rationalized single Securities Markets Code.
- Amendments proposed in the Insurance Act, 1938 to increase the permissible FDI limit from 49% to 74% in Insurance Companies and allow foreign ownership and control with safeguards.
- An Asset Reconstruction Company Limited and Asset Management Company to be set up to consolidate and take over the existing stressed debt of public sector banks and then manage and dispose of the assets to Alternate Investment Funds and other potential investors for eventual value realization.
- For NBFCs with a minimum asset size of INR 100 crore (INR 1 Billion), the minimum loan size eligible for debt recovery under the SARFAESI Act, 2002 is proposed to be reduced from the existing level of INR 50 lac (INR 5 Million) to INR 20 lac (INR 2 Million).
- Privatization of two Public Sector Banks and one General Insurance company in the year 2021-22.
- IPO of LIC to be announced post requisite amendments in FY 2021-21.
- Fast forward disinvestment of Public Sector Companies to be carried out and estimation of INR 175,000 crore (INR 1,750 Billion) as receipts from disinvestment in BE 2021-21.Industrial & Corporate Sector
- PLI schemes to create manufacturing global champions for an Atma Nirbhar Bharat have been announced for 13 sectors for which the government has committed nearly INR 1.97 lac crore (INR 1.97 Trillion), over 5 years starting FY 2021-22.
- MITRA will be launched in addition to the PLI scheme. This will create world-class infrastructure with plug-and-play facilities to enable create global champions in exports. 7 Textile Parks will be established over 3 years.
- Decriminalization of the LLP Act, 2008. Thresholds of paid-up capital for Small Companies under the Companies Act, 2013 extended from “not exceeding INR 50 lac (INR 5 Million)” to “not exceeding INR 2 crore (INR 20 Million)” and turnover from “not exceeding INR 2 crore (INR 20 Million)” to “not exceeding INR 20 crore (INR 200 Million).
- Incentives extended for the incorporation of OPCs by allowing them to grow without any restrictions on paid up capital and turnover, allowing their conversion into any other type of company at any time, reducing the residency limit for an Indian citizen to set up an OPC from 182 days to 120 days and also allow NRIs to incorporate OPCs in India.
- NCLT framework to be strengthened, e-Courts system to be implemented and alternate methods of debt resolution and special framework for MSMEs to be introduced.
- Data analytics, artificial intelligence, machine learning driven MCA21 Version 3.0 to be launched.
- Margin money requirement under the scheme of Stand-up India reduced from 25% to 15%.
- INR 15,700 crore (INR 157 Billion) provided to MSMEs.
- Amount allocated for wheat producing farmers increased to INR 75,060 crore (INR 750.60 Billion) in 2020-21 as against INR 62,802 crore (INR 628.02 Billion) in FY 2019-20 and a similar increase for paddy, pulses and cotton.
- SWAMITVA Scheme extended to cover all the states/ UTs during FY 2021-22.
- Agricultural credit target enhanced to INR 16.5 lac crore (INR 16.5 Trillion) in FY 2022 to provide adequate credit to the farmers.
- Allocation to Rural Infrastructure Development Fund enhanced from INR 30,000 crore (INR 3,000 Billion) to INR 40,000 crore (INR 4000 Billion).
- The Micro Irrigation Fund to be augmented by another INR 5,000 crore (INR 50 Billion).
- ‘Operation Green Scheme’ to be enlarged to include 22 perishable products.
- 1000 more mandis to be integrated with e-NAM.
- The Agriculture Infrastructure Fund to be made available to APMCs.
- One Nation One Ration Card scheme implemented by 32 states and UTs reaching about 69 crore beneficiaries.
- Multipurpose Seaweed park to be established in Tamil Nadu to promote seaweed cultivation.
- Portal launched to formulate Health, Housing, Skill, Insurance, Credit and food scheme for migrant workers.
- Minimum wages to apply to all categories of workers and women will be allowed to work in all categories and also in night shifts.
- 100 new Sanik schools to be set up in partnership with NGOs.
- More than 15000 schools to be qualitatively strengthened.
- Central University to set up in Leh for accessing higher education in Ladakh.
- The unit cost of Eklavya model residential school increased from INR 20 crore (INR 0.2 Billion) to INR 38 crore (INR 0.38 Billion) and to INR 48 crore (INR 0.48 Billion) in hilly and difficult areas.
- Allocation of INR 35,219 crore (INR 352.19 Billion) to benefit 4 crore SC students under the Post Matric Scholarship Scheme.
- Over INR 3,000 crore (INR 30 Billion) will be provided for training of graduates and diploma holders under the scheme National Apprenticeship Training Scheme.
- Financial incentive of INR 1500 crore (INR 15 Billion) provided to promote digital modes of payment. • NRF outlay will be INR 50,000 crore (INR 500 Billion), over 5 years.
- Wealth of government-and policy to be available on the Internet in major Indian languages under the initiative NTLM.
- The NSIL, a PSU under the department of space to execute the PSLV-CS51 launch.
- Deep Ocean Mission to be launched with a budget outlay of INR 4000 crore (INR 40 Billion) over 5 years.
- The national nursing and Midwifery commission bill to be introduced to bring reforms in the nursing profession.
- Allocation of INR 3,768 crore (INR 37.68 Billion) in the year 2021-22 for the forthcoming Census.
- Grant of INR 300 crore (INR 3 Billion) to the government of Goa for diamond jubilee celebration of the state’s liberation from Portuguese rule.
- INR 1,000 crore (INR 10 Billion) provided for the welfare of the Tea workers in Assam and West Bengal.
- Budget 2021 is an out and out spending based budget. It is to stimulate economic growth and control the fiscal deficit through tax collections. Its compliance will require specific administrative reforms. The government is also looking at monetization of assets and disinvestments as alternative revenue sources. Since the Budget 2021 attempts to address the Sustainable Development Goals and growth by an integrated approach, the Indian policy making is now transcending the vision of growth driven economic vision to a holistic development centric approach.