Team ulaunch brings you the Key Takeaways from the Union Budget 2021-22.
Finance Minister Nirmala Sitaraman presented her 3rd Union Budget on 1 February 2021. Many eyes were set on the government as it plans to repair, restore and rebuild the Indian economy after the disruptions caused by Covid pandemic. The Finance Ministry reinforced the government’s commitment to building Atmanirbhar Bharat. The budget aimed at boosting capital expenditure, increasing spending and, providing greater employment opportunities.
The first-ever digital budget aimed at long term expansion by focusing on Infrastructure and R&D, Disinvestment of Public Undertakings. The government proposed an all-rounded budget built around health, hope, and growth. It refrained from levying any additional covid cess or surcharge transferring money from an individual’s pocket to government’s.
The budget rests on following 6 pillars —
- Health and wellness
- Physical & Financial capital and infrastructure
- Inclusive Development for Aspirational India
- Reinvigorating Human Capital
- Innovation and R&D
- Minimum Government and Maximum Governance
SECTOR WISE HIGHLIGHTS
- HEALTHCARE AND WELLNESS
The anticipated surprise in this budget was health as Rs. 2,83,000 crores were allocated to the healthcare and wellness sector. This was a whopping 137% increase compared to last year’s allocation.
- Rs. 35000 crores were allocated for Covid-19 vaccine in 2021-22.
- Mission POSHAN 2.0- GoI merged the Supplementary Nutrition Programme and Poshan Abhiyan to launch Mission Poshan 2.0 which aims to strengthen the nutritional content, delivery and outreach and to improve nutritional outcomes across 112 aspirational districts.
- PM Atma Nirbhar Swasth Bharat Yojna to be launched to develop primary, secondary and tertiary healthcare.
The budget showed continuity with its tax code and hasn’t made any changes in the income tax slabs. The focus has been on making taxes less harrowing experience for all.
- Income tax relaxation for senior citizens above 75 years, who only live on a pension and interest income.
- VIVAD SE VISHWAS scheme extended until 28th February 2021.
- Reduction in tax assessment reopening from 6 to 3 years.
- Affordable housing projects to get a tax holiday for one year.
- Reducing litigation for small taxpayers whose annual receipts do not exceed 5 crores.
- Tax holiday on affordable housing projects extended until 31st March 2022.
- ECONOMY AND FINANCES
The increase of FDI from 49% to 74% in an insurance company is promising as it will help the sector to grow and showcase global investors that India is open for business.
On a Macro level country’s fiscal deficit is estimated at 9.5% of GDP for FY’21. For FY22 the GOI estimates a fiscal deficit of 6.8% with a projection of steadily reducing it below 4.5% by the year 2025-26.
On the Receipt side, out of Rs 1, Government earns 36p from Borrowing and Liabilities, 13p from Corporate Tax, 14p from Income tax, 3p from Customs, 8p from Union Exercise Duties, 15p from GST, 6p from Non-Tax Revenue, 5p from Non-debt Capital Receipt.
On the Expenditure side, Out of Rs 1, Government spends, 20p on interest payment, 9p on Central sponsored scheme, 10p on Other expenditure, 5p on Pension, 16p on States share of tax and duties, 10p on Finance commission & other Transfer.
Other Notable points:
- Divestment target of Rs. 1.75 lakh crore has been set for 2021-22.
- Air India, Bharat Petroleum, 2 Public Sector Banks, and a General Insurance company are the major entities from which the government stakes will be withdrawn.
- Initial Public Offering for Life Insurance Corporation will be launched, thus increasing private stakes in the erstwhile government-owned national insurer.
- A new Development Financial Institution will be established to cover the gaps in the financing of infrastructure projects of National Importance.
- Public Sector Banks will be infused with Rs. 20,000 crore to address the stressed balance sheets.
- Proposal for relaxation in state borrowing up to 4% of Gross State Domestic Product.
The budget allocation for the Department of Agriculture, Cooperation and Farmers Welfare was slashed by 8.5% in 2021-22. The flagship PM-KISAN scheme, meant to provide income support to farmers, saw a 13% drop in its budget, which is Rs 10,000 crores lower than last year’s initial allocation.
This was the major area of focus as the government put many proposals in the budget.
OVERALL THE BUDGET HAS A SIGNIFICANT MASS APPEAL AND IS CREATED WITH MUCH CARE TO GET THE COUNTRY BACK ON TRACK. WITH SENSEX SOARING MORE THAN 2,000 POINTS, THE STOCK MARKET SURELY HAS RESPONDED POSITIVELY TO IT.
HOWEVER, HOW MUCH OF THIS TRANSLATES TO EARNINGS GROWTH AND WHETHER IT’LL CONTINUE TO SUPPORT THE CURRENT STOCK MARKET LEVELS IS A QUESTION THAT IS STILL A COUPLE OF QUARTERS AWAY FROM BEING ANSWERED.
Researched and Written by Garima Mangla and Shyam Agrawal, Team ulaunch.