Analysis Of Budget 2021
Author- Niveditha R
Designation- Student, Institute Of Law, Nirma University
Contact - 984*******
Healthcare was going to be the centre of attention of this budget. This was the reason for celebration when the government introduced a centrally sponsored scheme with plans to develop the primary, secondary and tertiary health care in India. The government has promised to spend Rs. 65,000 crores over the span of 6 years. They also suggested that they plan to spend 137% more in the next financial year on the healthcare programs.
This financial year, the government is expected to invest Rs. 94,000 crores. They expect to invest Rs. 2,23,000 crores the year after that. But a large portion of it is dedicated to water and sanitation services. Given that there is a pandemic at large, maybe the government should have done more on the health care front. As it stands, in an attempt to help them invest in the health care sector, the central government will reserve Rs. 35,000 crores for vaccinations and the Finance Commission will award another Rs. 13,000 crores to states. But there isn't a huge improvement here outside of these special allocations.
On the other hand, infrastructure is poised to receive a significant boost. The most notable announcement was perhaps concerning the establishment of a Development Financing Institution (DFI). The government wants to build jobs, and it wants to do so in a sustainable way. Incentivization of the private sector is one potential solution as it creates new jobs. Effective assets are generated. In the long run, it adds value. However, if they are strapped for cash, these private companies won't spend. The government would set up a new funding institution to lend long-term loans at reasonably competitive interest rates in an effort to free them from such banal constraints. The government has also promised to set aside Rs 20,000 crores to fund the DFIs which will subsequently create loans worth Rs 5 Lakh Crores over a span of the next 3 years.
Disinvestments will also occur. Two public sector banks, one general insurance company and Air India will soon be privatised. They're going to IPO LIC as well and generate some funds there. Letting go of public sector firms, however, can also be highly difficult.
AGRI INFRA CESS
The Government has added an Agri infra cess, i.e., an additional tax on petrol and diesel subject to Rs. 2.5 and Rs. 4, respectively. The cessation also refers to a lot of other things, including alcoholic drinks. For the most part, this would not impact the price of these products. And it would definitely not impact the price of petrol. And it so happens that the government has also cut the excise tax by the same rate. They then added a cessation, made petrol more costly, and then reduced duties by a comparable margin to negate the effect of the cessation. In an attempt to make more revenue available, the government raised the cessation, at the expense of the states, but made sure that the change did not impact customers. But this money can only be used by the centre for Agri-Infra initiatives.
MONETISATION OF GOVERNMENT ASSETS
The government is going to monetize the Roads operated by NHAI, power transmission assets operated by the Power Grid Corporation, Oil and Gas pipelines of GAIL, IOCL and HPCL, Airports in Tier 2 and Tier 3 cities, Warehouses, Sports Stadiums and Rail Infrastructure among others. These assets will be transferred to a private institution under certain conditions. The ownership will however remain with the government. The government will get a cash injection as the private entities are required to pay a large sum to operate the assets.
Senior citizens above the age of 75 years will also be excluded from filing returns and the interest received from the individual employee fund will be liable to tax if they pay more than Rs. 2.5 lakhs a year to the EPF.
FOREIGN DIRECT INVESTMENT
The Government has announced that it plans to raise the FDI cap in the insurance market. Global buyers will now own a controlling interest in an Indian insurance company, 74% contrary to 49%. This would help attract outside investors, and Indian customers will benefit from additional competition.
The government vowed to change the banking regulations in order to safeguard depositors. When banks go bankrupt, most people will lose access to their savings. It's happened so much in the recent years. And with a view to alleviating some of these issues, the government will soon implement amendments that will enable depositors to automatically access up to 5 lakhs in the event that the bank collapses.
Indian banks have had trouble with outstanding loans for sometime now. For the meantime, the intention is to transfer all these toxic loans to a bad bank. Struggling banks can only be left with loans that are expected to be entirely repaid. The method usually entails a bad bank buying risky loans and then attempting to resolve them. The owners of the bad bank are likely to be a combination that includes the government, institutional investors, and the banks themselves.
The theme of this year’s budget majorly revolved around Covid-19, economic recovery and growth. Though the budget has an angle of revenue generation and advantages to Startups and Corporates, it has terribly failed to satisfy the Middle-Class population of the country. Taxation on EPF and raise in custom duty for products as basic as Apples and as useful and recommended as Solar Panels indicate that the budget could’ve been better balanced. The country has invested far more than it receives. India's fiscal deficit is forecast to decline to 9.5% of GDP this fiscal year. When the budget was announced last year, the government projected the deficit to sit at 3.5%. However, after the pandemic, these preparations had to change. The government has proposed several changes to generate revenue including the increase in custom duties. The government will most likely recover money from the above discussed programs to tackle the increasing fiscal deficit.