Union Budget 2021: Hours after Finance Minister Nirmala Sitharaman presented the Union Budget 2021 in Parliament, India Inc hailed the slew of reforms and big-ticket announcements made by the Modi government. FM Sitharaman, in her 110 minute of Budget speech, introduced several policies and outley for some major ailing sectors such as healthcare, finance, automobile, power, infrastructure and others.
Reacting to FM Sitharaman's digital Budget, India Inc. termed government's plans and announcement 'visionary' and 'growth-oriented'. Here are some top reactions:
Chandrajit Banerjee, Director General, CII
The Union Budget 2021-22 was truly a transformative one as it pulled out all levers within its ambit to mark yet another successful attempt by the government to rejuvenate a pandemic ravaged economy. The bold measures which encompassed almost all critical sectors of the economy are expected to galvanize the recovery process which has been set into motion, according to Chandrajit Banerjee, Director General, CII.
CII is happy to note that the Budget ticked all the right boxes of lives, livelihood and growth which would propel the economy to an inclusive growth trajectory. We expect the reform process to continue beyond the budget announcements as well.
Amit Kapur, Joint Managing Partner, J Sagar Associates
The budget speech expectedly has given a strong signal for infrastructure development focusing on actualizing the ambitious national infrastructure pipeline targeting an investment of Rs.111 lakh crores over 5 years. The signal comes from the announced budgetary allocations and decisions (a) central allocation of Rs5.54 lakh crores, (b) state allocations of Rs.2 lakh crores, (c) announcement to tap into budgetary resources of PSUs and wide ranging InVITs monetising assets in highways, power transmission, gas pipelines, dedicated freight corridors, airport.
The devil lies in the details and the success in reviving the economy would depend on effective structural reforms in infrastructure sectors removing barriers to growth + how the government goes about monetising the land bank and assets held by PSUs.
Mohammad Athar(Saif), Partner, Economic Development and Infrastructure, PwC India
The budget has focused on bringing safety, quality and clean transport to the front by announcing a slew of initiatives. The Voluntary scrapping policy announced in the budget will for the first time bring fitness test as a criteria for scrapping old vehicles. Over 1 crore Light, Medium and Heavy commercial vehicles with an age of more than 15 years have been plying on Indian roads. The policy will enable shifting of older to new vehicles which will be safer and cleaner, and reduce road accidents.
Alternate models of Mass transit in the form of metro lite, and metro neo will appeal to cities with narrower right of ways and with higher urban density. The continued investment focus on Kochi, Nagpur, Nashik and Chennai metro will enable completion of various project phases, and investment in the Bangalore suburban railway network will bring relief to urban transport challenges in the IT and R&D hub of the country.
Rajiv Agarwal, CEO and MD, Essar Ports Ltd.
The budget 2021 is extremely positive, driving the country towards Aatmanirbhar Bharat by laying huge stress on health care, infrastructure, banking and insurance, textile and agriculture that will aid the country not only towards economic revival but also spur growth. The Infrastructure spending is going up by 34% through NIP and a welcome Focus on boost in Road and Railway infrastructure with new economic corridors planned will certainly help the growth of the logistics sector and will lead to enhancing trade in the country.
Anish De, Partner and National Head, Energy and Natural Resources, KPMG
Hon’ble FM announced introduction of framework for promoting competition in power Distribution - As the Discoms operate as regional monopolies in their respective area of supply, this framework will bring in private players and improve operational efficiencies, which will benefit consumers, by providing them choice for supplier selection. This proposal has been in works for 6 years, when the Electricity Amendment Bill 2014 was tabled. The recent Electricity Amendment Bill 2020 excluded this provision, and therefore it’s a welcome step.
Dr. Samantak Das, Chief Economist and Head of Research, JLL India
Given that the economy is well on its path to recovery, Union Budget 2021 has focused on enhancing expenditure while keeping the fiscal targets at bay in the short term. This Budget focuses on augmenting infrastructure with a special focus on expediting urban infrastructure projects which will act as a strong catalyst in driving real estate in urban areas. There is also a continued thrust on the agriculture sector which is likely to result in higher incomes and drive consumption.
The proposed easing of restrictions on leverage by InvITs/REITs will attract more REITs listings and thus higher investments into real estate. The announced monetisation of surplus land of government and government bodies is a welcome move; however, the implementation will need to be monitored.
Abheek Barua, Chief Economist, HDFC Bank
A bold budget in many senses. The central intent has been to use expansionary fiscal policy to support growth sidestepping concerns over debt sustainability and sovereign rating. The fiscal deficit is pegged at 6.8% of GDP in FY22 compared to a revised estimate of 9.5% for FY21. The focus has been on increasing capital expenditure both by the centre (+35% y-o-y) as well as states. Moreover, the budget introduced new institutional structures (like the Development Finance Institution, asset reconstruction company) and provided greater detail on asset monetisation to finance infrastructure needs in the economy. In light of the COVID-19 health crisis, the budget’s focus on health and sanitisation with increased allocations and introduction of a new health scheme are also welcome steps.
Moody’s Investors Service
The budget highlights the challenges to stabilizing India’s debt trajectory following the coronavirus-induced economic shock. Although a decline in new COVID-19 cases and normalizing activity are driving an economic rebound, the lasting effects of the pandemic on the economy and the financial sector will continue to pose downside risks to sustained growth in the medium term. This risk is embodied in the negative outlook on India’s rating.
B Gopkumar, MD & CEO, Axis Securities
The FY22 budget has turned out to be a landmark budget with the government meeting the sky-high expectations of equity markets and the general public. The focus of the government is clearly on spending to revive the economy without major changes in the taxation structure. The government is doing quality spending with a focus on infrastructure, health care, and key social programs. The fiscal deficit pegged at 6.8% is clearly expansionary which will aid the economy significantly. The government’s borrowing also seems quite reasonable which indicates the budget is quite well balanced. The proposals for the financial sector which include privatization of public banks and asset reconstruction company are also significant positives for the financial sector. Overall, the budget has checked most of the boxes and will help the economy.
Motilal Oswal, MD & CEO, Motilal Oswal Financial Services
The FY22 budget has been much better than the market’s expectations. The feared and anticipated measures around Covid-Cess/higher capital Gains tax/Wealth Tax etc did not materialize. This will provide a huge relief to market and economy and help in sustaining the buoyant sentiments in the economy. Government has clearly articulated the focus towards Infra and Capex spending with five key measures: [1] Capex spends proposed to go up by 26% in FY22 vs. FY21 RE [2] Setting up of Development Financial Institution [3] Setting up of ARC/AMC to deal with stressed assets [4] Asset monetization plans in various segments and [5] List of CPSE’s for divestments. We believe this will push the CAPEX spending in the economy and augur well for the overall economic revival of India. The significant increase in allocation to the Healthcare sector should lift the general well-being in the economy, in our view.
Prathit Bhobe, CEO&MD, Tata Mutual Fund
Sometimes we suffer more in our imagination than in reality. Couldn’t be more true today. In the run up to the budget market was bracing for higher taxes on the back of a pandemic year. The fact that there were no changes in taxes coupled with a boost for growth made it double joy for equity markets.
DDT on Reit and INveit is a positive step. This will further increase attractiveness and will also deepen the category. The measure to set up a body to buy bonds upto investment grade is a good step to help deepen and market making in Corporate bond market. It is a very positive step for MFs.
Warren Harris, CEO & MD Tata Technologies
With a significant outlay on Infrastructure spend and the much-needed Vehicle Scrappage policy, the government of India has finally set the tone for recovery of Auto Sector which has been significantly impacted by the pandemic. This will not only help boost the demand for production of Commercial vehicles but also support the entire transportation ecosystem. Also, while it would have been good to see some more initiatives to promote Electric Vehicles in this budget, we are glad that the government has noted India’s critical role in the global automotive supply chain post COVID 19. Specific initiatives through Production linked schemes, creation of infrastructure for R&D and enabling skill development in new-gen technologies such as artificial intelligence (AI) and Machine Learning (ML) will help drive investment in Engineering and Research
Bala Sarda/ Founder Vahdam Teas
Budget2021 is a good push for startups.
1.97 trillion committed to the manufacturing sectors over 5 years starting this financial chain. It’ll help bring scale, job and growth. Manufacturing companies need to become an integral part of the supply chain and the government is gearing up to support the economy for sustainable growth. This is a much-needed stimulus to boost demand and consumer confidence.
The Government plans to set aside Rs 15,700 crore in FY22 for the MSME sector. The Government also proposes to reduce margin money requirements from 25% to 15% for startups. The MSME and startup industry have been hit hard by the unprecedented Covid wave and this is a progressive budget headed in the right direction for the startup ecosystem.
The government plans to allow incorporation of one-person companies with no restriction on the paid-up capital and turnover and Non-resident Indians will also be allowed to incorporate one-person companies in India. This is a positive step for single founders who are able to start a company and attract investments.
The government has proposed an extension of the eligibility for claiming tax holiday which will incentivise startups in the country. The proposal to extend capital gains exemption for investment in startups till March 31, 2022 will attract more investments and funding for startups. This should be a good boost for them especially after COVID, since they were massively hit. This will give them a leg up in the road to recovery. We still hope the government reduces long term capital gains tax on private equity, soon.
Most importantly, Rs 1000 crores has been announced for tea workers of Assam and West Bengal. The details have not yet been shared but this is a positive step for the COVID impacted tea industry. Last year was a really difficult year for them and this is a timely intervention to provide much needed relief to the tea workers and will go a long way in easing the pain and hardships.