Budget 2021 Reflects Govt's Confidence & Priorities; Heading Towards USD 5 Trillion Economy Eventually
The Government is not being excessively concerned with the opinion of the global credit rating agencies in matters of fiscal deficit, writes Ashok Hinduja.
Budget 2021 is different from the budget of the other years. The massive disruption caused due to the pandemic in the world since March 2020 is unparalleled. The context of today’s budget is “RESILIENCE IN FACE OF A CRISIS”. Under the leadership of Hon. Prime Minister Modi, India has withstood the onslaught of the pandemic.
The Budget 2021 is positive. That the Government is not being excessively concerned with the opinion of the global credit rating agencies in matters of fiscal deficit, reflects the confidence of the Government and its priority.
Healthcare spending, Infrastructure spending and the BFSI roadmap are the three important directions of the Government. The allocation of Rs.2.23L Crore to healthcare reflects the central theme of the budget. It is pragmatic.
The budget outlined three areas: preventive health, curative health, and well-being to be strengthened. Integrated public health labs will be set up in all districts of the country. Critical care hospital blocks would be established in 202 districts. A National Institution for One Health will be set up. Under this would come up nine bio-safety laboratories. Hon.FM announced the Swachh Bharat Swashth Bharat programme with a capital of Rs 1.9 lakh crore.
On infrastructure, salient initiatives are large ticket infrastructure rollout, funded by asset monetization of the existing road, power lines, gas pipelines and railways assets. Debt financing of REITs and InvITs (through suitable amendments) will provide a major impetus and will attract investments. Capex push of Rs.5.54 Trillion is growth positive. Spending Rs.1.97L Crore on various PLI schemes over the next 5 years will create exports from India. The proposed spending of Rs.1.10L Crore on Railways is a job creator of many MSMEs.
The budget outlined about strengthening the manufacturing sector saying the Indian companies need to become the core of the global supply chain for an Atmanirbhar Bharat. The government had announced Rs 1.97 lakh crore allocation for this in 2020 to be spent over the next five years. Hon.FM said this would be further strengthened. This is welcome news.
Vehicle scrappage policy is a welcome development in support of clean air. It offers a boost to the auto sector. To check pollution and its impact on health, Hon.FM announced as part of the government’s scrapping policy, to phase out old and unfit vehicles; after 20 years in case of personal vehicles, 15 years in case of commercial vehicles. This has been a long pending demand of the auto sector.
In the infrastructure sector, the National Infrastructure Pipeline announced in December 2019 with 6,835 projects has been expanded to 7,400 projects Rs 102 lakh crore fund. To give further thrust to National Infrastructure Pipeline, three concrete actions will be taken:
- Creating institutional structures
- Monetizing assets
- Increasing share of capital expenditure in central and state budgets
This is a positive development.
The proposal for setting up a new Development Financial Institution (DFI) is the first welcome step towards attracting global investors. The proposed IPO of LIC, PSU privatization, enhanced FDI limits in insurance (to 74% from 49%) are definitive BFSI reforms. Development Financial Institution will be set up with a capital of Rs 75,000 crore. A new bill will be introduced for the same. It will be a professionally managed body to provide, enable and catalyze infra financing with a capital of Rs 20,000 crore. The aim of the institution is to have a lending portfolio of at least Rs.5 lakh crore in three years. This is definitely a multiplier effect.
The disinvestment target of Rs.1.75L Crore is expected to materialize this year.
Two questions remain. Addressing the health of Power Discoms (and its deterioration) cannot be postponed any further. PSU Bank capitalization is another. Rs.20,000 Crore allocated for PSU Bank capitalization is inadequate.
(Mr. Ashok Hinduja is the Chairman of Hinduja Group of Companies (India)
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