Union Budget 2021-22: Highlights
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A Budget of hope with a focus on revival of inclusive economic growth, an expansionary fiscal policy that prioritized Government spending over fiscal deficit considerations, with fund allocation to multiple sectors, backed by a broad-based focus on diverse stakeholders.
Theme
Budget 2021-22 is to be seen as a continuation of 5 mini-Budgets presented in 2020 towards achieving the vision of ‘AtmaNirbhar Bharat’
Segments
Health and Wellbeing, Physical and Financial Capital, and Infrastructure, Inclusive Development for Aspirational India, Reinvigorating Human Capital, Innovation and R&D, Minimum Government and Maximum Governance
Focus areas
Healthcare, Infrastructure, Start-ups, Manufacturing, Disinvestment, Agriculture, strengthening the digital economy and clean energy.
Macroeconomic parameters
(i) Fiscal deficit: FY21: 9.5% of GDP, FY22e: 6.8% of GDP
(ii) Borrowings: INR 80000 cr to be raised from the markets to fund the FY21 fiscal deficit. Budgeted borrowings in FY22: INR 12 lakh cr
Sectors
1. Digital payments (Fintech)
(i) INR 1500 cr allocation to boost digital modes of payment
2. Start-ups
(i) For the benefit of the start-up ecosystem, the Budget has extended the eligibility for claiming tax holiday for start-ups till 31st March, 2022. Additionally, to ensure access to funds, the capital gains exemption for investment in start-ups has been extended till 31st March, 2022.
(ii) Incentivization of the incorporation of One Person Companies (OPCs) to encourage growing as OPCs, without any restrictions on paid up capital and turnover, with the flexibility to convert into any other type of company at any point of time.
3. Banks
(i) PSBs recapitalization infusion of INR 20000 cr in FY2021-22
4. Affordable housing
(i) Related projects to benefit from the extension of tax holiday till 31 March 2022
(ii) Thrust on the supply of affordable rental housing for migrants
5. Infrastructure
Aligned to the investment multiplier concept supported by big-ticket public investment and Govt capex spending to stimulate growth
(i) Expansion of National Infrastructure Pipeline to include further projects
(ii) Establishment of dedicated DFI with INR 20000 cr capitalisation for infrastructure financing
(iii) Encourage FPI participation in debt financing of REITs and InVITs through legislative amendments
(iv) Capital expenditure hiked to Rs 5.54 trillion in FY22 (34.5% jump in proposed spending)
(v) Relaxation of clauses to encourage foreign investment by SWFs and Pension Funds
(vi) Notified Infrastructure debt funds eligible to issue tax-efficient zero-coupon bonds
6. Agriculture
(i) Higher agricultural credit target for farmers increased to INR 16.5 lakh crores in FY22 with focus areas being animal husbandry, dairy and fisheries
(ii) Integration of 1000 mandis under e-NAM
(iii) Dedicated Agriculture Infrastructure fund for APMCs
(iv) Operation Green Scheme to be extended to 22 perishables besides tomatoes, onions, and potatoes
(v) Agriculture Infrastructure and Development Cess to be charged on certain items
7. Manufacturing
Focus is on building robust supply chains, encourage technology adoption, creation of export hubs and job generation
(i) Allocation of INR 1.97 cr over 5 yrs for 13 key sectors
(ii) Establishment of 7 dedicated textile parks
8. Roads
Augmenting roads infrastructure
(i) Fund allocation for dedicated economic corridors across the country
(ii) INR 118101 cr allocation ( 91.6% being capital in nature)
9. Railways
Building future-ready railways network, optimization of logistics costs and passenger safety
(i) Announcement of future-ready National Rail Plan by 2030
(ii) Freight corridors in strategic zones to reduce logistics costs under the PPP mode
10. Automobiles
Commissioning of over 20000 buses in urban regions under the PPP model, estimated to cost INR 18000 cr towards public transport
11. Financial sector
Govt to support the creation of a fintech hub at GIFT-IFSC.
12. Healthcare
Swastha Bharat focus with a jump of 137% in outlay
(i) Scheme to be launched with an outlay of INR 64,180cr over 6 years
(ii) Allocation of INR 35000 cr towards COVID-19 vaccine
(iii) Additional 2 vaccines to be developed
13. Social welfare schemes
Provision of basic facilities for all
(i) Swachch Bharat implementation in urban areas with an allocation of INR 1,41,678cr over 5 yrs
(ii) Clean water project (urban): Allocation of INR 287000 cr under JalJeevan
(iii) Clean Air project: Outlay of INR 2217 cr for specified urban centers
(iv) Focus on higher education and skill-building initiatives (INR 3000 cr)
14. Clean Energy
Allocation of INR 1,000 crores to Solar Energy Corporation of India and INR 1,500 crores to Indian Renewable Energy Development Agency
Key Reforms
Resolution of stressed assets of PSBs by setting up of separate entities to realize value from asset disposal to AIF and investors
Revamp of Deposit Insurance provisions to ensure access to depositors’ money even in case of stressed banks
Roadmap towards monetization of public infrastructure brownfield assets comprising
– Five operational roads valued at an estimated INR 5,000 crores are being transferred to the NHAI InvIT.
– Transmission assets worth INR 7,000 crores will be transferred to the PGCIL InvIT
– Specified freight corridor assets of the Railways
– New airports to be notified
– Other core public assets including toll roads, oil and gas pipelines, warehousing assets, and sports stadiums
1. Disinvestment
Target FY22 receipts pegged at INR 175000 cr
(i) Major disinvestment initiatives on the cards with strategic stake dilution of several central public sector enterprises namely BPCL, Air India, Shipping Corporation of India, Container Corporation of India, IDBI Bank, BEML, Pawan Hans, NeelachalIspat Nigam
(ii) LIC IPO in 2021-22
(iii) A SPV to carry out sale of non-core assets like surplus land with Government and PSEs
2. Power
Overhaul of the workings of DISCOMs towards enhancing customer choice, system up-gradation, and pre-paid meters
3. Insurance
FDI hiked from erstwhile 49% to 74% with the majority of KMPs being resident Indians, 50% independent Directors and specified transfer of profits to general reserve
4. Labour Reforms
Implementation of the ground-breaking 4 labor codes to provide social security cover to gig and platform workers and construction workers
5. MSME
Allocation of INR 15,700 crores
6. R&D
Funds to the tune of INR 50000 cr to be channelized to National Research Foundation
7. Digital transactions
Tax audit limit hiked to INR 10 cr for persons undertaking 95% of their transactions digitally
Taxation
Focus on easing compliance burden through technology and enhancing transparency, accountability and efficiency
(i) Income tax slabs unchanged
(ii) Access to pre-filled IT returns
(iii) Exemption from filing IT returns for senior citizens over 75 yrs with only pension, interest income
(iv) Reduction in Time for Income Tax Proceedings including relaxation in rules towards reopening of cases
(v) Emphasis on faceless taxation
(vi) NRIs to benefit from relaxed tax rules on accrued income
(vii) Rationalization of customs duty with a review of 400 old provisions related to exemptions
Companies
(i) Easing of compliance norms for small Companies by increasing their thresholds for Paid-up capital to “not exceeding `2 Crore” and turnover to “not exceeding `20 Crore”.
(ii) Incentivization of incorporation of One person companies
(iii) Technology boost to compliance procedures of companies incorporating data analytics, artificial intelligence and machine learning
Markets and Investors
(i) Integration of rules related to capital markets including the regulator SEBI under a single, unified Securities Markets Code
(ii) Measures under an institutional framework towards deepening the corporate bond market and enhancing liquidity
(iii) Setting up of SEBI regulated gold exchanges
(iv) Comprehensive investor charter covering all financial products
