Budget 2021- A foundation stone for future India?
One of the most distressing years by far, 2020 marked the year of a deadly pandemic that drastically impacted health, businesses, and communities across the globe. The Indian economy also got battered due to the subsequent lockdown which exposed gaps in the supply chain and delays in working around the social distancing norms. Critical indicators such as de-growth in the economy, contraction in GDP, widening of fiscal deficit, and high inflation have highlighted the severe strike on the economy in the past year.
But as it is said, ‘There is hope after despair and many suns after darkness’, similarly, the Indian economy has started showing signs of recovery. Faced with the daunting twin tasks of pulling back the economy from the clutches of de-growth, a slew of fiscal and non-fiscal measures were taken during the year to rebound the economy from the aftermath of the pandemic. This is evidenced by the pre-budget Economic Survey’s projection of 11% growth in real GDP for 2021.
Pre-budget, Hon’ble Finance Minister Nirmala Sitharaman hinted that Budget 2021 would be hailed as a “never before Budget.” Public sentiment developed to expectations and raised curiosity regarding the growth and policy path to provide the requisite momentum to India’s sustainable economic recovery
Laying a vision for AtmaNirbhar Bharat, the Hon’ble Finance Minister has rested the budget proposals on six pillars –
- Health and Wellbeing.
2. Physical and Financial capital and infrastructure.
3. Inclusive Development for Aspirational India.
4. Reinvigorating Human Capital.
5. Innovation and R&D.
6. Minimum government — Maximum governance.
With an aim to provide the impetus for growth revival, the Budget has largely focused on aspects of key areas such as healthcare improvement, infrastructure boost, supports for the MSMEs, skill development, etc.
So Keeping in mind the main aspect and Six pillars of the budget which would provide revival to the economy after the steep fall of -24.9%in GDP in a quarter of the fiscal year and overall fall of estimated -9.0% in GDP in 2020–21, we will be doing a deep analysis on the budget allocations provided under the Infrastructure sector which will be providing the foundation for the revival of our economy by generating both employment and also set up for other sectors to come into the role.
Key Points-
- Infrastructure:
- National Infrastructure Pipeline (NIP) expanded to 7,400 projects.
- Measures in three thrust areas to increase funding for NIP:
- Creation of institutional structures:
- Set up and capitalize a Development Financial Institution (DFI).
- Big thrust on monetizing assets.
- Enhancing the share of capital expenditure.
- Roads and Highways Infrastructure:
- Rs. 1,18,101 lakh crore, highest ever outlay, for Ministry of Road Transport and Highways.
- New Economic corridors and Expressways being planned.
- Advanced Traffic management system in all-new 4 and 6-lane highways.
- Railway Infrastructure:
- National Rail Plan for India (2030) to create a “future-ready‟ Railway system by 2030.
- 100% electrification of Broad-Gauge routes to be completed by December 2023.
- Western Dedicated Freight Corridor (DFC) and Eastern DFC to be commissioned by June 2022.
- Measures for passenger convenience and safety:
- Aesthetically designed Vista Dome Linke Hofmann Busch (LHB) coach on tourist routes for better travel.
- High-density network and highly utilized network routes to have an indigenously developed automatic train protection system, eliminating train collision due to human error.
- Urban Infrastructure:
- Expansion of metro rail network and augmentation of city bus service.
- Metro lite and Metro Neo technologies will be used to provide metro rail systems at a much lesser cost with similar experience.
- Power Infrastructure:
- A comprehensive National Hydrogen Energy Mission 2021–22 to be launched.
- Rs. 3,05,984 crore over 5 years for a revamped, reforms-based, and result-linked new power distribution sector scheme.
- Ports, Shipping, Waterways:
- Rs. 2,000 crores worth 7 projects to be offered in Public-Private Partnership (PPP)-mode in Financial Year (FY) 2021–22 for the operation of major ports.
- Petroleum & Natural Gas:
- Extension of Ujjwala Scheme to cover 1 crore more beneficiaries.
- A new gas pipeline project in Jammu & Kashmir.
- An independent Gas Transport System Operator to be set up for facilitation and coordination of booking of common carrier capacity in all-natural gas pipelines on a non-discriminatory open access basis.
ANALYSIS :
Reforms, disinvestment, status quo on tax rates, and long-term infrastructure development have been the focus of this year’s Budget. As expected, the government has stepped up the expenditure on various large-scale projects to provide impetus to the economy and largely relied on asset monetization and borrowings to fund the same. The Budget reflects how an increased thrust and investment in the infrastructure sector can create a multiplier effect on the economy. The announcements are not just on increasing the capital expenditure outlays (highest ever in some sub-sectors including roads and highways), but also a thrust for the most needed institutional strengthening for boosting sector performance. Clean water and sanitation as well as the urban transportation sector announcements through the most-awaited launch of Jal Jeevan Mission — Urban and a new scheme for improving urban transportation respectively, will be an enhancer for urban livability. Infrastructure debt funds are now enabled to issue tax efficient bonds and this is expected to create a further boost to the sector. Focus on rail and road infrastructure especially, economic and logistic corridors will enhance the competitiveness of Indian agriculture by lowering the cost of transportation and better connectivity between production and consumption markets, mainly domestic. The Budget has laid the foundation for a cleaner and environment-friendly mobility ecosystem. Hydrogen energy mission for generating hydrogen from green power sources; enhancement of CNG — city gas distribution network for vehicles to over 100 more districts and mandatory fitness assessment of personal and commercial vehicles will push adoption of alternative fuel vehicles and accelerate R&D in alternative fuel technology. As the Finance
Minister presented the first digital budget, it reflected the government’s commitment to digital, technology, innovation, and R&D. The adoption of new-age technologies, such as AI and ML, in the administration of companies, tax administration and focus on fintech, digital payments, as well as the proposed investment of INR 500,000 crore towards National Research Foundation all, substantiates the government’s endeavor. The proposals around setting up of Fintech Hub at GIFT City, INR 1500 crore fund as an incentive for digital payments and impetus to the start-up sector by extending tax benefits by one year would further strengthen the Digital India program. One would, however, have welcomed a move to direct overseas listing as it would have been an impetus to new-age tech companies.
Conclusion:
