Way to Grow and Reform

Context: Prioritizing growth over fiscal considerations, the Budget-2020 lays the foundation for a resilient economic recovery

Booster dose in Union Budget 2021-22:

• Construction Based Recovery:
  • Capital expenditures:
    • 5 % increase in budget allocation (Rs 5.54 lakh crore); will help create new jobs and trigger greater consumption and investments.
    • Provided more than Rs 2 lakh crore to states and autonomous bodies for capex.
  • Real estate sector:
    • Extension of tax holidays.
    • Allowing Foreign Portfolio Investments (FPIs) in the debt financing of Real Estate Investment Trusts (REITs).
  • Infrastructure activities:
    • Proposed setting up of a Development Finance Institution (DFI) to reinvigorate investment.
    • Allowing Foreign Portfolio Investments (FPIs) in the debt financing of Infrastructure Investment Trust (InVITs).
    • Propose to introduce a mechanism to nudge states to spend more on the creation of infrastructure – through tax incentives.

• Banking and financial sector:
  • Resolving stressed assets: Setting up an Asset Reconstruction Company and Asset Management Company for a one-time resolution of large non-performing assets.
  • For strengthening the financial sector: Proposed privatization of two public sector banks and one general insurance company.
• Insurance sector: to increase Insurance penetration, increased the Foreign Direct Investment(FDI) cap to 74 % from 49 % and allowed foreign ownership and control.
• Attracting Foreign Investments: By providing additional tax incentives at the International Financial Services Centre (IFSC).
• Agriculture sector:
  • More financial support: Increased allocations for agriculture credit and rural infrastructure and micro-irrigation fund and increased Minimum Support Price (MSP) procurement.
  • Reforms: Addition of 22 perishable crops under the “Operation Green Scheme” and proposal of an increase in the number of mandis under e-National Agriculture Market (e-NAM).
• Atmanirbharta in Manufacturing:
  • Textile sector: Proposal to create seven mega-investment textiles parks to make Indian textiles globally competitive and create significant employment opportunities. 
  • Micro Small and Medium Enterprises (MSMEs): Correction of the inverted duty structure on several products.
• Ease of doing business: Through easier compliances and faceless tax assessment. (widen the tax base)
• Incentivize privatization: Aligning policies of states with national priorities by introducing an incentive framework for states.
• Funding Development Expenditure: By garnering more non-tax revenues through strategic disinvestment, privatization and monetization of non-core assets.