Place in Place, Work the Plan

The Economic Times     4th February 2021     Save    

Context: The budget treads a fine balance in incentivizing all stakeholders or sectors in the economy to propel growth and actualize aim of  Aatmanirbhar Bharat.

Key Focus Areas of the Budget 2021-22

  • Healthcare: A holistic approach towards health and well-being through following measures-
    • Improving nutritional outcomes via Mission Poshan 2.0.
    • Reducing environment pollution through-
      • Vehicles scrapping policy of old and unfit vehicles (it will also provide impetus to the automotive industry by spurring demand).
      • Budgetary provision for waste management and clean air.
    • Increase in budgetary allocation for healthcare infrastructure( 224% higher than in FY2021).
      • It will provide the foundation for Aatmanirbhar Swasth Bharat Yojana and improved Human Development Index (HDI) through right governance.
  • Infrastructural push: recognizing multiplier effects of infrastructure, to crowd-in private investment and raise medium-term productive capacity and growth potential through following measures -
    • Creation of a Development Finance Institution (DFI).
    • Rise in capital expenditure budgeted outlay by 34.5% over 2020-21.
    • Emphasis on the National Infrastructure Pipeline and Public infrastructure Asset Monetisation Pipeline.
    • Public-Private Partnership (PPP) in urban transport and ports.
    • Debt financing of Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs).
    • Zero-coupon bonds by Infrastructure Debt Funds (IDFs).
  • Banking Financial Services and Insurance (BFSI) sector: budget aims to improve independence, professionalism and operational and financial efficiencies of BFSI through following initiatives-
    • Single securities market code.
    • Privatization of Public Sector Banks (PSBs) and general insurance company.
    • Setting up of asset reconstruction and management companies to address stressed loans.
    • Increasing FDI limit in insurance from 49% to 74%.
  • Ease of doing business and investments: inducing investment through following initiatives-
    • Result-linked power distribution scheme to promote competition in the power distribution.
    • Production Linked Incentive (PLI) scheme is strengthened with Rs2 lakh crore allocation.
    • Direct tax proposals, faceless assessments and exemption for startups and ‘one-person companies will reduce compliance burden.
    • Asset monetization of Government-owned operating assets such as highways, power transmission and even sports stadia - can quickly raise capital and open up a new debt market.
  • Fiscal transparency: an expected fiscal deficit of 9.5% of GDP in 2020-21 and 6.8% in 2021-22 reflects transparency in accounts and finance food and fertilizer subsidy through budgetary outlays.

Way Forward

  • Legislative provision for REIT and InvIT: to further deepen the shallow debt market and creates a new asset class for debt raising.
  • Focus on agriculture infrastructure.
  • Develop a national hydrogen policy: India is lagging the world in defining a hydrogen policy.
  • Reduce stressed assets in PSBs: recapitalization of PSBs to the tune of Rs20,000 crores may fall short of returning them to financial health and instilling in them confidence for onward lending.
  • Recognize intellectual and financial capital: treat Non-Resident Indian’s (NRI) at par with resident Indians on matters like investments in strategic sectors including defence (not as proverbial 12th man)
Reinvigorated disinvestment programme: with a delineated role for PSUs in four strategic sectors to further enhance the allocative and productive efficiency of invested capital.