Way to Grow and Reform

The Indian Express     3rd February 2021     Save    

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.