Union Budget 2021: Key Highlights and More
On Feb 1, 2021, Finance Minister Nirmala Sitharaman presented the Union Budget 2021. This was Sitharaman’s third budget under the National Democratic Alliance (NDA) government led by Prime Minister Narendra Modi.
Independent India’s first-ever paperless budget with a clear focus on ‘AtmaNirbhar Bharat’
- Under the Atmanirbhar package, Sitharaman announced a total spend of ₹27.1 Lakh to deal with the COVID-19 pandemic.
- India has started a nationwide vaccination programme, the largest in the world.
- India has approved two vaccines (Covaxin and Covishield), and two more vaccines are in the pipeline.
- The government will provide ₹35,000 crores for the COVID-19 vaccination with a commitment to provide more funds.
Key Highlights of the Union Budget 2021
Health and Wellbeing:
- PM Atma Nirbhar Swasthya Bharat Yojana to develop primary, secondary and tertiary healthcare
- Mission POSHAN 2.0 to improve nutritional outcomes across 112 aspirational districts
- Operationalisation of 17 new public health units at points of entry
- Modernisation of existing health units 15 seaports, at 32 airports, and land ports
- Better water supply nationwide via Jal Jeevan Mission Urban
- Strengthening of Urban Swachh Bharat Mission
- Highway and road work to be done in Tamil Nadu, Kerala, Assam and West Bengal
- Vehicle scrapping policy to remove old and unfit vehicles – fitness test for all vehicles in automated fitness centres every 20 years for personal vehicles and every 15 years for commercial vehicles.
- National Asset Monetising Pipeline to monitor asset monetisation process
- 100% electrification of Railways to be completed by 2023
- Created a National Rail Plan to have a future-ready Railway system by 2030
- Announced metro services in 27 cities, plus additional allocations for Chennai Metro Phase 2, Kochi Metro, Nashik, and Nagpur Metros, and Bengaluru Metro Phase 2A and B
- 1 crore or more beneficiaries to be covered under Pradhan Mantri Ujjwala Yojana (LPG scheme)
- Double recycling capacity of ports by 2024
- National Hydrogen Mission to generate hydrogen from green power sources
- Gas pipeline project to be set up in Jammu and Kashmir
- 750 Eklavya schools in tribal areas to be set up
- 100 new Sainik Schools to be set up
- A Central University to be established in Ladakh
Economy and Finance:
- Proposal to allow States to raise borrowings up to 4% of GSDP this year
- Completion of strategic sale of IDBI Bank, BPCL, and Air India
- The fiscal deficit is at 9.5% of the GDP; in 2021-22, it is estimated to be 6.8%
- Creation of a Unified Securities Market Code by consolidating provisions of the Sebi Act, Depositories Act, and two other laws
- Set up of an asset reconstruction company to take over stressed loans
- Proposal to increase the FDI limit from 49% to 74%
- Increase in deposit insurance for bank depositors from Rs 1 lakh to Rs 5 lakh
- One general insurance firm and two PSU bank to be disinvested this year
- Proposal to decriminalise Limited Liability Partnership Act of 2008
- The debut of an IPO of LIC this fiscal
- IT assessment cases reopening window reduced from 6 to 3 years, but can go up to 10 years in case of serious tax evasion cases of above ₹50 Lakh
- People above 75 years who earn interest from deposits and get pension are excluded from IT filing
- Tax holiday of 1 year for affordable housing projects
- Proposed agriculture infrastructure and development cess on certain items including apples, sunflower oil, crude soybean, urea, crude palm oil, peas, and Kabuli chana
- Reduced duty on copper scrap to 2.5%
- Compliance burden of small trusts with annual receipts less than ₹5 crores to be eased
- Customs duty on gold and silver to be rationalised
- Increased duty on solar lanterns from 5% to 15% and on solar inverters raised from 5% to 20%
- Reduced duty on naphtha to 2.5%.
- 5% customs duty charged on all nylon products
- Increased customs duty on cotton from 0 to 10%
- Customs duty of 7% charged on tunnel boring machines
- A portal to maintain information on gig and construction workers
- Via Stand-up India scheme, margin capital required for loans reduced from 25% to 15% for SCs, STs, and women
- Gig and platform workers will have social security
- Setting up a multipurpose seaweed park in Tamil Nadu
- Integration of 1,000 more Mandis into the E-NAM marketplace
- APMCs would be able to use agriculture infrastructure fund for augmenting their infrastructure
- Development of five major fishing hubs – including Kochi, Chennai, and Paradip
Fintech Takeaways From India’s Union Budget 2021
- AatmaNirbhar Bharat
- With a laser-sharp focus on healthcare, textile, infrastructure, and agriculture, more jobs will be created
- Economic revival and maximum growth
- Allocation of ₹ 15 billion to support and boost digital payments
- Boost digital infrastructure and a cashless economy
- Make the e-payments mode easily accessible across the country, especially in the Tier II and Tier III cities
- Setting up a fintech Hub in GIFT City
- Create around 150,000 jobs for the youth
- Accelerate the use of artificial intelligence and machine learning in governance and drive tech-enabled tax functioning
- ‘Bad bank’ to set up for the removal of non-performing assets (NPAs)
- Set up an asset management company and asset reconstruction company to improve the health of the banking sector
- ₹ 157 billion allocated for the Ministry of Micro, Small, and Medium Enterprises (MSME) sector
- Update the definition of small companies under the Companies Act, 2013
- Increase in the MSME budget
- Incorporate one-man companies with no restriction in paid-up capital and turnover
Expert Take: MoneyTap Founders Talk About the Impact of the Union Budget
Bala Parthasarathy, CEO, MoneyTap
Since we have seen that India is one of the fastest-growing Fintech Markets in the world, we have no doubt that the government’s support in creating and promoting a world-class Fintech hub at GIFT City will draw everyone’s attention and can soon become the cradle of developing Fintech companies. We see enormous growth in that region and in creating jobs, drawing more people to work in Fintech. The exposure can bring in more innovation and technical know-how, help companies thrive in a joint collaboration set up, attract many incubators, investors, and accelerators, and create an ecosystem for growth.
Regarding the government’s ₹1500 crore influx to support digital payments, we all know that The Digital India Program is a flagship program by India’s Government. MoneyTap has also mirrored this goal to make more Indians digitally empowered, use financial apps in better ways, improve knowledge and create apps that are easy to use, flexible, and can make people’s lives more secure. So, we are hopeful that any influx like this will help people get more convenience and accessibility to financial payments online.
Bala Parthasarathy’s view was published on Deccan Herald.
Kunal Varma, Co-Founder, MoneyTap
The key theme of this budget is Growth, as against taking a conservative stance and managing fiscal consolidation. This was very much needed, considering the pandemic’s impact on FY’21.
A strong focus on infrastructure spending has emerged. Multiple measures to help fund this spending, including disinvestments and capital market reforms.
Government spending is projected to be at one of the highest levels as compared to the recent past – an estimated 15.6% of FDP for FY’22, which’s a significant jump from the 13.2% number in FY’20.
To finance a much higher spend, the fiscal deficit estimate has been revised to 9.5% of GDP in FY21 and a proposed 6.8% of GDP in FY22, as compared to the budgeted estimate of 3.5%. This is a massive jump by any stretch, and a lot of measures will be needed to make this happen, along with strong and continued support from the RBI.
No major changes were made to the tax regime. However, there was an emphasis on making IT returns filing processes much simpler and more streamlined, introducing more digital and faceless steps. This is expected to introduce automation in information flow and make return filings easier for everyone and, in particular, for senior citizens.
Creating a “bad bank” is an interesting move aimed at moving bad assets of banks to an ARC. This, coupled with some measures on strengthening banks through recapitalisation, is a strong message that the government is paying a lot of attention to the banking sector.
A substantial increase in the spending on healthcare infrastructure was proposed. The FM increased the proposed budget for Health and Wellness to around 137% of the current number for FY21. This will be spread across multiple schemes in areas of disease prevention, cure and treatment, and overall wellbeing.
The Agri and rural sectors received a lot of focus, as expected. The targets for agricultural credit were increased substantially, to ₹16.5 Lakh crores in FY22. Rural infrastructure development received a jump in budget allocation to ₹40,000 Cr. However, one surprise was the overall drop in funds allocated to the MNREGA scheme. This could potentially have some impact on the living standards if the rural job market continues to be muted. But with the overall impetus to the Rural and Agri secures, hopefully, there should be an overall benefit.