The Union Budget 2021 has been a common man’s budget with a key focus on ease of living. It has drastically increased healthcare spending, made space for infrastructure, and laid out a plan for divesting two PSU banks, all aimed to dig an economy out of a pandemic-induced slump.
Budget 2021- A Budget like never before
On 1st February 2021, Union Minister Nirmala Sitharaman presented the Union Budget 2021 applicable over the previous year 2021-22 and assessment year 2022-23. The key highlights of the budget were Increased Capex (Capital Expenditure), no change in Income Tax slabs, Agriculture Infrastructure & Development cess on petrol & diesel, Increase in FDI limit for Insurance Sector and setup of Bad Banks. We are going to discuss in detail all these points and a few more announcement which are significant for the economy.
The government has provided a big infrastructure push with a 34.5% higher capital budget at Rs.5.54 lakh crore. I believe that with such a huge increase in the expenditure the government aims to increase employment in the economy as during the pandemic most of the daily wage earners had lost their job. Moreover, with increased employment, the Personal Disposable Income (PDI) will increase leading to higher demand and a boost in the economy. The upper crust of our economy had a sigh of relief when Finance Minister didn’t impose any surcharge or covid cess which was expected for a long time. With the imposition of Agriculture Infrastructure & Development cess on petrol & diesel, most of the people believed that it would prove out to be a strain on their pocket. But the good news is that the government has reduced basic customs duty (BCD) on the same. So, all in all, there would be no change in the expenditure of people on petrol & diesel.
The Insurance Sector was booming after the announcement of increased Foreign Direct Investment (FDI) limit from the existing 49% to 74%. The repercussions would be a greater inflow of much needed foreign investment to revive our insurance sector. After the pandemic, everybody has realized the significance of insurance but to expand its reach to the remotest areas would require a strong financial boost. Presently only 44% of the Indian population is covered by health insurance, this figure is expected to increase significantly in near future. Everything decision has some cons & this is no exception to it. While giving 74% of ownership to foreign investors there is a fear that the Indian insurance sector would be dominated by foreign individuals or there might be a case when the foreign investors would only make investments for short-term profits. GoI is determined to overcome such obstacles by giving key management positions to Indian residents & special resolutions to make important decisions.
Moving on to certain key sectors of our economy I would like to talk about Health, Education, Defense, and Banking. With a whopping 137% increase in the Health Budget along with the introduction of the Atmanirbhar Swatha Bharat Yojana-A comprehensive coverage of health infrastructure, sanitation & waste measures the government has given the much-needed focus to the health sector. With a highest-ever increase of nearly 19% in the past 15 years, the defense budget has been in highlight. But it was felt that a cut of 6% in the education sector was somewhat unfair as during the pandemic most of the students, mostly from poor families, could not have proper access to online teaching. Finally talking about the bad banks, this has been one of the most significant announcements in the banking sector. The basic idea behind it is to segregate the bad assets from the good so that the banks can focus on fresh lending. This has also been a well-timed decision as after the pandemic the banks expect a significant rise in NPA (non-performing assets).
To conclude with the Union Budget 2021 has been a common man’s budget with a key focus on ease of living. It has doubled healthcare spending, made space for infrastructure, and laid out a plan for divesting two PSU banks, all aimed to dig an economy out of a pandemic-induced slump.