The Union Budget 2021 is presented by the finance minister of the ruling government on February 1. The budget is a document that lays out the expenditure and income plan of the government for the upcoming financial year. It lays out the policies.
This year the budget will be presented by Ms Nirmala Sitharaman, India’s finance minister. This budget will also be India’s first-ever digital-only budget.
➡️YouTube – https://t.co/pb5tXMiZlx
— Ministry of Finance (@FinMinIndia) February 1, 2021
There has already been a lot of hue and cry on what can be expected from the budget after the finance minister had said that this will be a budget that India has not seen in the last 100 years.
Read more on Groww: Budget 2021 Expectations
Markets At End of The Budget Presentation
At 1.15 p.m.
- Nifty up 2.82-2.89%
- Sensex up around 3%
- FY21 Fiscal Deficit Pegged At 9.5% Of GDP
- Need Rs 80,000 crore from markets in the last two months of FY21
- FY22 fiscal deficit target at 6.8% of GDP
- Propose to reduce the compliance burden for senior citizens above 75 years of age.
- The time limit for reopening of tax records to be reduced to 3 years from 6 years.
- Citizens above 75 years with only interest income will not have to file income tax returns.
- The government proposes to set up a faceless dispute resolution committee for individual taxpayers.
- Compliance to be eased for all taxpayers with the help of pre-filled forms.
- Capital gains from listed securities, dividend income, and interest income to also be pre-filled in tax forms
- The eligibility of provision for an additional deduction of Rs 1.5 lakh for loans taken to purchase affordable housing to be extended by one more year
- Late payment of employees’ contribution of retirement schemes by employers will not be allowed for tax deduction. Hence timely payment is to be ensured.
- FY22 Divestment target is Rs 1.75 lakh crores. In FY21, the government had budgeted to raise Rs 2.1 lakh crore through divestments but fell short.
- Apart from IDBI Bank Ltd., the divestment of two other state-run banks and one general insurer have been proposed
- Names of the companies were not specified
Innovation and R&D
- National Research Foundation outlay Rs 50,000 crores over 5 years to strengthen overall research ecosystem
- Digital payments: To boost Rs 1,500 crores for a proposed scheme to provide financial incentive to promote digital payments
- More than 15,000 schools will be qualitatively strengthened to include all components of the National Education Policy
- 100 new Sainik schools to be set up
- High Education Commission
- The legislation for this to be introduced this year. It will be an umbrella body.
- A central university to be set up in Leh for higher education in Ladakh
This will be brought about in 2021-22
Customs Duty on Steel
- Steel customs duty will be reduced to 7.5% on semi, flat and long products of non-alloy, alloy and stainless steel
- Duty on steel scrap till March 2022 will be exempted
One Person Companies
- To incentivise incorporation of one-person companies, no restriction on paid-up capital and turnover
- Conversion of one-person company to any other kind, reducing residency limit from 182 days to 120 days, allow non-resident Indians to incorporate one-person companies in India
Small Companies Definition
- Paid-up capital not exceeding reduced from Rs 50 lakhs to not exceeding Rs 20 crores
- Turnover eligibility from Rs 2 crores to Rs 20 crores
Stressed Asset Resolution
- This will be done by setting up a new structure
- An Asset Reconstruction Company Ltd. will be set up to consolidate and take over the existing stressed debt and dispose off the assets to AIFs and other potential investors fo eventual value realisation
Recapitalisation of PSBs
Further recap of Rs 20,000 crores is proposed in 2021-22.
An increase was approved from Rs 1 lakh to Rs 5 lakh.
Minimum loan size eligible for debt recovery under Sarfesi Act to be reduced from Rs 50 lakhs to Rs 20 lakhs
Insurance Act 1938 To Be Amended
- Permissible FDI Limit to Increase to 74% from 49%
- To allow foreign ownership with safeguards
- Majority board of directors to be resident Indians
To instil confidence in the market during times of stress, a permanent institutional framework will be established. This will purchase investment-grade debt securities in stressed and normal times and help in the development of the bond market.
Such a charter for investor protection across financial products to be launched
Petroleum and Natural Gas
Ujjwala scheme which has benefited 8 crore households is being extended to more 1 crore beneficiaries
Shipping And Waterways
- Major ports will be privatised
- 7 projects worth more than Rs 2,000 crores in PPP mode in FY 21-22
- Consumers will be able to choose from more than one distribution company
- Revamped reformed power distribution sector scheme worth Rs 3.5 lakh crores will be launched over five years
- National Hydrogen Misson to be launched
Markets at 12.06 p.m.
- Sensex up 1.91% and 884 Points, Regains 47,000 Levels
- Nifty Up 1.82%
Road and Railway/Metro Infrastructure
- By March 2022, another 8,500 km will e awarded and complete an additional 11,000 km of the national highway corridor
- Outlay Rs 1.18 lakh crores for Ministry of Road Transport and Highways
- Record sum of Rs 1.1 lakh crores for Railways Infrastructure
- Another 1016 km of metro is under construction in 27 cities
Physical And Financial Capital Infrastructure
- For 2021-22, an outlay of Rs 5.54 lakh crores, 34.5% more than the budget estimate for 2020-21.
- More than Rs 2 lakh crores to states and autonomous bodies for their capex.
- Monetising operating public infra assets is an important financing option.
- A National Monetisation Pipeline of potential brownfield infrastructure assets will be launched.
- National Infrastructure Pipeline announced by the FM in December 2019 was launched with 6,835 projects and now expanded to 7,400 project
- Around 217 projects worth Rs 1.1 lakh crores have been completed
- A professionally managed Development Financial Institution (DF) for infrastructure financing will be set up. A bill will be introduced to set up the same. A sum of Rs 20,000 crores is being provided to capitalise this institution.
- It will have a lending portfolio at least Rs 5 lakh crores within three years time
- Debt financing of InvITs and Reits by foreign portfolio investors will be enabled. This will augment funds for infrastructure and real estate
Atmanirbhar Bharat and $5 Trillion Indian Economy
- Our manufacturing sector needs to grow in double-digit on a sustained basis for us to make India a $5 trillion economy.
- PLI schemes to create manufacturing global champions for Atmanirbhar Bharat for 13 sectors, 1.97 lakh crores over five years
- Scheme of a mega-investment textile park in addition to PLI scheme to be launched. 7 textile parks will be established in three years.
Health and Wellbeing Provisions in the Budget
Health and wellbeing outlay: 2,23,846 crores in the BE 2021-22
Here are the provisions announced by the budget:
- A Made in India vaccine, which is presently limited to five states, that will tackle 50,000 child deaths annually
- Rs 35,000 crores for Covid-19 vaccine, committed t to provide further funds
- An outlay of Rs 2217 crores for 42 urban centres to tackle air pollution
Urban Swach Bharat mission
Outlay 1.41 lakh crores over a period of five years from 2021
Jal Jeevan Mission Urban
- Outlay: Rs 2.87 lakh crores
- Aims at universal water supply 4,378 urban local bodies with 2.6 crores household tap connections as well as liquid waste management in 500 Amrit cities
Mission Poshan 2.0
- To strengthen nutritional outreach, the government will merge Supplementary Nuttrional Programme and Poshan Abhiyan to launch Mission Poshan 2.0
- Improve nutritional outcome in 112 aspirational districts
Swasth Bharat Yojana With an Outlay of Rs 64,180 crores
- PM Atmabirhar Swasth Bharat Yojana will be launched with an outlay of Rs 64,180 crores over 6 years. his will develop capacities of primary, tertiary and secondary health care systems, strengthen existing national institutions and create new ones to cater to detection and cure of new and emerging diseases.
- This is in addition to national health mission
- Support for 17,000 rural and 11,000 urban health and wellness centres
- Set up integrated public health labs in all districts
- Set up 3,382 block public health units in 11 states
- Set up critical care hospital blocks in 602 districts and 12 central institutions
- Strengthening national centre for disease control, 5 regional branches and 20 metro health surveillance units
- Expansion of integrated health information portal to all states and UTs
- Operationalisation of 1 new public health units and strengthen exiting 33 public health units at points of entry
- Set up of 15 health emergency operation centres and two mobile hospitals
- Set up of national institution for One Health, a regional research platform for WHO SE Asia region office, 9 biosafety level three labs and 4 regional national institutes for virology
Finance Minister Nirmala Sitharaman Begins Budget Speech
- With the current budget, Ms Sitharaman intends to lay out the vision for Atmanirbhar Bharat
Finance Minister Arrives at The Parliament
— DD News (@DDNewslive) February 1, 2021
Stock Markets at 10.00 a.m.
One hour before the budget presentation begins, BFSI indices were racing ahead of its peers.
- BSE Bankex was up 1.57%, BSE Finance was up 1.38%
- Nifty Bank was up almost 1.45%, Nifty Finance was up 1.47%
- Nifty Realty was up 1.67% and BSE Realty was up almost 1.67%
- When it comes to the benchmark indices, Nifty was up almost 0.7% to 12,730 levels and Sensex was up 0.8-0.9% to 46,710 levels.
GDP and Macroeconomic Health of India
India’s GDP has slipped heavily due to the pandemic-induced lockdown and the times following that. The pandemic stalled India’s growth trajectory in the previous year. GDP contracted 23.9% year-on-year (YoY) in the April June quarter. This was the first GDP contraction in more than 40 years. It again contracted, but by 7.5%, for the July-September quarter.
On the other hand, India is set t surpass its fiscal deficit target of 3.5% of the GDP in the past financial year.
Read more on Groww: Budget 2021: Understanding the Concept of Fiscal Deficit
So a huge challenge lies ahead for the government.
Economic survey is a report released a day before the budget is presented on how have the government policies fared in the trailing 12 months. The Economic Survey of India, 2021 was presented on January 29, 2021.
Read more on Groww: Budget 2021: Economic Survey and Its Highlights
Key Terms To Know About The Budget
The much-awaited Union Budget 2021 will be presented on Feb 1 , 2021. To help you understand the budget better, we have compiled a list of frequently used financial terms that you can expect to hear during the budget to help you understand the announcements better.
Read more on Groww: Budget 2021 Glossary: Key Terms To Know About The Budget