Union Budget 2021 Aims at Getting the Nation Back on its Feet

After the catastrophic 2020, every citizen from every part of the world wants a revival of health and economy. And there is no exception in India for sure. After the mammoth job loss, pay cuts, business losses, and companies getting closed down, everyone had a lot of expectations from Union Budget 2021.

Union Budget 2021 was significant for the government as it was for the common man of the country. As the common man lost his job and faced pay cuts, the government has also come under a fiscal deficit of 9.5 per cent of its GDP that it plans to recover over 4-5 financial years. The Finance Minister, Nirmala Sitharaman claims to bring down the fiscal deficit to 6.8 per cent by FY 2022-23 and gradually bring it down to 4.5 per cent of the GDP by FY 2026. The government plans to deal with this situation with gross borrowing from the market at Rs. 12 lakh crores.

Union Budget 2021 was presented on February 1st, 2021, at 11 AM by the Finance Minister, Nirmala Sitharaman. In compliance with the mission to establish Atma Nirbhar Bharat, this year, the Union Budget is based on six pillars - healthcare, infrastructure, financial capital, inclusive development, human capital for research and development, and minimum government, and maximum governance.

1. 137% Hike in Healthcare Budget

After a year-long struggle to deal with the Covid-19 pandemic, the healthcare resources have been depleted. Even though vaccines have been rolled out, the coronavirus threat is not over yet. Realising the urgency in the healthcare sector, the government has hiked the budget allocation in this sector up to 137%. A budget of Rs. 2,83,846 lakh crores for the healthcare and wellness sector has been proposed by the Finance Minister. Additionally, Rs. 35000 crores have been allocated for the indigenous vaccines.

In compliance with the Atma Nirbhar Swasth Bharat Yojana, Rs. 64,180 crores have been allocated for the development of prevention, diagnosis, and cure of new and emerging diseases. This will focus on the betterment of the primary, secondary, and tertiary health care segment for the next six years. 17000 rural and 11000 urban healthcare and wellness centres have been proposed to make healthcare more accessible and affordable. Telemedicine and digital technology-driven healthcare will also be facilitated to be availed from home.  

2. Tax Relief for Senior Citizens

Tax slabs and tax rates remained unchanged in Union Budget 2021. There are just two significant mentions about tax relief – one about the senior citizens and the other for the NRIs.

In the Union Budget 2021, Finance Minister, Nirmala Sitharaman declared the scrapping of income tax returns for senior citizens that is for people above 75 years if they have no other source of income apart from the pension. The bank will deduct their tax on their own. This, however, is applicable for account holders of some selected banks.

It comes after the introduction of 80TTB in the Income Tax Act, 1961, in 2018, where deduction of medical expenditure was facilitated in case the pension holder did not have medical insurance. Section 80TTB also allows the senior citizens to claim up to Rs. 50,000 interest earned from the pension as their non-taxable income.  

3. Amendment of DTAA

Budget 2021 also removed the double taxation for NRIs. Since NRIs have a retirement account in their country of residence, they have to pay the tax separately in that country and also in India. They are taxed for their income through savings accounts, investment or fixed deposit, or from a property in India. Through the Double Tax Avoidance Agreement (DTAA), NRIs can cut down the taxes that apply to their income from India. Now a specific tax rate has been decided upon and accordingly DTAA has been signed by India with other countries which facilitate Indian residing in that country to pay tax as per the decided rate. The tax rate is between 7.5 to 25% depending on the country of residence.    

4. Faceless and Electronic Taxation

All taxation processes to be made electronic. Electronic processes will make the process of filing taxes and income tax returns seamless, less-error prone, faster, and more cost-effective.

5. Disinvestment of Government Assets

The government has set disinvestment targets to deal with the fiscal deficit. While presenting the Union Budget 2021, Sitharaman mentioned that the LIC IPO will be out in the market by 2022. The Air India privatisation will also be completed by 2022. These apart, two public sector banks and several other national assets will be monetised. A National Asset Monetisation Pipeline and Dashboard will be created. National assets including NHAI, Gail, Airports Authority of India, Railways, HPCIL, and some sports stadiums are among the few that will be monetised to pull Rs.175,000 crores from the market.

As per the Oxfam reports, the billionaires in India grew their wealth by 35% during the lockdown. Hence, it also indicates that though, majority of the people suffered and the inequalities in the economic strata have worsened during the Covid-19 pandemic, the wealthy industrialists in the private sector have the money. Now, as the government plan to monetise PSU assets, it gives these industrialists a chance to invest their money to create jobs and make more constructive contributions towards the growth of the nation.

6. FDI in Insurance with security riders has been raised to 74 per cent.    

The increased FDI in insurance will not only help to pull foreign inflows but will also encourage foreign insurance companies to bring in their innovative business practices that will enrich the Indian insurance sector.

As per industry experts, the insurance sector will play a vital role in streamlining household savings into long-term investments.

At present, the insurance segment constitutes only 3.71 per cent of the GDP, which can be improved if more comprehensive and simple products with low premiums are introduced to the Indian population.

7. Comfort of Traveling

One of the six pillars that uphold the objectives of Union Budget 2021 includes infrastructure. Essentially, upgraded expressways, railway, air travel will ensure better connectivity and ease of travelling. Finance Minister has announced complete electrification of railways by 2023 and allotted a budget of Rs. 1,10lakh crore rupees for the same. Further, the Automatic Train Protection System to prevent train collisions has also been promised by the government.    

Introduction of Vista Dome LHB coach across tourist routes, both domestic as well as international to facilitate better travelling experiences for passengers will give a much-needed boost to the tourism sector in the country.

8. Incentives for Start-ups

A tax holiday for start-ups by one more year has been announced in the Union Budget 2021. For better funding of the start-ups, Capital gains exemption has been extended for one more year

9. Import duties Slashed on Gold, Silver, and several other goods

Import duties for gold and silver have been reduced from 12.5 per cent to 7.5% which has resulted in the fall of gold prices by about Rs. 1500 per 10 grams. The sharp rise in the price of precious metals had impacted the import records to a large extent. The slashing of the import duties is good news for the bullion market in India as well as the gems and jewellery sector as people in India love to buy gold and silver jewellery. Gold is purchased in bulk for marriages and also as a mode of investment.

In addition to this Agricultural Infrastructure and Development Cess (AIDC) of 2.5% will be levied on the import duty of precious metals which will be channelized for the improvement of the agricultural sector. This has been levied on the import duty to save the buyers of these precious metals from the additional burden.    

10. Mega Sops for Poll bound states

In the Union Budget 2021, the major impetus has been given to the infrastructure of all the poll-bound states that include West Bengal, Tamil Nadu, Assam, and Kerala. Rs.25,000 crores have been announced for the road construction in West Bengal, Rs. 65,000 for roads and highways in Kerala, Rs. 3,400 crores in Assam and Rs.1.03 lakh crores for the 3500 km National Highway project in Tamil Nadu.

11. Boost Infrastructure and Support for Agriculture

With farmer’s welfare being the primary focus, the government has announced an increase in the Minimum Support Price (MSP) and assure prices that would be at least 1.5 times the production cost. Farmer’s salary, procurement of food grain, integrating 1000 more mandis to ‘eNAM’ – a government-owned digital agriculture trading platform has been proposed. Also, the agricultural credit amount has been set to Rs.16.5 lakh crores. Rs. 40,000 crores allocated for the Agri Infrastructure and Rs. 10,000 crores for Micro Irrigation Corpus.

12. Benefits for First time Home Buyers

Homebuyers from the low and middle-income groups would be able to save Rs.3.5 lakh per annum. Affordable housing schemes have been extended till March 2022. There is a possibility that the price of affordable housing will go further down. The government has declared a tax holiday for real estate developers for affordable housing and housing projects that promote affordable rentals. In addition to all these, a reduction in the customs duty of steel and iron helps in bringing down the construction costs. All these measures and reforms help to have higher savings and more money in the hands of low and middle-income groups.        

13. Faster Access to Deposit Insurance

There have been many instances when bank withdrawal is constricted due to pressure on banks. Last year, the deposit insurance was raised from Rs. 1 lakh to Rs. 5 lakh. Now, the depositors can access that insurance amount if they face trouble in withdrawing money from the bank.

14. Expert’s Opinion on Union Budget 2021

The following opinions from industry experts have been collated from several opinion polls conducted by the national news channels.

Uday Kotak, “It is the first budget after a pandemic that our generation had not seen. It is a budget that has happened at the backdrop of the pandemic. The five key areas that I can see have been focused on the national interest and prioritisation point of view include infrastructure, healthcare, defence, education, and sustainability. And I include sustainability in this category. Please keep in mind that the world axis is going to change in terms of sustainability with the change in the administration in the United States.”

Pawan Goenka, Chairman, CII Mission on Atma Nirbhar Mission, “We have to make Indian industries more capable, and I would say that the biggest step taken by the government is the PLI scheme for three pus ten sectors.” He emphasised rolling out the PLI schemes and making them easy to use. “Atma Nirbhar Bharat will not happen easily. It would require disruptive changes in the way we govern and control the ease of doing business, cost of doing business. It will take a lot of effort from the industry and the government to bring about Atma Nirbharta.

Economist Professor Abhijit Banerjee, Budget comes as an implication for tax cuts. We should have higher taxes on the rich. We are in a budgetary crunch. And if we want to redistribute the resources and raise demands, we should substantially increase the taxes for the rich and wealthy citizens. The banking sector is in a fragile state with an alarming hike in the percentage of NPAs. It will stop the banks from rolling out loans in the market, and people who need loans to start afresh will be affected as a result.    

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FAQs

Q. Who presented the first-ever budget for India?

Ans. The first-ever budget was presented in colonial India. It was presented by a Scottish economist and politician, James Wilson in the year 1860.

Q. Who presented the first independent Indian budget and when?

Ans. Sahnmukhan Chetty presented the first Indian budget on 26th November 1947.

Q. Who was the first woman Finance Minister to present the budget?

Ans. Indira Gandhi, the former Prime Minister of India presented the budget in 1970.

Q. Which budget was named to be the Epochal Budget?

Ans. The budget for the financial year 1991-92 is known as the Epochal Budget because it marked the initiation of the economic liberalisation of India.