Union Budget 2021 has cheered not just the Indian markets but also the citizens of India as it had not brought any shock on the tax front. The Finance Minister, Nirmala Sitharaman has presented the budget with focus on 6 pillars to energize the economy which has been hit by the pandemic. It is evident that the government is committed to all-round development and making India self-reliant. The Budget proposed higher spending on key areas such as healthcare and infrastructure without bringing any proposals that would seek to expand the direct tax revenue base.
Let us discuss the impact and allocation of budget across different sectors of the economy.
So, without further ado, let us discuss about the allocation of budget across various sectors of our economy.
1. Infrastructure
The infusion of funds into India’s infrastructure segment, with a focus on improving connectivity, would be particularly beneficial for India’s housing sector. The proposed debt financing for REITs and InvITs and the setting up of the Development Financial Institution for augmenting funds for infra and the real estate sector would provide a significant boost to the sector and might attract further investments. Increased consumption and infrastructure spend would have a positive impact on collateral sectors like tourism and hospitality. Better connectivity would be of great help to logistic service providers also.
2. Housing
The government’s move to extend the benefit of additional Rs 1.5 lakh tax deduction on home loan interest, until March 31, 2022, would serve as a further impetus to the residential property sector. The government’s agenda of ‘Housing for All’ is justified by the announcements. The FM's support for rental housing announced today will also go a long way in stimulating the real estate market and will alleviate a lot of pressure points in the rental home market.
3. Healthcare
FM proposed an allocation of Rs 2.23 lakh crore for healthcare expenditure including a new central scheme 'PM Swasth Bharat Yojana' with an outlay of Rs 64,180 crore. Investing in healthcare is one of the best decisions for any nation. A healthier India is a more productive India. The diversification in the funds allocated would augment major branches under this space like pharmaceuticals, hospitals and laboratories. It will strengthen and develop primary, secondary and tertiary healthcare facilities even in the last miles of our nation.
4. Agriculture
The government has assured farmers that the MSP scheme will continue and be improved further. The government has announced that it will utilize 1 lakh crore infrastructure fund for infrastructure creation of state-controlled mandis to reassure its commitment to developing APMCs. This may alleviate fears of protesting farmers. These measures will boost farm income, which in turn will contribute to the demand. It is also an indication to the farmers that the government is working for their well-being.
5. Roadways and Transport
The Eastern Freight Corridor is to be taken up this year via PPP mode. In addition, three potential dedicated freight corridors—the East Coast, East-West and North-South are in works. New allocation of investment in the country's public transport system and subway lines, especially in Tier 2 cities. New freight corridors would support the free flow of goods and services across India and would also be good for the government's aim of raising the income of farmers, especially with the current bill in place, as they will be able to sell across states and also reduce the cost of transport with new infrastructure. The new infrastructure, improved access to travel facilities and the connection of cities through metro lines would also boost the economy and increase employment in these areas.
6. Foreign Direct Investment (FDI)
The rise in FDI limits for the insurance sector from 49 percent to 74 percent is a welcome move and will help insurance firms raise funds to ensure that their solvency is in line with rising business needs. Higher amounts of foreign capital would certainly be attracted by a more liberal FDI scheme which will further increase insurance penetration in India.
6. Income Tax:
The Finance minister surprised taxpayers by not announcing any change in income tax slab rates. She also did not announce the proposal to introduce much-hyped COVID cess. Senior citizens (above 75) earning only pension and interest income from deposits would not be required to file Income Tax Return. FM proposed to make dividend payment to REIT/InvIT exempt from TDS.
Conclusion
This budget appeared to be forward looking and progressive with implementation remaining the key. The government’s steps to revive the economy and building a strong foundation through infrastructure spending indicated a holistic approach to address the gaps in the economy. It will not only accelerate us in recovery stage but also provide a direction for the long run.
