Category: Budget

Impact on Stock Market

The Union budget 2021 has been a bold one, where the government has increased its expenses without increasing the tax rates. Till now, the investors have welcomed the budget with open arms and it may continue to have a strong positive impact on the equity markets for FY ’21-’22 due to increase in liquidity, especially for some sectors including Infrastructure and affiliated sectors, Railways, Financial, and Capital Goods. Auto and Pharma sectors can boost from the scrappage policy introduced in the budget, and Consumer Goods (Electronic) sector can gain from the higher customs duty levied on imports. In short term, the equity markets might witness a correction, but for the year, the budget looks to be fruitful for equities, and in turn, for the country’s economy as well.

Impact on Commodity Market

In the Union Budget 2021, the FM has not announced any changes in the commodities transaction tax. However, there has been some changes in the custom duty on some commodities, which might affect the commodity market. Base customs duty on gold and silver has been reduced from 12.5% to 7.5%, but they will attract agriculture Infrastructure and development cess so the net rate levied comes around 10.75%. The budget has no impact on crude oil. As for iron and steel, Customs duty has been reduced to 7.5% from 10% earlier on semis, flat, and long products of non-alloy, alloy, and stainless steels.

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In union budget 2021-22, the FM has announced capital infusion for development of healthcare centres, healthcare institutions, swatch Bharat schemes, construction of National highways and highways and building 7 new textile parks among others.

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Today, the Finance Minister of our Country, Nirmala Sitharaman presented the Union Budget for the year 2021. After an adverse effect of COVID-19 pandemic on the economy during the past year, the FM stated that Indian economy has witnessed a revival.

Major Allocation

Summary

• No Changes in personal income tax slab or rates
• Senior Citizen over 75 years of age, with no income other than pension and interest, exempt from filing returns
• FDI in insurance to increase from 49% to 74%
• LIC IPO would be introduced this year
• Government to launch vehicle scrappage policy
• Gold and silver to become cheaper as government reduced customs duty
• Iron, steel, copper items, nylon clothes to get cheaper
• Mobile Phones and charger, leather shoes, imported auto parts, alcoholic beverages, raw silk, solar lanterns, imported products like compressors of refrigerators and ACs with get expensive.
• More metro rail projects to be undertaken under PPP model
• Additional highways and national highways to be constructed
• Measures for clean air to be taken
• Made in India COVID-19 vaccine to be made available across the country
• Some ongoing divestment transactions will be completed this year
• One Nation One Ration Card scheme for migrant workers and laborers

• 100 new Sainik Schools will be set up in partnership with NGOs/private schools/states
• Proposed to set up a Central University in Leh.
• Allocated INR 3,768 crores in the year 2021-2022 for the upcoming digital censes
• The capital expenditure, estimated in RE is INR 4.39 lakh crores in 2020-2021 as against INR 4.12 lakh crores in BE 2020-21.
• The fiscal deficit in RE 2020-21 is pegged at 9.5% of GDP. Additional INR 80,000 crores will be required.
• Plan and intend to reach a fiscal deficit level below 4.5% of GDP by 2025-2026.
• Will allow a normal ceiling of net borrowing for the states at 4% of GSDP for the year 2021-2022
• Proposed to increase limit for tax audit for those who carry out 95% of their transactions digitally from turnover of INR 5 crore to INR 10 crore.
• Simplified GST filing

Budget in Detail

PART A

Part A has been focused on AtmaNirbhar Bharat. The FM mentioned the six pillars of this budget:

1.     Health and Wellbeing

2.     Physical and Financial Capital and Infrastructure

3.     Inclusive Development for Aspirational India

4.     Reinvigorating Human Capital

5.     Innovation and R&D

6.     Minimum Government, Maximum Governance

Health and Wellbeing

PM AtmaNirbhar Swasth Bharat Yojana Scheme

• Outlay of INR 64,180 crores over 6 years
• Will develop capacities of primary, secondary, and tertiary care Health Systems
• Strengthen existing national institutions
• Create new institutions
• Support for 17,788 rural and 11,024 urban Health and Wellness Centers
• Setting up integrated public health labs in all districts and 3382 block public health units in 11 states
• Establishing critical care hospital blocks in 602 districts and 12 central institutions;
• Strengthening of the National Centre for Disease Control (NCDC), its 5 regional branches and 20 metropolitan health surveillance units

• Expansion of the Integrated Health Information Portal to all States/UTs to connect all public health labs
• Operationalization of 17 new Public Health Units and strengthening of 33 existing Public Health Units at Points of Entry, that is at 32 Airports, 11 Seaports and 7 land crossings
• Setting up of 15 Health Emergency Operation Centers and 2 mobile hospitals
• Setting up of a national institution for One Health, a Regional Research Platform for WHO South East Asia Region, 9 Bio-Safety Level III laboratories and 4 regional National Institutes for Virology.

Water Supply

• Jal Jeevan Mission (Urban) will be launched with an outlay of INR 2,87,000 crores over 5 years
• Aims to supply water in all 4,378 Urban Local Bodies with 2.86 crores household tap connections, as well as liquid waste management in 500 AMRUT cities.

Swachch Bharat, Swasth Bharat

• The Urban Swachh Bharat Mission 2.0 will be implemented with a total financial allocation of INR 1,41,678 crores over a period of 5 years from 2021-2026.

Clean Air

• Provided an amount of INR 2,217 crores for 42 urban centres with a million-plus population.

Vaccines

• Made in India vaccine is currently present to only 5 states and will be rolled out across the country.
• INR 35,000 crores is provided for Covid-19 vaccine in BE 2021-22 and will provide further funds if required.

Total allocation for Health and Wellbeing is INR 2,23,846 crores in BE 2021-22 as against this year’s BE of INR 94,452 crores an increase of 137%.

Physical and Financial Capital and Infrastructure

AtmaNirbhar Bharat – Production Linked Incentive scheme (PLI)

• AtmaNirbhar Bharat have been announced for 13 sectors with an outlay of around INR 1.97 lakh crores, over 5 years starting FY 2021-22.

Textiles

• Mega Investment Textiles Parks (MITRA) scheme will be launched in addition to the PLI scheme.
• 7 Textile Parks will be established over 3 years.

Infrastructure

• The National Infrastructure Pipeline (NIP), which was announced in December 2019, was launched with 6835 projects; the project pipeline has now expanded to 7,400 projects.
• Around 217 projects worth INR 1.10 lakh crores under some key infrastructure Ministries have been completed.

Infrastructure financing – Development Financial Institution (DFI)

• Introduced a bill to set up a DFI with an outlay of INR 20,000 crores to capitalise the institution.
• The ambition is to have a lending portfolio of at least INR 5 lakh crores for this DFI in three years’ time.

Asset Monetization

• A “National Monetization Pipeline” of potential brownfield infrastructure assets will be launched.
• An Asset Monetization dashboard will also be created for tracking the progress and to provide visibility to investors.
• NHAI and PGCIL each have sponsored one InvIT that will attract international and DIIs.
• Five operational roads with an estimated enterprise value of INR 5,000 crores are being transferred to the NHAI InvIT.
• Similarly, transmission assets worth INR 7,000 crores will be transferred to the PGCIL InvIT
• The next lot of Airports will be monetized for operations and management concession.

Sharp Increase in Capital Budget

• In the BE 2020-21, INR 4.12 lakh crores was provided for Capital Expenditure.
• For 2021-22, INR 5.54 lakh crs has been provided, which is 34.5% more on YoY basis
• Of this, more than INR 44,000 crores to be provided for projects / programs.
• More than INR 2 lakh crores to States and Autonomous Bodies for their Capital Expenditure has been provided.

Roads and Highways Infrastructure

• More than 13,000 km length of roads, at a cost of INR 3.3 lakh crores, has already been awarded under the INR 5.35 lakh crores Bharatmala Pariyojana project of which 3,800 kms have been constructed.
• By March 2022, another 8,500 kms will be awarded and complete an additional 11,000 kms of national highway corridor.
• Provided an enhanced outlay of INR 1,18,101 lakh crores for Ministry of Road Transport and Highways, of which INR 1,08,230 crores is for capital, the highest ever.

Railway Infrastructure

• Indian Railways have prepared a National Rail Plan for India – 2030. The Plan is to create a ‘future ready’ Railway system by 2030.
• Has providing a record sum of INR 1,10,055 crores for Railways, of which, INR 1,07,100 crores is for capital expenditure.

Urban Infrastructure

• A new scheme will be launched at a cost of INR 18,000 crores to support augmentation of public bus transport services.
• The scheme will facilitate deployment of innovative PPP models for over 20,000 buses.
• A total of 702 km of conventional metro is operational and another 1,016 km of metro and RRTS is under construction in 27 cities.
• Metro Rail Project:
  • • Kochi Metro Railway Phase-II – 11.5 Km – INR 1957.05 crores
    • Chennai Metro Railway Phase-II – 118.9 km – INR 63,246 crores.
    • Bengaluru Metro Railway Project Phase 2A and 2B – 58.19 km – INR 14,788 crores.
    • Nagpur Metro Rail Project Phase-II – INR 5,976 crores
    • Nashik Metro – INR 2,092 crores

Power Infrastructure

• A revamped reforms-based result-linked power distribution sector scheme will be launched with an outlay of INR 3,05,984 crores over 5 years.

Ports, Shipping, Waterways

• 7 projects worth more than INR 2,000 crores will be offered by the Major Ports on Public Private Partnership mode in FY21-22
• A scheme for merchant ships in India will be launched with an outlay of INR 1624 crores over 5 years.

Petroleum & Natural Gas

• Schemes will be launched to add more cities in Gas distribution Network

Non-conventional energy sector

• Additional capital infusion of INR 1,000 crores to Solar Energy Corporation of India and INR 1,500 crores to Indian Renewable Energy Development Agency

Insurance Sector

• Proposed to increase the permissible FDI limit from 49% to 74% in Insurance Companies and allow foreign ownership and control with safeguards

Stressed Assets

• An Asset Reconstruction Company Limited and Asset Management Company would be set up to clean banks’ Balance Sheet.

Recapitalization of PSBs

• To consolidate the financial capacity of PSBs, recapitalization of INR 20,000 crores is proposed in 2021-22.

Deposit Insurance

• To improve credit discipline for NBFCs with minimum asset size of INR 100 crores, the minimum loan size eligible for debt recovery under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 is proposed to be reduced from the existing level of INR 50 lakhs to INR 20 lakhs.

Company Matters

• Proposed to revise the definition under the Companies Act, 2013 for Small Companies by increasing their thresholds for Paid up capital from maximum INR 50 Lakh to INR 2 Crore and turnover from maximum INR 2 Crore to INR 20 Crore.

Disinvestment and Strategic Sale

• Strategic disinvestment transactions for BPCL, Air India, Shipping Corporation of India, Container Corporation of India, IDBI Bank, BEML, Pawan Hans, Neelachal Ispat Nigam limited among others would be completed in 2021-22.

• IPO of LIC will be launched in this year

• INR 1,75,000 crores as receipts from disinvestment in BE 2021-22.

Inclusive Development for Aspirational India

Agriculture

• Enhanced the agricultural credit target to INR 16.5 lakh crores in FY22
• Enhanced the allocation to the Rural Infrastructure Development Fund from INR 30,000 crores to INR 40,000 crores
• Propose to double a corpus created under NABARD by augmenting it by another INR 5,000 crores
• Around 1.68 crores farmers are registered and INR 1.14 lakh crores of trade value has been carried out through e-NAMs
• One Nation One Ration Card scheme for migrant workers and laborers

Financial Inclusion

• Have provided INR 15,700 crores to MSME sector, more than double of this year’s BE.

Reinvigorating Human Capital

School Education

• 100 new Sainik Schools will be set up in partnership with NGOs/private schools/states

Higher Education

• 100 new Sainik Schools will be set up in partnership with NGOs/private schools/states

• Proposed to set up a Central University in Leh

PART B

Relief to Senior Citizens

• Senior Citizen over 75 years of age, with no income other than pension and interest, exempt from filing returns

Exemption from Audit

• Proposed to increase limit for tax audit for those who carry out 95% of their transactions digitally from turnover of INR 5 crore to INR 10 crore.

Affordable Housing/Rental Housing

• Additional tax deduction of INR 1.5 lakh for interest on home loan for affordable housing extended for additional one year

Incentives for Start-ups

• Proposed to extend the capital gains exemption for investment in start-ups by one more year – till 31st March, 2022.

Custom Duty

Source: Union Budget 2021 PDF provided by the government

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In the Union Budget 2021, the government might give some relaxation in income tax on income of more than INR 5,00,000 for individuals in lower income group. It might also increase the limits for deduction u/s 80C so, that more savings and ultimately more funds are available with the government. Long Term Capital Gains (LTCG) tax, which is at 10% currently, is expected to be waved off. Main sectors in focus might be Defense, Pharma, Healthcare and Auto.

ETV Bharat Coverage

https://www.etvbharat.com/gujarati/gujarat/city/ahmedabad/the-government-should-accelerate-the-economy-by-increasing-spending-economic-experts/gj20210130224158664

ABP Live Gujarati Coverage

https://gujarati.abplive.com/news/ahmedabad/pre-budget-2021-22-quotes-from-industry-leaders-603743

News 18 Gujarati Coverage

https://gujarati.news18.com/news/business/union-budget-2021-what-common-man-expecting-about-new-and-old-income-tax-regime-vz-1068492.html

Chitralekha News Coverage

https://chitralekha.com/news/gujarat/expectations-evaluations-of-experts-from-different-sectors-in-the-central-budget/

Zee News Coverage

https://zeenews.india.com/gujarati/business/pre-budget-expectation-2021-budget-2021-has-given-hope-to-various-sectors-of-the-country-134805

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