Union Budget 2021 Is Progressive On All Counts

The government presented the first paperless Budget – 2021-22 on the backdrop of a pandemic induced global economic slowdown. The FM managed to present a progressive budget which not only helps push the economic growth forward but also takes care of the healthcare and welfare of the people. There are several measures announced which were particularly positive from a capital market perspective and in favour of retail investors.

Under the ‘Sankalp of Aatmanirbhar Bharat’ the Budget focused on 6 pillars, which include — health & well-being, inclusive development, human capital, innovation and R&D.

The overall FY22 health and well-being spend has been pegged at `2.23 lakh crore. Of this, `35,000 crore has been earmarked for the Covid-19 vaccine. Further, under the PM Aatmanirbhar Swasth Bharat Yojana, government will spend `64,180 crore on healthcare over a period of six years.

In line with popular expectation — the Budget proposes sharp uptick in government expenditure to boost economic growth. For FY21, capital expenditure is seen at `4.39 lakh crore (compared to previous estimates of `4.12 lakh crore). For FY22 capital expenditure is pegged at `5.54 lakh crore — a growth of 26% YoY with strong impetus on infrastructure spending including roads, rail, ports and airports.

The FY22 disinvestment target has been set at `1.75 lakh crore. Apart from two PSU banks and one general insurance company, divestments of BPCL, CONCOR, Pawan Hans and Air India are planned to be completed in FY22. The government will create a list of new companies for divestment. The much awaited IPO of LIC is also slated in FY22. All these measures would boost activity in the capital market and help retail investors participate in the growth of these government owned marque companies.

Some of the other progressive policy changes proposed are raising FDI in insurance sector to 74% from 49%, PSU bank recapitalisation plan of `20,000 crore, setting up of asset reconstruction and management companies for taking over stressed assets from some of the PSU banks.

The government will also launch a securities market code which will include SEBI Act, Government Securities Act, Depositories Act. It is also looking to launch a new investor charter for investor protection. SEBI will be notified as regulator for a gold exchange. These are significant step in creating a positive environment for capital markets and would go a long way in attracting foreign investments in India.

There are a lot of measures towards easing tax compliance such as reducing time limit for reopening of tax records to three years from six years. Senior citizens above 75 years of age with only interest income will not have to file income tax returns. Advance tax liability on dividend income will arise only after declaration or payment of dividend. Details of capital gains, dividend income and interest income will be pre-filled in the return forms.

There is some good news for real estate sector. The deadline has been extended by 1 year till 31 March 2022 for the additional `1.5lakh tax deduction given on loans taken to buy a house in an affordable housing project. Affordable housing projects also get an extension for tax benefits, for projects completed till March 31, 2022.

Another major factor has been no introduction of new Covid-19 related tax in the budget. Further government’s focus on spending on infrastructure, capex, healthcare and efforts to boost credit flow by taking out the bad assets from the banking system are various positive factors for supporting overall growth. Overall at a time of unprecedented economic crisis, we believe that the government has been progressive on all fronts and done its part to spend enough to revive the economy. Hence, there would be enough impetus to the capex driven sectors like cement, capital goods, infra & construction, real estate going forward for next few years.

(Source: Financial Express)