Union Budget 2021: A solid Budget that lays the foundation for strong growth
The other key area where the government has shown great conviction is divestment and privatisation, setting a target of `1.75 lakh crore.
By Kumar Mangalam Birla
Finance Minister Nirmala Sitharaman has unveiled a bold, ambitious and unconventional budget, putting growth at the front and centre. Faced with unprecedented economic challenges in the aftermath of Covid-19, the finance minister has shown single-minded focus in introducing big-ticket policy reforms consistent with the government’s long-term vision for the country. The Budget talks to the needs of an aspirational India that is poised to become a $5-trillion-economy. While enabling a reset for the economy, the bold and ambitious Budget, also shows a roadmap to India’s dominant role in a new post-pandemic world order.
The Budget has introduced a series of structural reforms that will create solid and sustainable growth in the years to come. The sharp focus on infrastructure creation—driven by an almost 35% increase in outlay for capex—will revive the growth engine. The move to identify alternative sources for development finance is indeed welcome. This is manifest in the constitution of a new development financial institution with a seed capital of `20,000 crore, and a target lending portfolio of `5 lakh crore. Debt-financing through InVits will also be eased to further enable and augment funds for infrastructure and real-estate. Moreover, state governments will also be incentivised to increase their capex.
Addressing the legacy issue of non-performing assets on the books of banks, the Budget has made a short-term provision of `20,000 crore to recapitalise the banks and introduced a long-term solution. A new asset reconstruction structure will be created to take over stressed assets and clean up the bank balance sheets. Furthermore, increasing the FDI limit in the insurance sector will bring much more capital into the financial sector.
The other key area where the government has shown great conviction is divestment and privatisation, setting a target of `1.75 lakh crore. Besides fast-tracking existing proposals like Air India and BPCL, the government will also divest its stakes in two PSU banks and one general insurance company. The Budget has also announced aggressive plans for strategic asset monetisation—from toll roads of NHAI and transmission assets of PGCIL to Railway’s dedicated freight corridors and the oil & gas pipelines of PSUs, besides unlocking the value of airports, warehousing assets and setting up an SPV to monetise under-utilised landholdings of PSUs.
Through the Budget, the FM has demonstrated that she understands the challenges of the manufacturing sector, especially the SMEs, and has gone the extra mile to address the situation. Aware that double-digit growth in manufacturing is integral for India to become a part of the global supply chain, the `1.97 lakh crore allocation for production-linked incentive scheme will give a big boost to the manufacturing sector. The incentives and measures for manufacturing and exports will directly contribute to the GDP while revitalising job creation and domestic consumption.
The provision of `2,23,846 crore for health and well-being—a sharp increase of 137% over last year—is much needed, as it brings India closer to peer countries, in terms of spending on healthcare. The enhanced outlay will not just offer significantly improved access to medical care across the country, but also promote preventive care and well-being for every Indian.
All in all, this is a farsighted, ambitious and bold Budget with a realistic fiscal glide path that lays the foundation for long-term growth and sets the country on course to emerge as one the fastest-growing big economies in the world in the years to come. No wonder the stock market gave the budget thumping applause.
The author is Chairman, Aditya Birla Group