Finance minister Nirmala Sitharaman on 1 February presented the Union budget for the next financial year where she announced a slew of measures to aid the recovery of the economy battered by the coronavirus disease package. There was an eye on the upcoming Assembly elections in four states as the finance minister announced infrastructure projects for Tamil Nadu, Kerala, Assam and West Bengal.
The budget had good news for senior citizens and affordable housing scheme as she announced tax relaxations for these categories.
Her budget speech in Parliament began at 11 AM, in which the finance minister highlighted the difficulties India and other global economies faced due to Covid-19. She quoted Rabindranath Tagore to term the post-Covid world the “dawn of a new era”.
“Faith is the bird that feels the light and sings when the dawn is still dark,” said Sitharaman.
“Now, just it happened after the two world wars, There are signs that the political, economic and strategic relations in the post Covid world are changing. This moment in history is the dawn of a new era. One in which India is well-poised to truly be the land of promise and hope,” she said.
Reading from a tablet – the first for any budget – Sitharaman said the budget proposals for 2021-12 rest on six pillars: Health and well-being, physical and financial capital and infrastructure, inclusive development for aspirational India, reinvigorating human capital, innovation and R&D, and minimum government and maximum governance.
The minister started by announcing schemes for improving the healthcare infrastructure in the wake of the Covid-19 pandemic and launched a centrally sponsored scheme Atmanirbhar Swasth Bharat Yojana with an outlay of about 64,180 crores over 6 years.
“I have provided ₹ 35,000 crores for Covid-19 vaccine in this year 2021-22. I am committed to provide further funds if required,” Sitharaman said.
“The government is fully prepared to support and facilitate the economy’s reset,” she said. “This budget provides every opportunity for our economy to rise and capture the pace it needs for a sustainable growth.”
Talking about the Public Sector Banks (PSBs), Sitharaman said that the government would infuse ₹ 20,000 crore into them to meet the regulatory norms. For the current financial year, The government had made a provision of ₹ 20,000 crore for recapitalisation, she said.
In Part A of the budget, Sitharaman laid out a vision for ‘Atmanirbhar Bharat’ to strengthen the vision of nation first, doubling farmers’ income, strengthening infrastructure, women’s empowerment, healthy India, good governance, education for all, inclusive development.
In Part B, Sitharaman talked about tax holidays and giving exemptions to senior citizens. “We shall reduce the compliance burden on our senior citizens who are 75 years of age and above – for senior citizens who only have pension and interest income, I propose exemption from filing their Income Tax return,” said the finance minister.
Sitharaman said that affordable housing remains a priority area for the government as she announced tax holidays for promoter of such schemes for one more year – till 31 March 2022. Tax holidays for start-ups, resolution of tax disputes and Goods and Services (GST) measures were announced by Sitharaman.
“I propose to double the limit from exemption from tax audit to ₹ 10 crore turnover for companies doing most of their business through digital modes,” said Sitharaman. Customs duty on gold and silver was reduced.
However, import duty was increased on a number of products to facilitate Indian companies in becoming self-reliant. Most importantly, there was no announcement on overhaul of taxation system like previous budgets.
One of the important policies announced by the finance minister included a voluntary vehicle scrapping policy to phase out old and unfit vehicles. Under it, personal vehicles will undergo a fitness test in automated centres after 20 years while the commercial vehicles will undergo the test after 15 years.
Experts welcomed the announcements made by the finance minister. “The indications are that the government is going to do more to promote growth rather than maintaining fiscal discipline. This is a welcome move as it will have a positive impact on growth. We are seeing a lot of measures on conditions of doing business which was required. The intent for reforms is strong,” Sujan Hajra, chief economist at Mumbai-based Anand Rathi Securities, told Reuters.
The markets extended gains to around 1.4% as Sitharaman laid out her proposals. The rupee was marginally stronger at 72.86 against the dollar, while the 10-year bond yield slipped to 5.89%.
The economy is projected to contract 7.7% in the current fiscal year, although the government forecasts growth of 11% for the coming fiscal year, after a massive Covid-19 vaccination drive and a rebound in consumer demand and investments.