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COVER STORY
18 INDUSTRIAL ECONOMIST FEBRUARY 2021
Union bUdget – 2021-22
2020-21 HAS BEEN one long year of budgets. The Co-vid-19 pandemic threw to winds the estimates, priorities and the very framework of the budget presented a year ago on 01 February 2020. We witnessed continuous attempts at fiscal corrections to cope with the enormity of the Covid-19 dislocations. Finance Minister Nirmala Sithara-man presented Atmanirbhar Bharat packages 1.0, 2.0 and 3.0 in quick succession. Reserve Bank Governor also an-nounced a few monetary measures. These together were estimated to cost Rs 27.1 lakh crore that amounted to over 13 per cent of the GDP.
The Finance Minister in presenting the budget for 2021-22 explained that the Atmanirbhar packages was designed to accelerate the pace of structural reforms, re-define MSMEs, commercialise the mineral sector, reform agriculture and labour, move towards privatisation and the One Nation One Ration Card, ensure faceless income tax assessment, direct benefit transfer of reliefs to benefi-ciaries and financial inclusion.
The FM built her budget proposals 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.
BIG BOOST TO HEALTH AND WELL-BEINGThe budget outlay for health and well-being was pro-posed as Rs 223,846 crore, an increase of 137 per cent over the Rs 94,452 crore in the budget estimate. This included Rs 35,000 crore for the Covid-19 vaccine. The proposal included health systems, nutrition, universal coverage of water supply, Swachch Bharat and clean air. This re-grouping makes the allocation looks so impressive!
The second pillar on capital and infrastructure covered a vast range of manufacturing and infrastructure develop-ment plans. The production-linked incentive scheme, an important part of the Atmanirbhar Bharat, has been announced for 13 sectors with a commitment of Rs 1.97 lakh crore spread over five years. This is a necessary focus in the context of private industries resorting to cheaper imports of a variety of products for which the country has capabilities. A leading manufacturer of fasteners pointed to a Korean car producer importing fasteners on consider-ations of supplies from his chosen Korean vendor and at a
Nirmala Sitharaman, Finance Minister
There is need to take policy issues to citizens spread across the country. TV interviews in English and Hindi from Delhi won’t do. We had a BJP leader of stature like Arun Jaitley who could successfully pilot the GST Bill, building the consensus of all chief ministers. Narendra Modi could develop Nitin Gadkari as another ambassador plenipotentiary to deal with the state leaders. Gadkari has the political stature as also the needed suavity for donning this post.
BOOSTER DOSE TO PRIVATISATION...
S Viswanathan
INDUSTRIAL ECONOMIST FEBRUARY 2021 19
COVER STORY
marginally cheaper cost. We have also witnessed resort to imports of a large variety of components and semi-assem-blies from China switching from indigenous suppliers.
MONETISATION OF ASSETS…The focus on infrastructure has been sharpened by creating institutional structures, monetising assets and enhancing the share of capital expenditure in the Central and state budgets. The FM pointed to launch-ing a national monetisation pipeline of potential brown field infrastructure assets including assets in highways, power transmission, railways, airports, warehouses, sports stadia…
The FM has proposed an enhanced outlay of Rs 118,101 lakh crore for roads and highways with Rs 108,230 crore for capital expenditure. Assam, Kerala, Tamil Nadu and West Bengal, all slated to hold elections to state assemblies, have received special attention.
Railway development has been allot-ted Rs 110,055 crore (Rs 107,100 crore of capex). The western and eastern dedicat-ed freight corridors that have been beset with problems, mostly relating to land ac-quisition, will be commissioned by June 2022. 100 per cent electrification of the broad gauge routes would be completed by December 2023, the FM stated. Both are welcome news that are overdue. In the same breath, there could be focus on high speed bullet trains. The one announced with lot of promise – the Mumbai-Ahmedabad project – has been stuck with land acquisition prob-lems. There is welcome news on metro rail systems to improve urban infrastructure.
The attention to the use of natural gas through pipelines is another welcome pro-posal.
PRIVATISATION, NOT JUST DISINVESTMENT!In regard to the financial sector, there are several bold re-forms such as the increase in FDI limit from 49 per cent to 74 per cent in insurance companies providing for foreign ownership and control with safeguards; increase in de-posit insurance cover from Rs 1 lakh to Rs 5 lakh for bank customers and, most importantly, disinvestment and strategic sale. The NDA II government has been keen to proceed ahead with disinvestment of PSUs. It announced a bold plan to privatise BPCL, Air India, Shipping Cor-poration of India, Container Corporation, IDBI Bank, BEML, Pawan Hans and Neelachal Ispat. During 2021-22, due to the Covid-19 induced depressed state of the stock market for most part of the year, these schemes could not be implemented. The FM proposed to complete all these and even more during 2021-22. The budget has proposed to privatise two more PSBs and one government-owned general insurance company. The IPO of LIC planned dur-
ing the current year would also be completed during next year. A target of Rs 175,000 crore has been proposed for disinvestment/priva-tisation.
The proposals on privatisation and monetisation of public assets are bound to be red rags not just to the socialist bulls; par-ties in opposition, notably Congress, that routinely oppose any and every move of the NDA government, are bound to be hyper critical of this measure.
I remember the spree of nationalisation through which Indira Gandhi nationalised 14 public sector banks, the general insur-ance business, coal mines and over 100 sick textile mills. The leftist government of West Bengal, with glee, shoved on the Centre, dozens of terminally sick engineering units. Most of these were not viable. We had the in-
Source: Budget 2021-22 documents
Pension
Defence
Major Subsidies
Agriculture and
Allied Activities
Commerce & Industry
Development of
North East
Education
Energy
External Affairs
Finance
Health
Home Affairs
IT and Telecom
1,89,328
3,47,088
3,35,361
1,48,301
34,623
2,658
93,224
42,824
18,155
91,916
74,602
1,13,521
8,09,701
53,108
Planning and Statistics
Rural Development
Scientific Departments
Social Welfare
Tax Administration
Transfer to States
Transport
Union Territories
Urban Development
Others
2,472
1,94,633
30,640
48,460
1,31,100
2,93,302
2,33,083
53,026
54,581
87,528
Grand Total
34,83,236`
Budget Estimates for 2021-22, In Crore`
How Central Govtwill spend
KBK graphicsInfo
InterestCrore
Union Budget
2021-2022
Source: Budget 2021-22 documents
Union Budget 2021-22 Highlights
KBK graphicsInfo
The 6 Pillars
Health and
Wellbeing
Physical & Financial
Capital and
Infrastructure
Inclusive
Development for
Aspirational India
Reinvigorating
Human Capital
Innovation
and R&D
Minimum Government
and Maximum
Governance
Fiscal deficit stands at 9.5% of the GDP for 2020-21,
estimated to be 6.8% in 2021-22
Increase of 137% in the outlay for Health
and Wellbeing. 2,23,846 crore allocated in
BE 2021-22 as against 94,452 crore in
BE 2020-21
`
`
` 35,000 crore for COVID-19 vaccine
in BE 2021-22
Mission POSHAN 2.0 to improve nutritional outcomes
across 112 Aspirational Districts
Highest ever outlay of 1,18,101 lakh crore for Ministry
of Road Transport and Highways with an aim to complete
an additional 11,000 km of national highways in the year
`The capital expenditure for the year 2021-22 will be
5.54 lakh crore as against 4.12 lakh crore allocated
in BE 2020-21, an increase of 34.5%
Proposal to allow States to raise borrowings
up to 4% of GSDP in 2021-22
No IT filing for senior citizens above
75 years who get pension and earn
interest from deposits
Reopening window for IT assessment
cases reduced from 6 to 3 years. In case
of serious tax evasion, with evidence of
concealment of income of 50 lakh or
more, assessment can be re-opened
up to 10 years with approval of the
Principal Chief Commissioner
`
Tax holiday for affordable housing
projects extended till March 2022
Strategic disinvestment of BPCL, Air India, Shipping
Corporation of India, Container Corporation of India and
IDBI Bank among other PSUs to be completed this year
An amount of 1.97 lakh crores allocated
to nurture global manufacturing champions
and increase jobs for the youth over
5 years, starting this FY as part of
AatmaNirbhar Bharat
`
Agriculture infrastructure fund to be made
available for Agricultural Produce Market
Committees (APMCs) for augmenting their
infrastructure
1,000 more mandis to be integrated with e-NAM
to bring transparency and competitiveness
Voluntary vehicle scrapping policy to phase out
old and unfit vehicles: After 20 years in case of
personal vehicles and after 15 years in case of
commercial vehicles. Fitness tests to be done
in automated fitness centres
KBK
MajorSubsidies
In crore`
2019-
20
‘20-21
(BE)
‘20-21
(RE)
‘21-22
(BE)
5,9
5,3
55
3,3
5,3
61
RE: Revised Estimates
BE: Budget Estimates
-43.67
%
Union Budget
2021-2022
2,2
8,3
41
2,2
7,79
4
(Fertilizer, Food
and Petroleum)
COVER STORY
20 INDUSTRIAL ECONOMIST FEBRUARY 2021
stance of the sick bicycle units of Hind Cycles and Sen & Pandit were kept under the public sector for decades with no production, but with mounting losses. There was the realisation for a while on the futility of continuing with these. But the long years of loose coalition governments during 1989-2014 would not permit this.
STATES ALSO TO BE INCENTIVISED FOR PRIVATISATION…Sitharaman mentioned a plan to come out with a policy of strategic disinvestment of PSEs with a clear roadmap for disinvestment in all non-strategic and strategic sec-tors: “we have kept four areas that are strategic where bare minimum CPSEs will be maintained and rest privatised. In the remaining sectors all CPSEs will be privatised,” she said. NITI will work out the next list of Central public sector companies for strategic disin-vestment. The budget also incentivises states to take to disinvestment of their PSEs. By far this proposal ap-pears the boldest of reforms proposed.
MSP AND THE PROCUREMENT BONANZA (FOR PUNJAB?)In the background of the farmers’ agitation Sitharaman provided in her budget interesting data on the huge benefits extended to the farm sec-tor: “the MSP regime has undergone a sea change to assure a price that is at least 1.5 times the cost of production across all com-modities... The procurement has continued resulting in substantial increase in pay-ments to farmers. In the case of wheat, total amount paid to farmers increased from Rs 33,874 crore in 2013-14 to Rs 75,060 crore in 2020-21. For paddy, the increase dur-ing this period was from Rs 63,928 crore to Rs 172,752 crore. For pulses the increase was from Rs 236 crore to Rs 10,530 crore, more than 40 times,” she said. The number of farmers benefited is over 2 crore. The FM could have gone a little farther and an-nounced that the preponderant portion of these were from Punjab.
UNSUSTAINABLE ABSURDITY…We are witnessing an unsustainable absurdity: of the Food Corporation compelled to procure around 90 mil-lion tonnes of foodgrains, more than 50 per cent in excess of the stocks needed to assure food security and in the bargain, incurring a loss of Rs 4.22 lakh crore which is far higher than the food subsidy estimated at around Rs 1.15 lakh crore.
With the three ‘pillars’ occupying so much attention, the other three relating to human capital including educa-tion, innovation and R&D and governance received much less attention. I felt education and R&D could have been given more attention, especially in the context of self reliance.
WELCOME TRANSPARENCY AND REALISMA welcome feature of Sitharaman’s presentation relates to a greater sense of transparency and honesty. For years, the mandarins of the North Block, ably supported by a posse of fiscal (statistical) experts, juggled with the fig-ures and allocations to help present a rosy picture of the finances. There were attempts to show compliance to
the targets fixed for fiscal deficit, FRBM… Finances getting totally out of hand with Covid-19, seem to have contributed to the move towards honesty: the budget men-tions fiscal deficit at 9.5 per cent of GDP, funded through government borrowings, multilateral borrowings, small saving funds and short term borrowings. There is also ad-mission on containing it to 6.8 per cent next year and to 4.5 per cent thereafter.
So, what was projected as sacrosanct for decades, a target of 3 per cent for fiscal defi-cit, has quietly been thrown to the winds. The states have also been permitted to bor-row up to 4 per cent of the GSDP. Realism at last!
The current government, blessed with a majority in the Lok Sabha and with capac-ity to manage favourable voting in the Rajya
Union Budget
2021-2022
KBK graphicsInfo
Budget SnapshotKey Numbers
In crore`
Source: Budget 2021-22 documents
Revenue Receipts
Capital Receipts
Total Receipts
Total Expenditure
Revenue Deficit
Effective
Revenue Deficit
Fiscal Deficit
Primary Deficit
16,84,059
10,02,271
26,86,330
26,86,330
6,66,545
4,80,904
9,33,651
3,21,581
2019-20
(Actuals)
2020-21
20,20,926
10,21,304
30,42,230
30,42,230
6,09,219
4,02,719
7,96,337
88,134
(Budget
Estimates)
2021-22
17,88,424
16,94,812
34,83,236
34,83,236
11,40,576
9,21,464
15,06,812
6,97,111
(Budget
Estimates)
2020-21
15,55,153
18,95,152
34,50,305
34,50,305
14,55,989
12,25,613
18,48,655
11,55,755
(Revised
Estimates)
BUDGET AT A GLANCEUnion Budget
2021-2022
In crore`RECEIPTSRevenue Capital
EXPENDITURERevenue Capital
In crore`
2019-20(Actuals)
2020-21(Budget Estimates)
2020-21(Revised Estimates)
2021-22(Budget Estimates)
`
` `
`
`
`
``
``
`
`
`
DEFICIT TRENDS % of GDPSource: Budget 2021-22
KBK graphicsInfo
16,8
4,0
59
20,2
0,9
26 15,5
5,1
53
17,8
8,4
24
10,0
2,2
71
10,2
1,3
04
18,9
5,1
52
16,9
4,8
12
23,5
0,6
04
26,3
0,1
45
30,1
1,1
42
29,2
9,0
00
3,3
5,7
26
4,1
2,0
85
4,3
9,1
63
5,5
4,2
36
Fiscal
DeficitRevenue
Deficit
EffectiveRevenueDeficit
Primary
Deficit
2019-20
(Actuals)
2020-21
(Budget
Estimates)
2020-21
(Revised
Estimates)
2021-22
(Budget
Estimates)
1.6
5.9
0.4
3.12.4
6.3
1.8
4.13.3
7.5
2.7
5.14.6
9.5
3.5
6.8
KBK
2018-
19
‘19-20 ‘20-21
(RE)
‘21-22
(BE)
RE: Revised Estimates
BE: Budget Estimates
ResourcesTransferredto States & UTs
Union Budget
2021-2022
` lakh Crore
11.95 11.4513.14
13.89
KBK
As per cent of GDP
2019-
20
‘20-21
(BE)
‘20-21
(RE)
‘21-22
(BE)
RE: Revised Estimates
BE: Budget Estimates
DeficitTrends
Union Budget
2021-2022
Fiscal
Deficit
Revenue
Deficit
Primary
Deficit1.6
5.9
0.4
3.13.3
7.5
2.7
5.14.6
9.5
3.5
6.8
INDUSTRIAL ECONOMIST FEBRUARY 2021 21
COVER STORY
1,0
9,2
83
1,38
,00
0
1,12
,00
0
1,36
,00
0
5,56
,876
6,8
1,0
00
4,4
6,0
00
5,4
7,0
00
2,4
0,6
15
2,6
7,0
00
3,6
1,0
00
3,35
,00
0
Source: Budget 2021-22 documents
Tax Collection
KBK graphicsInfo
Gross TaxRevenue
GST
CustomsUnionExcise Duties
CorporationTax
Income Tax
2019-20
(Actual)
2020-21
(Budget Estimates)
2020-21
(Revised Estimates)
2021-22
(Budget Estimates)
Incrore
`
Union Budget
2021-2022
5,9
8,7
50
6,9
0,5
00
5,15
,10
0
6,3
0,0
00
4,9
2,6
54
6,3
8,0
00
4,5
9,0
00
5,6
1,0
00
20
,10
,059
24
,23,
02
0
19,0
0,2
80
22
,17,
059
Sabha, has been able to conceive and implement much needed structural reforms. There is criticism over the absence of consensus over several of these measures. In a divisive society such as ours, building such a consensus appears most difficult, if not outright impossible.
TAKE POLICY ISSUES TO THE MASSES SPREAD ACROSS…Sitharaman deserves praise for her eloquent rationale of government’s fiscal policies. But more is needed. Policy-
makers need to take such issues to the citizens for frequent and wide interactions. Decades ago it was common prac-tice for policymakers, including senior ministers and civil servants, to visit state capitals and other cities, interact with sections of society and the local media to explain ma-jor policies. With the advent of national TV this has ground to a zero level. With the multiplicity of languages, news in English and Hindi from capital Delhi, do not reach effec-tively citizens spread across the country. Venkaiah Naidu as Minister of Information & Broadcasting, interacted with media persons in the south at Chennai. Policymakers also provided for interactions at Delhi in annual conferences of economic editors to explain current and emerging poli-cies. These provided for two-way communications. Sadly these have been stopped.
With different parties in power in different states, there has also been the drying up of contacts from policymakers in Delhi with state policymakers. I remember the disinter-est of DMK supremo M Karunanidhi or chief ministers M G Ramachandran and J Jayalalithaa in receiving, much less interacting, with ministers from Delhi. In fact, during the reign of Jayalalithaa from 2011, the Central ministers, including the Prime Minister, were persona non-grata. Similar seems to be the situation today in West Bengal un-der Mamata Banerjee.
There is need to take policy issues to citizens spread across the country. TV interviews in English and Hindi from Delhi won’t do. We had a tall BJP leader like Arun Jaitley, who could successfully pilot the GST Bill, build-ing the consensus among chief ministers. Narendra Modi could develop Nitin Gadkari as another ambassador plenipotentiary to deal with the state leaders. Gadkari has the political stature as also the needed suavity for donning this post.
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