HIGHLY IMPACTFUL, EXPANSIONARY BUDGET

The FM pressed all the right buttons, with health, as expected, taking center stage. And yes, most certainly the upcoming elections in West Bengal were very much in focus, what with FM quoting Rabindranath Tagore right at the onset. And then the all-time favorite, Thiruvalluvar was also quoted.

Its good economics that the FM decided to go all-out and loosen all purse strings, irrespective of the fiscal deficit. The Budget clearly shows that the aim is to revive the economy and expenditure can be worried about later. An increased spend in healthcare, railways, highways, ports, airports – all this bodes well.

The salaried middle class was once again disappointed as they got no tax rebates but the senior citizens are mighty happy. But it’s a huge relief that there is no Covid-cess or Rich Tax or Wealth Tax or increase in taxes. No news is good news after all! Its good that this was not tinkered with as at this juncture, it is very important to keep the sentiments buoyant. Yet again, the devil is in the detail; so we will know more once we read through the Budget papers. The market is super thrilled and its currently up 1400-points.

Monetization of assets, cleaning up of the Banks, setting up an ARC for the bank bad debts, privatization of two PSU banks, IPO of LIC in current fiscal – all these are excellent moves in the right direction but once again, hope these do get off from the paper, gets implemented asap. Having good intentions alone is not enough. If all these proposed changes do get implemented, it would prove to be a truly generational shift - the Budget of this decade.

Like we had seen in the past five “mini Budgets” the FM outlined 6 pillars of this Budget - Health & Well-being, Financial Capital & infrastructure, Inclusive Development, Human Capital, Innovation and R&D and lastly, Minimum government, maximum governance.

Direct Taxes:

• Senior citizens, 75 years and over, with only interest and pension income exempted from paying income-tax returns - paying bank will deduct the tax on their behalf
• No other direct tax changes
• To make dividend from REIT and InVIT exempt from TDS
• To notify rules to eliminate double tax for NRIs on foreign retirement funds
• Advance tax rules eased on dividend receipts
• Tax audit limit raised from Rs 5 cr to Rs 10 cr in certain cases
• Affordable housing projects can avail tax holiday for one more year
• To reduce time limit for reopening of tax records to three years from six years
• Tax holiday for aircraft leasing company
• FPIs to get deduction of tax on dividend at a lower treaty rate
• Tax forms to come pre-filled with details of capital gains, dividend income and interest income
• To set-up a faceless dispute resolution mechanism for small taxpayers.

Customs Duty:

• Some mobile phone parts to move from zero customs structure to a 2.5% duty rate
• Duties on some automobile parts to be increased
• Duties on gold and silver proposed to be rationalized
• Duty on copper scrap reduced from 5% to 2.5%
• Increased duty on cotton from 0% to 10%, on raw silk and silk yarn from 10% to 15
• Custom duty on select iron and steel items reduced.
• Duty on shrimp feed increased to 15% from 5%.

Healthcare:

• Rs 64,180 crore spending plan for healthcare over the next six years
• This is over and above the National Health Mission
• 17,000 rural and 11,000 urban health and wellness centres to be set up
• Integrated public health labs to be set up in each district, 3,382 block public health units in 11 states
• FY22 health and well-being spend has been pegged at 2.23 lakh crore - Rs 35,000 crore of this, earmarked for the Covid-19 vaccine
• Urban Swachh Bharat 2.0 Mission to be launched at outlay of Rs 1.41 lakh crore over 5 years
• Jal Jeevan Mission Urban to be launched at outlay of Rs 2.87 lakh crore
• Forthcoming census will be the first digital census in the history of India -- Rs 3,768 crore allocated for the purpose

Agri-cess:

• Farm cess of Rs 2.5/litre on petrol, Rs 4 on diesel
• Will be applicable with effect from February 2, tomorrow.
• Cess on: Gold, silver (2.5%); Alcoholic beverages (100%); crude palm oil (17.5%); crude soyabean and sunflower oil (20%); apples (35%); coal, lignite and peat (1.5%); specified fertilisers (5%); peas (40%); kabuli chana (30%); Bengal gram/chickpeas (50%); lentil (20%) and cotton - not carded or combed (5%).

Market oriented reforms:

• To consolidate provisions of SEBI Act, Depositories Act, Securities Contracts Regulation Act, Government Securities Act
• To amend Insurance Act, 1938 to increase FDI limit from 49% to 74% in insurance companies
• To provide Rs 20,000 crore in FY22 for recapitalisation of public sector banks
• To set up an Asset Reconstruction Company (ARC) for NPAs
• SEBI to be notified as regulator for Gold Exchanges
• LIC IPO to happen in FY22

Farmers benefits:

• To increase provision to rural infra development fund to Rs 40,000 crore from Rs 30,000 crore
• Agriculture credit target set at Rs 16.5 lakh crore for FY22
• Five major fishing harbours to be developed as hubs for economic activity
• 1,000 more mandis to be integrated with e-Nam
• A multi seaweed park will be set up in Tamil Nadu

Migrant worker reforms:

• Minimum wages to apply to all categories of workers.
• Women to be allowed to work in all shifts, even in night shift, with adequate protection
• Portal to be set up for gig workers, construction workers
• One nation, one ration card scheme under implementation in 32 states. the four others to be integrated soon.
   

Auto sector:

• Voluntary scrappage policy for vehicles to be launched to reduce vehicular pollution
• Vehicles to undergo fitness test after 20 years for personal vehicles, 15 years for commercial vehicles
• New scheme to be launched to support augmentation of public bus transport
• Rs 18,000 crore provided to support bus transport scheme
  
   

New Development Financial Institution:

• To set up new Development Financial Institution
• Provision of Rs 20,000 crore for capitalization
• Aims to have lending portfolio of Rs 5 lakh crore in 3 years
• National Monetisation Pipeline
• This will be for brownfield projects
• NHAI and PGCIL have sponsored one InvIT each to attract FDI
• 5 operational roads with estimated Enterprise Value of Rs 5,000 crore being transferred to NHAI InvIT
• Rs.7000 crore worth Power Transmission assets to be transferred to PGCIL InvIT

Highway Infra

• Providing Rs 1.18 trn for Ministry of Roads, of which Rs 1.08 trn will be towards CAPEX, the highest ever
• 8,500-km of highways by March 2022
• 3,500 km of national highway works in Tamil Nadu – outlay of Rs 1.03 lakh crore 1,100 km of national highway works in Kerala – outlay of Rs 65,000 crore
• 675 km of highway works in West Bengal – outlay Rs.25,000 crore

Increased Railway spend:

• FY22 allocation for railways at Rs 1,10,055 cr.
• Railways' national rail plan for India to prepare a future-ready railway system by 2030

Other Infra boosters:

• 7 ports projects worth more than Rs.2000 crore via PPA mode
• 100% electrification of broad gauge rail tracks by 2023
• A framework to give power consumers the option to choose discoms
• Commits Rs 1.97 trillion to the manufacturing sector over 5 years
• Mega textile park over and above PLi.
• Seven textile parks to be set up in three years

Boost to Ujjwala Scheme

• Reach expanded to cover 1 crore more beneficiaries
• To add 100 more cities to the City Gas Distribution network
• To set up an independent gas transport system operator

Economics:

• Fiscal deficit pegged at 9.5% of GDP for FY21
• Fiscal deficit pegged at 6.8% of GDP for FY22
• Gross Tax revenue for FY21 to come down by Rs.5 lakh crore
• FY22 expenditure expected at around Rs 35 lakh crore India
• Market borrowing in FY22 seen at 12 lakh crore
• To raise Rs 80,000 crore from markets in last two months of FY21
   

Divestment proposals:

• Disinvestment target for FY22 at Rs.1.75 lakh crore.
• All disinvestment announced till date to be completed in FY22
• Policy for disinvestment in strategic and non-strategic approved
• Pipelines of GAIL (India) Ltd, Indian Oil Corp  and HPCL will be monetized
• To privatise 2 PSU banks, one general insurance company in FY22
• BPCL, CONCOR, Pawan Hans, Air India divestments to be completed in FY22
• A policy to be announced for privatisation of state-run companies and to create a new list of companies for disinvestment
• Two PSU banks to be privatised
• The number of centrally sponsored schemes being significantly reduced