Budget 2021: Government’s focus on supply-side to kick-start economic growth

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 Budget 2021: Government’s focus on supply-side to kick-start economic growth

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1. Union Budget 2021: With BSE Sensex skyrocketing 2050 points and investor’s wealth seeing a jump post the Union budget 2021-22, it seems that the Government's focus on growth revival has been noted. The emphasis on infrastructure and healthcare may give the needed boost to the economy and push GDP growth upwards.
2. Six pillars of FM: In light of the pandemic and Pillar 1 as mentioned by the FM being Health & Wellbeing, the Government’s proposal of increasing its spend on healthcare by 135% is a right step. The formula is “Jaan Bhi, Jahaan Bhi”. Increasing the FDI cap from 49% to 74% for the insurance industry will help revive the economy, mobilise resources for infrastructure development, encourage competition in the insurance sector leading to advantage consumer and improve quality of human capital.
3. Power sector: Many suggested to make power distribution network a competitive industry, but it could not be done so far. Now the Government is willing to create a competitive environment and provide consumers the choice to choose their preferred Discom!
4. Pillar 2: It is dedicated to the infrastructure push and focuses on capital expenditure and asset monetisation. The proposed outlay of Rs. 5.54 lakh crore aims to drive projects under the National Infrastructure Pipeline (NIP) and spend on Production Linked Incentive schemes (PLIS) announced in 2020, alongwith making Indian textiles competitive globally. Higher spend on building of roads, highways, expressways etc. will support other sectors such as cement, steel etc. The affordable housing push will have a multiplier effect on all other related sectors and give the boost to the real estate industry.
5. Asset monetisation: It will unlock value of unutilized or underutilized public assets which can be used for commercial purposes and will drive employment opportunities along with balanced regional development. It is about mobilizing revenue through non-tax means. Increased employment may lead to increased income and higher demand.
6. Atmanirbhar disinvestment package: The Government announced the policy on disinvestment that there would be a maximum of four PSU in strategic sectors while all state owned firms in non-strategic sectors would be privatized. Now, the announcement of disinvesting in two public sector banks and one insurance company is a step forward. Asset monetization, disinvestment and privatisation will help garner resources for infrastructure development, creating value and bridging of the fiscal deficit gap. Opposition to it stems from the fact that reserved jobs will come to an end in such firms, over time. Govt. has to find some solution to that.
7. Macro economy: The fiscal deficit for 2020-21 is around 9.5% of GDP but Government expenditure cannot be curtailed. The FRBM targets are now meaningless. A new future path for achieving fiscal consolidation by FY26 of 4.5% of GDP has arrived. But a higher fiscal deficit could have a likely impact on interest rates and external commercial borrowings and ratings.
8. Game changed in agriculture: A higher allocation was expected, but the three new laws have changed the game! In the Budget announcement, the focus was on showcasing procurement of record foodgrains-may be in the background the on-going agitation.
9. Taxes and bank deposits: The announcement of setting out of policy measures for easy and time bound access to deposits of stressed banks will help many aggrieved depositors. By reducing the reopening of assessment period from 6 years to 3 years except in cases of serious tax evasion and further driving faceless income tax assessment and pre-filing of returns will help ease of filing. This may trigger a widening of tax base.
10. Summary: The budget has proposed innovative ideas for revenue generation, research, human capital etc. It is primarily focused on the supply side aiming to kick-start growth in the economy, with the assumption that jobs will be created, thereby boosting the demand cycle.

Read more on - Polity | Economy | Schemes | S&T | Environment

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