8 Feb 2021, 16:04 — 4 min read
People had been waiting eagerly for Budget 2021 to primarily see how the government would prioritise economic development. As the Finance Minister shared, the six pillars of the budget have covered the economy on a macro-level.
While many have opined that the budget has ignored or gave minuscule importance to the middle class, let us focus on the silver lining. The pandemic has put an abrupt halt on the economic growth in 2020 and recently many surveys including an Economic Survey has shown a huge dip in the GDP and a rise in the fiscal deficit. But the projected figure of 6.8% for FY 2022 has been low when compared to the expected 9% and some double-digit figures. The low fiscal deficit figure has multiple consequences, like inflation deceleration and reduction in spending and expenditure.
Coming to the capital investments, the budget has been generous in allocating Rs 1500 crores for digital payments development, Rs 1.7 lakh crore for capital expenditure in railways, and Rs 1.18 lakh crores in logistics infrastructure. The enormous investments in infrastructure pave the way for the employment generation, which is the most needed at the hour with the unemployment rate standing at 7.8% (Nov 2020). This will churn up the growth cycle and improve the GDP in the coming fiscal years. We can also expect this mega investment by the government to act as a catalyst for the private investors to venture out, thus creating a startup environment. Again, the decrease in the margin for startups from 25% to 15% is a boost for the investors to dive in. Thus, a chain reaction as capital investments and expenditure leads to the development of the infrastructure and allied sectors which significantly comprise the manufacturing sector.
The focus of the 2021 budget is on economic development at the macro level - an increase in capital investments; a change in the customs duty structure and digitisation of public governance.
Ease of compliance is the next significant welcoming change in the budget. Prefilled tax forms, faceless transactions, and the Rs 1500 crores for digital payments promotion and development will improve the ease of doing business in India. Introducing digitisation into public governance will smoothen the regulations and compliances, and we can expect a decline in corruption because of the faceless transactions.
India has turned into a local pharmacy for the global economies with the vaccination drive. Nine countries have had arrangements with India for the procurement of the vaccine and there are 70 countries that are on the way to scheduling the arrangements. The mega-investment of Rs 35,000 crore for the COVID vaccine will ensure a smooth transition in the vaccine’s distribution locally and globally. This diplomatic distribution has had a significant impact on the economy in the name of foreign investments. Taiwan has announced a $140 million investment in India and also expected to sign a labour mobility pact.
Thus, the focus of the 2021 budget is economic development at the macro level. An increase in capital investments; a change in the customs duty structure and digitisation of public governance will assist the government’s aim of a ‘Self Reliant India’.
Also read: Highlights of Union Budget 2021-22
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