FM Nirmala Sitharaman Opens Government Purse-strings To Rebuild IndiaPage Visited: 2
Representative image (PC- MoneyControl.Com)
Making the Narendra Modi government’s intentions clear on how it plans to revive the Indian economy in a post-COVID world, Finance Minister Nirmala Sitharaman presented a fiscal expansionary budget on February 1.
After supply-side measures through the Aatmanirbhar Bharat set of announcements, the Union Budget 2021-22 came out with a host of demand-side measures, with an intention to create jobs primarily through big infrastructure announcements.
These included the highest-ever capital expenditure of Rs 5.54 lakh crore for FY22, a proposed development finance institution (DFI), and wide-scale asset monetisation by agencies like the National Highways Authority of India and the Indian Railways, as well as an asset monetisation pipeline.
Stating that fighting the COVID-19 pandemic remains the Centre’s biggest priority, Sitharaman also rolled out a Rs 2.46 lakh crore healthcare budget for FY22, with Rs 35,000 crore earmarked for COVID-19 vaccine programme.
Markets responded positively to the Finance Minister’s expansionary stance. The BSE Sensex was up 3.13 percent, while Nifty50 was up 3 percent when the Finance Minister ended her one hour and 50 minutes speech
The fiscal expansionary stance comes days after the Economic Survey 2021-22 had pushed for the counter-cyclical fiscal policies to enable the economy to come out of the COVID-19 pandemic-induced slowdown.
On the tax front, Sitharaman exempted senior citizens older than 75 years from filing tax returns. The timeline for reopening of assessment under income tax returns was also reduced to 3 years from present 6 years. The Finance Minister also exempted dividend distribution taxes for investing in REITs and InVITs.
She also provided an additional Rs 1.5 lakh tax deduction on loans taken to buy a house under the affordable housing scheme, with deadline extended till 31 March 2022.
Sitharaman also announced a renewed thrust towards asset sales and privatisation after the false starts of the past few years, with a target of Rs 1.75 lakh crore. She said the initial public offering (IPO) of LIC will be completed in the coming fiscal, and that the Centre had identified four sectors as ‘strategic’ in which government will have a presence.
She also said the Centre will pare stake in two state-owned banks and a general insurance company.
The budgeted capex for FY22 stands at Rs 5.54 lakh crore. For FY21, the Centre had budgeted its own capital expenditure at Rs 4.13 lakh crore, which was later increased by Rs 35,200 crore.
From a fiscal deficit of 9.5 percent of GDP in FY21, the Centre will now follow a glide path which will bring down the budget deficit to below 4.5 percent of GDP by FY26. This was based on the suggestions of the Fifteenth Finance Commission, whose report for FY22 to FY26 was tabled in Parliament along with the budget.
It was the small businesses which bore the brunt of the economic slowdown. While large corporates have bounced back to some extent, smaller businesses still face many headwinds. For them, Sithraman announced a separate debt resolution framework. She also said gig and platform workers will get social security benefits. Sitharaman allocated Rs 15,700 crore to the MSME sector.
The Finance Minister also announced the creation of a ‘bad bank’to take on non-performing assets (NPAs) from the books of banks, and said banks will be recapitalised to the tune of Rs 20,000 crore in FY22.