Coming after a pandemic that struck a fatal blow to the country’s economy, budget-making for this year must have been a tall order for Finance Minister, Nirmala Sitharaman and her team of economists. The Modi government is tasked with steering the $2.7-trillion Indian economy out of a recession caused by the pandemic even while having to ensure that more resources are committed towards health care to deal with the disease and the vaccination regime. Accordingly health spending is being increased by 137% this year, totaling to over 2.23 lakh crore which is a huge jump from the meager amount allocated over the years which is less than 2 % of the GDP.
The Government’s decision to set up a Development Financial Institution (DFI) with a projected lending portfolio of Rs 5 lakh crore with the provision for debt financing by foreign portfolio investors will boost the infrastructure sector. In this respect it appears that poll-bound states like Tamil Nadu, Kerala, West Bengal and Assam are likely to gain from the current budget since there will be major commitments towards these states. Assam could benefit immensely from inland water transport while rail and air connectivity in the other seven states need a fillip. The announcement of an additional 11,000-km of highways and metros, along with rapid rail transport projects for 27 cities and a much awaited vehicle scrappage policy will send the stocks of some of the steel and aluminium companies soaring.
Real estate and construction are set to take a leap and real estate developers will benefit the most from the DFI. But this is also the sector that has the potential to create maximum jobs which is imperative at this juncture as the pandemic has seen unprecedented job losses.
The Modi Government’s announcement of setting up a National Asset Reconstruction and Management Company to take over the stressed assets of banks will help clean up the huge burden of bad loans. The decision to recapitalize Public Sector Banks to the tune of Rs 20,000 crore will enable them to meet the credit requirements of a growing economy. A bold decision to privatize two public sector banks and one public sector insurance company underlines the Government’s commitment to withdraw even from strategic sectors and allow private players a bigger role in the economy.
The financial year ended with a 9.5% deficit yet no new taxes have been announced. This shows that the Government is treading cautiously so as not to hurt the taxpayers.
Amidst the ongoing farmers’ protest the Finance Minister announced the enhancement of agriculture credit target to Rs 16.5 lakh crore. So far the farmers have not reacted to the budget and are sticking to their demand for repeal of the three farm laws and a legal guarantee of the Minimum Support Price (MSP).
