Union Budget 2021- Here’s what you can expect
The expectations from the Union Budget 2021
Union Budget 2021: Indian equity markets have corrected more than 5% in the past 10 days ahead of Union Budget 2021. Retail investors and FIIs have booked profit ahead of the Budget 2021. Investors’ expectation from the Union Budget 2021 is high this time due to the recession after the coronavirus pandemic. This is an opportunity for the Indian government to fight back and present a growth focus budget for the common man.
Finance Minister Nirmala Sithraman has presented the Economic Survey of 2020-21 on 29 January 2021. The survey has tried to summarize the state of the Indian economy across various dimensions. Here are a few important points with regards to the Indian economy that the Survey had made.
Economic Survey 2021
The Economic Survey 2021 expects that the Indian economy will contract by 7.7% during 2020-21 to Rs 134.4 lakh crores. The Indian economy to grow by 11% during 2021-22, and this is close to the IMF growth forecast of 11.5% for 2021-22.
The gross tax revenue earned by the Indian government from April to November 2020 fell by 12.6% to Rs 10.26 lakh crore, it was budgeted 24.2 lakh crores. The government has not earned much from the disinvestment route due to the Covid-19 pandemic. This has increased the fiscal deficit to anything above 7%, earlier it was projected 3.5%.
As per the Economic Survey 2021, after contraction seen in the first half due to pandemic, India is witnessing a V-shaped recovery with a stable macroeconomic situation, job growth, stable currency, record-high forex reserve, comfortable current account, and encouraging signs in the manufacturing sector output.
Of all major sectors, the only sector that expected to grow this year is agriculture at a 3.4 percent rate as per the Economic Survey presented on 29 January 2021. The GST collection has seen improvement in the second of this financial year. The Survey also points out the increasing bank credit growth and ease inflation in the previous month.
Union Budget 2021 Expectation
In the Union Budget 2021, the government would remain focused on growth with a clear focus on Capex revival and manufacturing, boosting healthcare and sanitization. As an investor, the expectation from the Union budget 2021 would be
Sectors such as housing, construction, and infrastructure will continue to remain focused on the budget. Another big area that the government would focus is on healthcare. The Coronavirus pandemic has served as an urgent reminder of the need to increase government spending on the healthcare sector in India in 2021.
Many people have lost their jobs due to the coronavirus pandemic, this time in the Union Budget 2021 government would definitely focus on job creation. To create jobs the government needs to boost the manufacturing sector so we expect a further extension of liquidity support to the MSME segment. Also sectors with high job creation potential like textile, tourism may be getting boosted.
Here’s what an investor/common man can expect from the Union Budget 2021
Agriculture- Government can opt for the Direct Benefit Scheme route to grant an additional subsidy to farmers. The import duty on technical and finished pesticides can be reduced by 20-25 percent
Automobiles- Reduction of GST on small cars. Incentive-based scrappage policy for old vehicles to increase demand for a new one. Incentives for electric and hybrid cars.
BFSI- Recapitalisation of PSU banks is on the card. Enhancement of limit of Deduction u/s 80C up to 3L to boost investment. Removal of LTCG on equity and mutual fund
Capital Goods- Higher capital allocation to Infrastructure sectors under National Infrastructure Pipeline (NIP) and higher defense Capex allocation.
Chemical & Fertiliser- Government may include the chemical sector under the PLI scheme and can extend financial support and other development assistance for intermediates and technical grade pesticides indigenously under the ‘Make in India’ program.
FMCG- Government can take measures to boost the rural sector by setting up FMCG manufacturing hubs in Tier 2, 3, and rural towns. The reduction of GST on consumer durable items can directly benefit the FMCG companies.
Housing & Real Estate- Government can start a single-window clearance to large-sized projects. The Centre’s move to set up a development finance institution (DFI) to fund infrastructure projects is anticipated.
Information and Technology- Promoting New R&D Centres for IT. Allocation for promoting digital Infrastructure can boost the IT sectors
Metals- The government in this Union Budget 2021 can increase in import duty on aluminum and scraps to 10% each from 7.5% and 2.5% currently
Power- Policy thrust under the Atmanirbhar Bharat plan to encourage domestic manufacturing of solar cells and modules
Telecom- Expectation of reduction in License Fee (LF) to 1% and incentive plans and relaxation for 5G acquisition,
Tax Proposal- Exempt tax on long-term capital gains (LTCG) that arise from the sale of listed equity share. Tax exemption for people working from home. Increasing the overall deduction limit under Section 80C to Rs 3,00,000 from the current Rs 1,50,000.
So above are the expectations that an investor/common man can expect from the Union Budget 2021.
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