Tuesday, Aug 09, 2022

Dissecting Union Budget 2021: Here’s What The Experts Say

Union Budget 2021 has gained mixed reviews and here’s what the experts feel

Tribhuwan Tiwari

Finance minister Nirmala Sitharaman presented the Union Budget 2021-22 in Parliament on Monday.  She said the budget for 2021-22 rests on six pillars including that of healthcare and infrastructure. 

Dr Jaijit Bhattacharya, President, Centre for Digital Economy Policy Research feels that this year’s budget is an excellent one but not a transformational one as was promised.

“It has adopted a brilliant strategy of large-scale infrastructure rollout, funded by asset monetization of the existing road, power lines, gas pipelines and railway assets. The budget also covers funding of New Education Policy which is what I have been asking for as it will provide the human resources needed for growth in this decade. Adequate provisions have been made for health, education, agriculture, MSME and start-ups.

“However, hope there is the removal of GST on digital payments and removal of Angel tax as a follow up of the budget,” he said.

“Overall, the budget manages to put up a convincing package to fund the desired goals while providing revenue lines for the same,” Bhattacharya added.

Meanwhile, Rajosik Banerjee, Partner and Head, Financial Risk Management, KPMG feels that “to address concerns around asset quality, credit loss and liquidity stress, this budget has been proactive to infuse additional capital of Rs 20,000 Crore to PSU Banks for providing continued credit access to wholesale and retail borrowers, and therefore push growth agenda.”

Chintan Patel, Partner and Head, Building Construction and Real Estate, KPMG further added,  “The proposed Debt financing for REIT’s and InvIT’s (through a suitable amendment) is expected to provide a major fillip and will attract more investments for the sector.”

Meanwhile, Rumki Majumdar, economist, Deloitte India, said a stronger and sustainable rebound in the second half of FY2022 will help the government to improve its fiscal and debt situation in the years ahead.

“The fiscal deficit is pegged at 9.5% in FY2021 which is in-line with our predictions of 9.6% -10.3% made earlier in December. The high fiscal deficit was expected because of low growth leading to lower tax revenues and higher government spending to support lives and livelihoods. The deficit is likely to come down to 6.8% in FY2022 and below 4.5% in the years later, similar to our projections. The expenses will continue to remain high in FY2022 as infection reduces and vaccination exercise gains strength,” said Majumdar.

Sanjay Aggarwal, president, PHD Chamber of Commerce and Industry, said the government’s decision to set-up a Development Finance Institution (DFI), capitalised with Rs 20,000 crore to launch the National Asset Monetisation Pipeline to fund new infra projects is highly appreciable and is in line with the suggestions of PHD Chamber. This will help increase the funds for infrastructural investment in the country and will in turn provide a multiplier effect to boost demand and rejuvenate overall economic growth trajectory.

On the other hand, Yagnesh Sanghrajka, Founder & CFO, 100X.VC said that the start-up industry which had been anxiously waiting to receive some relief after taking a bad hit during the pandemic was provided with good news on some fronts.

“A couple of changes announced today that may bring a positive change to the industry is the incorporation of one-person companies for single founders that will enable them to start their own company, register it and attract investments. Some other satisfactory moves announced by the Finance Minister were the reduction of the non-resident days limit from 180 to 120 days and extension of the eligibility of tax holiday and capital gains for start-up investment by one more year till March 2022. The net considerations of capital gain invested in eligible start-ups incorporated before 31.3.2022 (now) to be eligible under 54 GB,” said Sanghrajka.

Meanwhile, Anish De, Partner and National Head, Energy and Natural Resources, KPMG (India) hailed the Centre’s announcement to increase LPG access as part of its Ujjwala scheme.

“By announcing expansion of the Ujjwala Scheme to cover an additional 1 crore households and by announcing City Gas Distribution to 100 new districts, the government has shown its intent of increasing availability and accessibility of clean energy to its citizen. It is admirable that the government has continued with its focus on clean energy and Infrastructure augmentation,” De said.

On the Centre’s decision to set up Independent Gas System Operator to manage the common carrier capacity of all gas pipelines in the country, De said, “This is a much-awaited initiative that will ensure a fair, non-discriminatory and easy access to the common carrier capacity in the national gas grid system. Gas consumers are poised to benefit immensely. An important step that will add to government’s effort to move towards a gas-based economy.”

On the other hand, Kunal Lakhara, VP of Finance and Operations, Pocket Aces, termed this year’s budget as a “promising” one and said that the government has taken “realistic” steps to boost the economy.

“The budget’s revised fiscal deficit estimate for FY21 which is pegged at 9.5% of GDP seems promising and has taken on a realistic approach that is focused on spends which are much needed to revive the economy. The tax holiday given to start-ups for an additional one year brings relief to enabling the sector to sustain and grow, as we recover from the pandemic. Furthermore, the move to encourage one-person companies without any restrictions is a step in the right direction. This will go a long way in encouraging more people to come forward to set up innovative businesses that solve the challenge of the day and grow the high-potential start-up ecosystem within the country,” Lakhara said.

Rajan Navani, Vice Chairman & Managing Director, JetSynthesys lauded the budget for its “massive spend commitment” across sectors.

“The increase in FDI in the insurance sector to 74 percent with management control will help in attracting FDI from across the world and help boost the economy. The government’s commitment to set aside an outlay of Rs 50,000 Crore for the National Research Foundation, the setting up of a new Fintech hub, and an allocation to incentivise digital payments is exciting. This budget also has a number of bold initiatives to simplify tax processes for businesses and honest tax-payers. The extension of the tax holiday and exemption of capital gains will also enable businesses and start-ups to focus on growing their business,” Navani said.