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Union Budget 2021 : Hits and Misses

The Union Budget 2021 announced earlier today has drawn a mixed response from the industry. While the initiatives announced for startups, fintech, and so on are drawing positive reactions, a lot more could be done for the MSME sector, say industry experts. Some experts are also of the view that it would be early to comment on the budget as it is not clear as to how many of these initiatives would materialise.

“The announcements made by the Finance Minister towards the further development of digital payments in India, as part of the Union Budget 2021 are indeed positive.  In fact, the allocation of Rs.1500 crore for digital payments is a welcome move, but it is too early to comment on the same. What we should be looking forward to is the implementation of the same. While the funds have been announced it is still unclear how these budgets allocation is going to be used for the benefit,” said Akash Gehani, co-founder and COO, Instamojo.

Although the Union Budget 2021 has paid emphasis to the healthcare industry, which was the backbone of the country during the COVID-19 pandemic, Dr. Prateek Raj, Faculty from the Strategy area at IIM Bangalore feels that a lot more could have been done to uplift the needy. He put forth the following points regarding his opinion on the budget:

  • This was a comprehensive budget with the good news of an increased outlay on healthcare. I hope this health outlay sustains and is not a one time bump.
  • Enough measures have not been announced. Although the budget bets on infrastructure spending, yet the first step to turn the plan into implementation is to undertake land reforms, with the consultation will stakeholders, so that land markets can become more efficient, and infrastructure progress could move faster. At a time when we see rising concentrated wealth, the budget could have also focused on the MSME sector more. One can get impressed by the budget as there is a little bit of spending for everyone, but once again a comprehensive vision to support MSMEs is missing. There are many small fragmented interventions, but a larger vision to move the economy towards recovery is missing.
  • The government could have focused on the poor households and the demand side. There were very few salient measures to put more money in the hands of the masses to boost local demand.

Aditya Mohan Jadhav, professor – accounting, economics and finance area, TA Pai Management Institute, Manipal, shares a similar view and says the budget has the following positives and some misses:

  • Increase in health budget by 134% was a necessity in lieu of the pandemic and step in the right direction.
  • The setting up of the National Asset Monetisation Pipeline, disinvestment target of 1.75 lakh crore and IPO of LIC becomes very important given that the fiscal deficit is expected to be 6.8% of GDP.
  • Focus on Infrastructure and increase in FDI in Insurance sector will boost these two sectors which can be big employment providers.
  • Decision to set-up Asset Restructuring Company and recap of PSBs will release capital for loans from these banks and kickstart the economy.
  • The key miss is the focus on households. Households have taken a income hit resulting from the pandemic which is expected to result into retail banking NPA surge. The budget was expected to take some effort to increase money in hands of the people. The government has not taken any substantial initiatives on this front.

Furthermore, Udaya Bhaskar Rao Abburu, CEO and managing director, iRam Technologies also stated that they were hoping for more from the budget. “We expected more from the Union budget 20-21. While the focus has been on infrastructure, FM has allocated Rs. 93,400 Crores for roads only, no allocation has been made for development of Smart Cities. Though FM talked about double digit growth of the manufacturing sector for India to become $5 Trillion economy, no roadmap has been laid out for the same. We also need more clarity on how Rs. 2217 Crores allocated for setting up 42 Urban centres to tackle pollution problem will be used. Change in definition of Small companies may benefit some Small-scale companies, provided more support for Small scale companies are announced,” he commented.

Also, on the announcements made with respect to solar energy, Gautam Das, co-founder and CEO, Oorjan Cleantech Private Limited, said “The budget focuses on transition to alternative sources of energy and providing support to ailing power distribution companies. There has been no major announcement with respect to solar energy except a nominal increase in custom duty for solar inverters and lanterns to boost make in India mission. With more details coming in, we are hopeful that even the power ministry (MoP) will roll out pro-solar reforms including abolition of the restriction on net-metering.”

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