The Union Budget 2021-22

'Whoever holds the purse, holds the power.'

The words of Former US President, John Madison is perhaps a very appropriate way to kick off such a topic. On February 1, 2021 the Minister of Finance Nirmala Sitharaman presented the Union Budget for the Fiscal Year 2021-22 in the Lok Sabha. According to Article 112 of the Indian Constitution it is refered to as the Annual Financial Statement. Till date 92 budgets have been presented with the first one by Dr RK Shanmukham Chetty for FY 1947-48. Whilst this was Sitharaman's third budget, it is unparalleled in the aspect of being India's first paperless budget. The Budget had some big announcements and had some gigantic figures which was hailed by the market. The Stock Exchange gave its 21 gun salute through brilliant and profitable transactions on the day the budget was being presented. Within moments it earned the sorbiquet of a 'balanced budget' by journalists and economists alike. The Budget concentrated on six key areas for growth - health and wellbeing, infrastructure, inclusive growth, human capital, R&D and minimum government and maximum governance.

Minister of Finance Nirmala Sitharaman and Minister of State of Finance Anurag Thakur outside the Secretariat of the Finance Ministry before the presentation of the Budget. 

The first aspect is the policy of disinvestment. In the most layman's terms disinvestment refers to the policy of selling the government's shares in the public sector enterprises in the market. This was an accompanying measure of the LPG reforms in the Indian economy and was carried out to get rid of heavy loss-making PSEs that was a burden on the exchequer. In the budget of 2020-21 the target was to gain an income of ₹2.1 lakh crore from this policy but owing to the pandemic it wasn't possible. This year the target is estimated to be ₹1.75 lakh crore. It would seem from the FM's speech that the disinvestment policy that the Government had initiated since last year would be merely completed this year that includes two nationalised banks (not named), Central Warehousing Corporation and the LIC. A new term called monetization was introduced in this year's budget and extended to pipelines of GAIL, HPCL and IOC, airports of tier-2 and tier-3 cities and five projects of the NHAI along with 6000km of highways under their maintainance by 2024. The Government stated that barring 4 'strategic' sectors where there would be a bare minimum number of PSEs it intends to disinvest all others even in vital fields such as atomic energy, space and defence and has announced that it may be selling Government owned lands as well. It even internds to introduce Foreign Direct Investment in the LIC something which it opposed when it was in the opposition benches for a deacde on the pretext of Swadeshi. Now two dimensions need to be articulated. Firstly those who believe that through disinvestment, the government will have more cash in hand seems to be forgetting that there's no logic with converting profit-making PSUs into loss-making and selling it to the market. Secondly and more importantly, in today's scenario who would purchases the equities of an artificially loss-making PSE is debatable and by selling the shares in lower prices the government can never reach its targets. Even the future of the finances earned from this policy that is in what schemes they maybe delegated to is something under question.

Hindusthan Petroleum, Indian Oil, Gas Authority of India Limited are a few of the PSEs that rhe government intends to disinvest. 

One of the other landmark announcements in the budget pertained education. Whilst many experts predicted that under the New Education Policy of 2020, the government would give the final green signal for IITs, IIMs and other such premier institutions to set up campuses abroad. Although this was not specifically mentioned but maybe present in the papers, it did announce the creation of a new Central University in Ladakh based in Leh and the establishment of 100 new Sainik Schools collaborating with the NGOs, private schools and state governments.The question naturally arises where such NGOs or private schools will be found. The National Research Foundation which was announced in the Budget of July 2019 received it's finances after two years- ₹50,000 crore will be delegated to it over 5 years. Even a sum of ₹4000 crore was sanctioned for the Deep Ocean Mission conceived way back in 2017 but over a period of 5 years. Instead of specifically enunciating on the spending of this year, the main intention of grabbing headlines is pretty evident by sanctioning these huge figures on previously announced projects that remained untouched for so many years. 

The Budget envisioned the establishment of 100 more Sainik Schools with the support of NGOs, Private Schools and State Governments.

The sudden interest in developing roadways and infrastructure in poll-bound states of Kerela, Tamil Nadu, Assam and West Bengal is also eye-catching. Highway infrastructure work proposed include the building of 8,500-km of highways by March 2022: 3,500 km corridor in Tamil Nadu, 1,100 km in Kerala at an investment of ₹65 thousand crore, 675 km in West Bengal at a cost of ₹95k crore and 1,300 km in Assam in next 3 years. Critics have been calling this a 'Road for Vote' scheme. Goa has been commissioned a sum of 300 crore for its 60 year celebrations of independence from Portuguese in December 2021. With its polls scheduled in February 2022, this again is perceived to be an electoral gimmick by the opposition. However these infrastructural developments and metros in cities like Chennai and Nagpur will certainly lead to employment opportunities as stated by the Principal Economic Advisor in the Finance Ministry, Sanjeev Sanyal and these on its completion will remain as assets to compensate for the fiscal defecit incurred by the Government whilst undertaking these projects. However whether the Government will enjoy the fruits of these is uncertain due to the proactive disinvestment policy pursued by the Government.

Chief Economic Advisor Sanjeev Sanyal quoted China's example for a pro-investment growth stating that as much it was necessary for the Government to provide cash in the hands of the public which it did during the pandemic through the Jan-Dhan Accounts, it was aslo essential for the Government to develop infrastructural assets that would benefit India in the long term and in Future generations.

In 2016, the decision to digitalize APMCs and Mandis were taken under the E-NAM scheme. In its first phase 585 Mandis were planned to be integrated in the next two years. When the figure reached 415 in May 2020- lesser than the target, it was increased to a thousand. This year another 1000 integrations have been pledged but there's no mention of by when that target will be reached. The ammount sanctioned for the Pradhan Mantri Krishi Samman Yojna has decreased from 75,000 crore last year to 65,000 crore. There's no guarantee of whether the figure shall remain the same when the final revised version will be released. However the intention to raise import tariffs of Cotton and Silk commodities by nearly 10 percent is worthy of praise and will be a boost to India's cash crop cultivators and small traders. What makes the budget really depressing for the middle class is the income tax slabs remain unchanged. Being a consumer based economy, the middle class was expecting tax concessions and a well-constructed policy to tackle the inflation of essential commodities especially petrol whose prices are skyrocketing and affect the prices of all other commodities. At this moment the cash was required by the public not only for basic subsistence but also for initiating the spirit of demand in the market. Even the gas and petrol subsidies have been massively cut down which may increase the prices of the cylinders. Although the Finance Secretary has specifically assured that the 4% and 2.5% cess imposed on diesel and petrol respectively in the agricultural sector would no affect the general public, but this would certainly result in the rise in prices of food items.

The Opposition states that by creating such artificial barriers like increasing the tariffs and controls would have a negative impact on the quality of goods produced in India. According to them the measures adopted by the Government and it's intention of globalising the Indian market with the international economy are two contradictory concepts.

The health budget is stated to be increased by a whopping 137 per cent. A sum of 35,000 crore is being sanctioned for the vaccination programme and a flagship  programme titled Atmanirbhar Bharat Scheme has been announced with a budget of 64,180 crores for six years to support  17,000 rural and urban wellness centres, establishing health labs in all districts and 3382 public block units in 11 states and critical care units in 602 districts and 12 government institutions, strengthening National Centre for Disease control - its five centres and its urban units, expanding integrated Health portal to all states & UTs and operationalising  17 Public Health units and strengthening of 33 existing units at points of  entry - 33 airports, 7 sea ports and 11 land crossings along 17 health emergency centres and 2 mobile hospitals. A regional WHO centre office, 9 bio-safety level 3 laboratories, 4 regional National Institute of Virology is also being planned. However to go by a report of the NDTV, there's no mention of such a scheme in the budget papers! Furthermore the health budget that is now worth of nearly two lakh and  a quarter crore, if we go by the details this figure is a grand total of adding up the finances of AYUSH and Water and Sanitation and not of the Health and Family Welfare alone. However the ammount for the vaccination programme is propounded to be enough to at least cover the first two phases of the programme. Moreover the Government has announced its decision to accept the recommendation of the 15th Finance Commission to make cuts in the existent schemes. Thus what will be the ultimate fate of these schemes is something we need to look for.

Till date, Morarji Desai holds the record of presenting most number of budgets(10), followed by P. Chidambaram (9) and Pranab Mukherjee (8). 

The Budget also introduced the minimum wage for labourers however made no allocation for the Social Security Fund proposed under the Code on Social Security, 2020 passed in the last year's session. A landmark positive aspect of this budget is to increase the time limit to open files of tax disputes of incomes of over ₹50 lakh from six years to ten years. The tax evasions of incomes of less than ₹50 lakh has been confined within a 3 year time frame. Senior Citizens of over 75 years of age are no longer required to file tax returns and the banks will directly charge it from the accounts. 

It must be remembered that markets respond very well on the day the budget is presented but they mourn for the rest of the 364 days over its improper implementation. It's essential to see whether the joy over these long term plans that are being tabled lasts for long or not. Whether this Budget has the ability to catapult us towards 6-7% GDP growth we had witnessed between 2004-14 and will it is going to incentivise our path to a 5 trillion dollar economy or impede it, is something that is perhaps pretty evident. As of now we can only wait for the revised figures and hope for a good session of debates and deliberations instead of disruptions between the Government and the Opposition.