Key Highlights of Union Budget 2021-22

Published by Sharekhan Education | January 12, 2021

Key Highlights of Union Budget 2021-22

This time around Union Budget highlights a significant shift in the government’s fiscal policy stance. Economic growth has taken precedence over fiscal prudence. The budget has given a massive push to healthcare and infrastructure with a sharp focus on growth, investment, and jobs.

Let us look into the key highlights of the budget:

Healthcare:

The government . has introduced a new scheme – PM Atmanirbhar Swasth Bharat Yojana with a total outlay of Rs 64,180 crores. The scheme will aim at developing capacities of primary, secondary, and tertiary health care in India. The govt. plans to spend 137% more in the next financial year on health care programs. It will reserve ~Rs 35,000 crores for vaccinations.

Infrastructure:

The govt. will set up a new Development Financing Institution (DFI) that will provide long-term loans for large infrastructure projects. It will set aside Rs 20,000 crores to fund the DFI, and the hope is that this will create new loans worth Rs 5 lakh crores over the next three years. Highway and road work announced in Kerala, Tamil Nadu, West Bengal, and Assam.

Banking:

Indian banks have had a problem with unpaid loans for a while now. The government will develop an asset reconstruction company to take over bad loans. It will help the struggling banks to deal with only the pristine stuff — the good loans (loans that are likely to be repaid in full). And they can focus on getting their act together. Two PSU banks and one general insurance firm would get privatized this year. FDI limit in the insurance sector increased to 74%.

Auto:

A vehicle scrapping policy would phase out old and unfit vehicles. All vehicles would undergo a fitness test in automated fitness centers every 20 years (personal vehicles), every 15 years (commercial vehicles). It will encourage fuel-efficient, environment-friendly vehicles, thereby reducing vehicular pollution and oil import bills.

Economy and Finance:

Fiscal deficit stands at 9.5% of the GDP in FY21; estimated to be 6.8% in 2021-22. States have been allowed to borrow up to 4% of GDP this year. Government plans to complete the strategic sale of BPCL, IDBI Bank, and Air India this year. Plan to monetize government assets like Roads operated by NHAI, power transmission assets operated by the Power Grid Corporation, oil and gas pipelines of GAIL, IOCL, and HPCL.

Most measures announced underscore a clear focus of the government on long-term growth without using creative accounting. The government has recognized upfront that the planned growth will require a higher fiscal deficit. Even a gradual glide path to 4.5% of GDP in another four years suggests a continued growth focus in the medium term.

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