As a fiscal roadmap to reinstate and revive India’s economic recovery, the spending oriented Union Budget 2021 comes across as an exercise in prudence. Underscoring the theme of ‘rethink, reconfigure and reinvent’ to address some of the immediate, mid term and long standing issues that needed weeding out, this Budget seems to have something for everyone, albeit in a conservative manner.
India’s first digital budget could be considered symbolic of the Government’s resolve towards a truly Digital India. Announcements around the digital census, creating an enabling eco-system to further a ‘Digital First Mindset’ in education, adding impetus to fintech, etc. are progressive moves that can add momentum to the pace of digital adoption in a post pandemic world.
The significant push to building digital infrastructure and digitisation across both the private and public sector is welcome. The proposed investments towards harnessing emerging technologies such as analytics, artificial intelligence (AI) and machine learning (ML) will aid creation of new opportunities that can help propel India as an intellectual tech hub for global markets. However, one had expected greater thrust on digital adoption in the Budget that is today appreciated by organisations, big and small, as being fundamental to navigating the crisis, emerging stronger as well as keeping the economic engine of the country running to a great extent.
In the wake of the current economic environment, the announcements around job creation through private and public investment by way of an infrastructure boost; set-up of textile parks, fishing hubs and a financial services hub; an increase in the FDI limit in the insurance sector; allowing one person companies; and allowing women in all categories of jobs and shifts, etc. are timely and laudable. Another significant move is the support extended to MSMEs by doubling allocation for the Ministry of Micro, Small and Medium Enterprises to INR 157 billion. Improving access to credit through setting up of a new asset reconstruction company and asset management company to take over stressed assets of banks, setting up of a Development Finance Institution to finance infrastructure projects and equity infusion of INR 200 billion for public sector banks are all pro business moves that would all help ease a lot of distress for the MSME sector, a significant job creator for the country.
The healthcare sector was at the focal point in the past one year. The increased total budget outlay for healthcare is a big step for strengthening the delivery system and building better capability and capacity to address the current challenges as well as combat any future pandemics. Besides curative care, the focus on preventive care and well-being would mean a more holistic approach for reducing morbidity and mortality. PLI push will make India integral part of the global supply chain, create job opportunities and help attract global players in the Indian pharma and medical devices manufacturing.
A 35% increase over last year in the spend allocation in the infrastructure space should see more projects being prepared and rolled out. The setting aside of ~10% (INR 44,000 crore) for additional funding to projects/programmes/departments showing good progress would incentivise execution and enable speedy execution. The intention to speed up monetisation of brownfield infrastructure assets by creating a National Monetisation Pipeline would also signal private investors, enabling them to make long-term commitment to Indian opportunities either by way of investment in capital assets, technology or sourcing funds. Setting up of the ARC and AMC to address bad assets while recapitalising lending intuitions and creating a new development finance institution can help trigger lending for infra sectors. However, many of the prevailing infra sector specific and cross-sector issues will still need to be resolved if the momentum has to be built up.
The promised rethinking, reconfiguring and reinvention around these key areas does bring in hope that India would not only get back on the positive growth trajectory soon enough, but also build the foundation towards becoming truly fit for future. The road ahead calls for unwavering intent, clear vision, enhanced operational efficiency and absolute transparency, especially in a Covid-19 hit world.
Views are personal. The author is Leader Advisory, PwC India.