‘A Budget of growth and next-gen reforms’

The Confederation of Indian Industry (CII), an apex trade body and advocacy group, has said that the Union Budget 2021 is both “strategic” and “tactical in actions” when viewed through the prism of lives, livelihood, and growth.

Its president Uday Kotak, who is also the managing director and chief executive of Kotak Mahindra Bank, went a step further and termed the Budget as “growth” oriented, with “next generation reforms”. “It has focussed on the key development issues, which are important for India’s future,” said Kotak while addressing the media during a post-Budget webinar on Monday.

In specific, Kotak was referring to the finance minister’s Budget outlay on healthcare and infrastructure, disinvestment and monetisation plans, opening up of the insurance sector for higher foreign direct investment (FDI), and a strategy to clean up the stressed assets in the financial sector.

In the backdrop of the Covid-19 pandemic, the Budget outlay for ‘Health and Wellbeing’ is ₹2,23,846 crore in 2021-22 as against the FY21 outlay of ₹94,452 crore, an increase of 137%. The government also announced a new centrally sponsored scheme, PM AtmaNirbhar Swasth Bharat Yojana, that will be launched with an outlay of about ₹64,180 crore over six years.

For the financial services sector, the government announced an increase in the FDI limit for insurance firms from 49% to 74%, while also announcing the setting up of the Reconstruction Company Limited and Asset Management Company. Both these entities would take over the existing stressed debts of public sector banks, and then manage and dispose of the assets to alternate investment funds and other investors.

“It [the Budget] has recognised the importance of the financial services sector,” said Sanjiv Bajaj, vice chairman, CII, and chairman and managing director of Bajaj Finserv. “The [government’s] divestment plans, which includes two public sector banks and a general insurance company and the LIC IPO, these are all very significant initiatives that are aligned towards a strong India in the coming years,” he added.

Textiles was another key focus area in the Budget, with the announcement of the creation of seven textile parks in three years. The textile industry has a huge job multiplier effect, particularly among the women workforce.

However, there are still concerns about the proposed Agriculture Infrastructure and Development Cess on a small number of items. While the finance minister has assured that the cess would not burden consumers, the fine print on it is yet to be assessed.

That apart, the CII welcomed the Budget’s “stable tax regime”—both for corporates and individuals. A few months prior to the pandemic, in order to attract investments the government had slashed corporate tax rates, abolished the dividend distribution tax, and given taxpayers a breather in the way of rebates. All of this has been untouched in Budget 2021. “We are enthused by it,” added Kotak.

Overall, a lot of what CII had requested for has been covered in the Budget, according to T.V. Narendran, president-designate, CII. A case in point: the government’s efforts in helping the gig and migrant workforce in the country. To this end, the government is planning to launch a portal that will collect relevant information on gig, building, and construction workers, which is expected to help formulate health, housing, skill, insurance, credit, and food schemes for them.

Though there are concerns over the fiscal deficit figures—6.8% of GDP for FY22 and 4.5% of GDP by FY26—the captains of industry aren’t too concerned about it for now. “The Budget truly reflects the aspirational and self-confident India for a different and a dynamic future in the post Covid-19 world,” said Kotak.