Budget 2021, the first budget of this new decade was announced by the Finance Minister on the 1st of February. While the country is still reeling with the impact of the ongoing pandemic not much hope was pinned on this budget.
The Finance Minister, Nirmala Sitharaman presented the budget which includes significant changes in tax reforms along with increased spending on health care. The day budget was announced there was a 2300 point surge in the Sensex and the overall market reaction was ‘no negatives mean positive’.
Some Hits And Misses Of Union Budget Of India 2021
What appealed to the market was there was no new cess or surcharge or no increment in capital gains tax or tax rates. India Inc. also welcomed the investment in infrastructure and the much needed financial sector reforms though in a nascent stage.
With the key principle being ‘Atmanirbhar Bharat’ of the Budget 2021, one did see the changes proposed on the both procedural and regulatory front for small to medium size companies including the startups which were overdue for a long time, however, was this enough is remains a question mark.
Maximum governance and minimum government were evident in some of the announcements but the budget missed out on the fact that the small to medium size companies are already reeling under the burden of compliance since the last year given the situation of no travel, no sophisticated digital support, and no access. This is not because the companies are not understanding that there is a need but it’s just that they are not ready or cannot afford it. In such circumstances, with a simple step of extending the moratorium on the interest and penalty of late filings one could have witnessed a better and more positive group of people who want to move ahead and rise from the present economic situation. To put it in other words, the government has extended a helping hand but failed to give a platform to stand.
If not all, but most of the policy announcements made do act as a prop for growth, for instance, setting up of ARC is great but an effective implementation would be the key to success.
The real estate sector which was reeling due to the economic downturn has some reasons to cheer if not all. The clear miss was the claim of the input tax credits under GST on the construction cost. However, some stimulus has been given in the affordable housing sector. This gives out a message that the demand at the domestic level can help stirring up economic development. The growth in this direction would lead to increased tax revenues.
The middle class of India expected certain measures that would increase in their disposable income in hand was missing. However, Budget 2021 brought cheer for the NRIs and expat Indian entrepreneurs. The brave move to permit one-person companies for NRIs and the legislation that will bring about an end to double taxation for Indian expats who plan to return to the country. One-person companies will unravel innovation and entrepreneurship.
A sector that has reasons to cheer from Union Budget 2021 is the startup ecosystem of India. With encouragement being given to NRIs to build a startup in India and the change in defining the small companies, the startup ecosystem will be benefitted. Another welcome move has been the extension of the time limit of capital gains exemption. Besides that, the startups as they recover from the cash flow challenges faced during the COVID-19 pandemic can make use of the extension of the tax holiday by another year.
The tourism and telecom sectors have expressed disappointment with this budget as their concerns have not been addressed. Even the analysts have pointed out that in this budget there is no specific support provided for these sectors that are stressed due to the pandemic.
Budget 2021 Garners Mixed Reviews
There have been mixed reactions to this budget while some calling it a ‘cruel blow’ to federalism. Mr. P Chidambaram quoted that it was expected that the finance minister would pay special attention to election-bound states as she has announced special outlays for Tamil Nadu, Assam, Kerala, and West Bengal. The TMC lashed out saying that it is a visionless budget and Congress termed it as a case of incorrect diagnosis and prescription.
While the emphasis on the health care sector was praised and experts from the industry feel that it will encourage innovation. Many also felt that this budget is pro-growth and pro-technology. The Prime Minister termed this budget as one which will not only built the confidence of people in these unprecedented times while keeping the farmers and villages of India in its heart.
Whether this budget takes us a step closer to the USD 5 trillion economy dream we will have to wait and watch as the year unfolds.