All eyes will be on Finance Minister Nirmala Sitharaman as she presents Union Budget 2021-22 in Parliament on Monday. The Budget this year will be keenly watched as it comes on the back of a year when the economy was ravaged by the coronavirus pandemic. The National Statistical Office (NSO) has forecast a 7.7 per cent contraction in India's GDP in 2020-21. The finance minister is expected to announce measures to continue the nascent recovery seen in the economy. Here are the thing to watch out for in this year's Budget:
In simple terms, fiscal deficit is the shortfall in government's income as compared to its spending. It is measured as a percentage of GDP. The government had set a fiscal deficit target of 3.5 per cent for 2020-21. However, with the government's tax receipts under pressure because of the pandemic, it is widely believed that it will overshoot the target. The Economic Survey 2020-21, tabled in the Parliament on Friday, also said the government is likely to miss its fiscal deficit target for the year. Moreover, with the need to boost spending to revive the economy, the government is expected to set a higher fiscal deficit target for 2021-22.
The finance minister had announced an ambitious disinvestment target of Rs 2.1 lakh crore in the Union Budget for 2020-21. However, adverse market conditions because of the pandemic affected government's plans, and it has been able to raise only Rs 15,220 crore so far. The finance minister may set a higher disinvestment target in this year's Budget, including initial public offering of LIC and sale of Air India, which it couldn't complete.
The government has already declared its intentions for privatisation of state-owned companies. As part of 'Atmanirbhar Bharat' package, it had last year said there will be a maximum of four public sector companies in strategic sectors and that the government-owned firms in other sectors would eventually be privatised. Higher proceeds from disinvestment will help the government to step up spending.
Tax benefits for salaried class
The COVID-19 pandemic has changed the way people save and spend their income. The finance minister is likely to announce measures to increase money in the hands of salaried class to boost spending, which in turn will help the economy. She can go for changes in income tax slab or increase the tax exemption limit under Section 80C from Rs 1.5 lakh.
Under Section 80C, one can claim tax exemption up to Rs 1.5 lakh on investments in life insurance premium, public provident fund, employees provident fund, equity-linked saving schemes, home loan principal amount, stamp duty and registration charges for property purchase, Sukanya Samriddhi Yojana, National Saving Certificate, senior citizen savings scheme, ULIPs, tax saving FD for 5 years, infrastructure bonds, among others.
The pandemic has made everyone realise the importance of a robust healthcare system. There have been demands from various quarters for the government to increase its spending on healthcare to strengthen the system and be better equipped with future pandemics. The Economic Survey also called for an increase in public spending on healthcare to 2.5-3 per cent of GDP from 1 per cent currently. Besides increasing government spending on healthcare, the finance minister may also announce further incentives and exemptions for health insurance premiums and preventive medical check-ups.
The government can also go for expansion of its flagship public health insurance scheme 'Ayushman Bharat Pradhan Mantri Jan Arogya Yojana'. All eyes will also be on the amount the finance minister sets aside for COVID-19 vaccination programme.
Boost for 'Atmanirbhar Bharat'
The government's focus on recent times has been on 'Atmanirbhar Bharat' or self-reliant India to reduce India's dependence on imported goods. It has already announced production linked incentive (PLI) schemes for many sectors to boost local manufacturing. Continuing with this, the finance minister is likely to announce further measures to boost domestic manufacturing and exports, and create jobs.