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Budget 2021: 5 areas Modi govt may focus on this budget

Budget 2021: Prime Minister Narendra Modi has already indicated that Budget 2021 is part of a series of four-five "mini-budgets'' presented in the form of economic packages last year. So what should you expect from this year's budget?

twitter-logoBusinessToday.In | January 31, 2021 | Updated 16:07 IST
Budget 2021: 5 areas Modi govt may focus on this budget
Budget 2021: Govt may provide an unprecedented boost to healthcare and infrastructure

Finance Minister Nirmala Sitharaman has promised "never before" like budget in 2021, which will help India emerge as the engine for growth and economic resurgence. Considering the economic setback India faced after a series of Covid lockdowns, it's important for the Centre to focus on areas that need urgent boost. "India's economic resurgence will help the world to recover," Sitharaman said at the CII Partnership Summit 2020 in December 2020. The finance minister said 'health' and 'investment in health' would be the top priority for the government in Budget 2021. But what are the key things to look out for in this year's budget? Will it be a "budget for all" or something that's aimed at targeting key sectors. Prime Minister Narendra Modi has already indicated that Budget 2021 is part of a series of four-five "mini-budgets'' presented in the form of economic packages last year. So what should you expect from this year's budget?

Also read:Budget 2021: Date, time, sector-wise expectations; everything you need to know

Sops for pharma and healthcare

If there's one sector that has been pushed to its limits in FY21, that's healthcare. As India's Covid-19 tally went up, becoming the second worst affected country in terms of coronavirus cases, the country's hospitals and the healthcare sector were overwhelmed. India's tally has come down significantly, thanks to strict Covid-19 curbs imposed by the government, but the battle is far from over. With two major vaccines already approved, the country has a gigantic task in front of it -- vaccination of 1.3 billion people.

Union Finance Minister Nirmala Sitharaman's budget for 2021 is likely to provide an unprecedented boost to the healthcare sector, including big incentives and investments in healthcare infrastructure, boost to technology, research and development and digital health, say industry sources. With the current inadequate infrastructure in healthcare segments (the doctor to patient ratio of 1: 1456 and beds to patient ratio of 131: 100000), there is a larger expectation that budget allocation to healthcare would be around 2 per cent to 2.25 per cent of the GDP, keeping in line with the government's policy to increase healthcare spending to 3 percent of the GDP by 2022.  The pharmaceutical sector is also  expecting more reduction in duties to bring down the prices of medicines.

Also read: Budget 2021: Top 5 expectations of middle class

Infrastructure boost

The Centre has big plans when it comes to investing in infrastructure. This time, the government could focus more on offering incentives to private investments for public infrastructure development. There's little clarity on how much funds the government can spare but it's expected that the Centre will increase capital expenditure to boost infrastructure investments. PM Modi in 2019 had set an ambitious target of spending Rs 100 lakh crore in infrastructure projects over the next five years. In this budget, FM is also expected to announce the Centre's progress on 'Infrastructure Vision 2025', under which it aims to give 24*7 affordable power, access to digital services, quality education, efficient transportation, housing and water for all. "Unless public expenditure is stepped up, GDP might shrink not just during this fiscal but even in the second and third quarters of FY22 once the favourable base effect wanes," the CII, in its Pre-Budget Memorandum 2021-22, has said.

Personal taxation

The year 2020 saw several reforms in income tax. To earn revenue from income tax, the Centre may impose Covid-19 cess for high-income earners. The government has also received demands to increase exemption for medical insurance premium under Section 90D of the IT Act. There are expectations that the government could consider enhancing the income-tax slab rate from the existing Rs 2,50,000 to Rs 4,00,000. Also, the deduction under section 80C towards PF and other heads may also be increased to Rs 1,50,000 vide the Finance Act 2014. The Centre may also increase exemption per minor child from Rs 1,500 to Rs 10,000. The Centre may also focus on giving tax waiver to senior citizens on interest on saving schemes.

Also read: Union Budget 2021: Here are 5 things to watch out for this budget

Employment

Among many things, all eyes will be on the Finance Minister's budget speech to see if she'll announce measures to solve India's ever growing issue of unemployment. The year 2020 was particularly a bad year for India in terms of employment. The economy suffered the biggest shock after the first lockdown in March when around 11.3 crore people lost jobs as the entire economy went into shutdown mode, the private think tank CMIE data suggests. To beat the Covid-19 blues, the government announced the Atma Nirbhar Bharat package worth Rs 20 lakh crore. Sitharaman also announced Atmanirbhar Bharat Rozgar Yojana in November. Under the scheme, the government announced subsidy to companies for two years for new employees engaged on or after October 1, 2020. Despite these quick fix measures, there's need to do much more to raise employment opportunities in the country, suggest experts. "Given the imperative to generate demand and employment opportunities to revive the economy, an increase in infrastructure spending should be the focus area in this budget," Arun Singh, Global Chief  Economist at Dun and Bradstreet.

MSMEs

The COVID-19 pandemic severely impacted India, leading the country into a recession. Nearly all sectors were affected by the disruption but the MSMEs industry was dealt a triple blow during the early days of the pandemic as Prime Minister Narendra Modi announced stringent lockdown causing demand to crash. The government had immediately jumped into action to save the falling industry after launching a stimulus package to help the MSMEs industry. The badly hurt MSME sector is still recovering from the effects of the economic disruption of the pandemic. Arun Singh, Global Chief  Economist at Dun and Bradstreet, says: "This year, the Centre must enhance the collateral-free loan limit for MSMEs, which currently stands up to Rs 2 crore. The recent notification which mandates that enterprises with over Rs 50 lakh in monthly turnover will be levied at least 1% of their GST liability in cash and this will not be allowed to be set off against input tax credit should be revoked for the fiscal year FY22." Other suggestions are ease in the cost of doing business by simplification of land laws and reducing the registration cost of land for MSMEs beyond a certain threshold; strengthening the value chain of MSMEs ; making export income tax free for micro and small enterprises for three years and medium for two years and tax deduction on product development for exports.

Also read: India's policy response after COVID-19 was mature, farsighted: CEA

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