Growth and Scale Up
Budget 2021: From expectations to reality
01 Feb 2021
Finance Minister Nirmala Sitharaman has presented the Union
Budget on 01 February 2021; underlining the business-friendly ideology of the
Government. The equity market and the private sector have welcomed the budget,
which is lenient to privatization, increased spending on infrastructure,
monetization of Government lands, increase in FDI limits in the insurance
sector, closure of non-performing and sick public sector units, to name a few.
Those proposals are aimed at improving productivity and pushing the potential
economic growth in the long-term.
The FM has budgeted total expenditure just 0.95 percent more
than the revised estimates for FY21. CAPEX is pegged to go up just 4.8 percent
over the revised estimates for FY21. The message given by the Government is
that it is ready to support the economy, despite the visible improvement in the
private sector as seen in the December corporate results and PMI numbers.
Here’s sharing the union budget 2021 roundup from Praxis
Madhur Singhal, Practice Director, Technology and Internet, said, “Major focus of Budget 2021 is on economic growth, strengthening of the healthcare system and infrastructure, and steps to help the startup ecosystem. Initiatives such as the extension of the tax holiday, incentivization of the incorporation of one-person companies, and the proposed reduction of compliance burden on startups by an increasing threshold for capitalization and turnover will give a fillip to the ecosystem. Meanwhile, renewed thrust on initiatives like Atmanirbhar Bharat and Sabka Saath Subka Vikas is aimed at the revival of the economy as well as a reformist economy. Now the timely implementation of the schemes is the key to the success of many of these policies.”
Aryaman Tandon, Practice Director, Technology and Internet, said, “The extension of capital gains exemption and eligibility of
tax holiday for one more year is a welcome step from the FM. Other proactive steps
for the startups include reduction of residency limit for an Indian citizen
from 182 days to 120 days and allowing Non-Resident Indians to incorporate
one-person companies in India. Reduction of mobile manufacturing exemption
could increase mobile prices, which in turn, could benefit manufacturers of
mobile parts and accessories.”
Shishir Mankad, Head, Financial Services, said, "For the banking sector, the announcement on the creation of the
much-awaited bad bank is indeed welcome, the thinking on the structures that
will be permitted in terms of AMC/AIF is indeed progressive. The Government’s
intent to divest stakes in LIC, two PSU banks, and one general insurance
company is also of strategic importance and could be a harbinger of things to
come. Reduction of collection limit under SARFESI Act to 20 lakh from the
existing level of 50 lakh will enhance the efficacy of recovery efforts of lenders.
Given the current asset quality cycle, the PSU bank recapitalization budget of
Rs 20,000 Crore seems inadequate; almost like a placeholder, notwithstanding
the constraints on the Government’s finances. Overall, however, there are many
things to look forward to.”
Arun Thukral, Practice Leader, Financial Services, said, “This is a great budget in recent years. There is a huge
focus on growth and next-generation reforms initiated in all major sectors.
Asset monetization to raise resources and putting that to use to generate
significant capital formation is really commendable. Also, the absence of no
new taxes has cheered the already buoyant stock market.”
Anjan Bose, Practice Leader and Advisor, Healthcare, said, "Driven by unprecedented global pandemic crisis creating multiple disruptions in both public health and national economy, Governments around the world are struggling to address the tremendous challenges faced by their countries. At this crucial juncture, India’s Union Budget with a focus on health infrastructure and a significant increase in health budget including Rs.35,000 crore for COVID-19 vaccines, is a step in the right direction in such difficult times. Focus on wellness through 17,000 rural and 11,000 urban health & wellness centers, is in line with the probable future of Healthcare. This is a disruptive transformation from curative to a preventive approach."
Prabal Chakraborty, Domain Leader, Healthcare, said, “Budget 2021 is growth-oriented. There is a great focus on
infrastructure, CAPEX, asset monetization, and disinvestment. This is extremely
encouraging. On the healthcare front, there is a growth of 137% in the overall
outlay and is intended to strengthen the healthcare infrastructure at primary,
secondary, and tertiary levels. This would expand the reach of quality
healthcare to a wider population base. Overall a very positive budget."
Bhave, Domain Leader, Financial Services, said, "The FDI increase in Insurance to 74%,
along with a pragmatic approach on management controls, should help bring in
the required capital and aid insurance penetration. This is an opportunity for
insurers to further innovate, and invest in customer-centric processes and
efficient scaling up of distribution. This step, along with the proposed LIC
IPO in this fiscal, sends a positive message to investors."
Richa Mahindru, Domain Leader, Pharma and Life Sciences, said, "The Indian pharma sector receives a 200%
stimulus under the new budget 2021 scheme. This is aimed to strengthen the
global image of the Indian Pharmaceutical industry and reduce its dependence on
raw material imports from China. Budget 2021 allocates Rs 124.42 crore for
development initiatives of the Indian Pharmaceutical Industry in comparison to Rs
42.05 crore of the budget 2020 scheme. The amount under the new budget will
provide an additional push in production-linked incentives (PLI) to boost
domestic manufacturing of critical key starting materials (KSM), drug
intermediates, and active pharmaceutical ingredients (APIs).”
Savio Monteiro, Sr.Vice President, Infrastructure, said, "The infrastructure sector has received a significant
focus in Budget FY21-22. The central theme being Infrastructure financing,
asset monetization, and allocation of further capital outlay for the central
and state Governments. The capital outlay has increased from INR 4.12 Lakh Cr.
to INR 5.54 Lakh Cr, a sizable increase of about 35%. The Government
understands the need to raise capital to fund new projects and hence
significant push towards asset monetization in sectors such as roads, railways,
ports, airports, oil & gas pipelines, etc. Lastly, infrastructure financing
has been given the necessary boost with the setting up of a DFI to finance
large infrastructure projects. Capital expenditure, asset monetization, and
financing have received prime focus in this budget, clearly indicating the
emphasis on infrastructure to rebuild a pandemic hit economy.”
Lokesh Bohra, Vice President, Sustainability and Impact
Advisory, said, "Budget 2021 continues to focus towards pillars in
development and growth. More emphasis towards sustained livelihood and focus on
digitization in critical sectors like education, urban governance, logistics,
Infrastructure, health, and compliances. Steps towards inviting more
participation from community and businesses are seen, especially
Sanjeev Garg, Practice Leader, Automotive, said, “The overall budget is growth-oriented aiming at 11% plus GDP growth with a primary focus on rural, health, banking, and infrastructure sectors. This should help the auto sector as one of the beneficiaries especially 2W, tractors, commercial vehicles, and entry-level cars as new jobs will be created. Scrappage policy will benefit the CV segment definitely with high replacement demand in Government and the Private sector. Some dampener in terms of customs duty increase in selective auto parts may increase the cost for companies where localization is still low.”
Preetam Singh, Sr. Vice President, Automotive, said, "The overall sentiment for the industry is expected to
be positive as there are no surprises with no tampering on tax/cess structure.
Due to the ongoing pandemic, the industry had literally no appetite to absorb
any shock on additional tax/cess being levied. Increase in customs duty rates
for auto parts shall boost domestic competitiveness through the PLI scheme and
is the right step towards Atmanirbhar Bharat. The initiative on voluntary
scrappage policy is indeed welcome. However, further details on the
implementation modalities could give an idea of the actual impact of this
Rahul Mehta, Domain Leader, Transportation and
Logistics, said, "Within the logistics sector,
warehousing assets of central public sector enterprises such as Central
Warehousing Company would be rolled out under the asset monetization program.
This is a welcome move to repurpose central warehouse assets that have
locational and space advantage to a Grade A level warehouse by private players.
The warehousing sector has been witnessing significant traction from private
players and private equity funds investing considerable capital over the last
1-2 years in Grade A level warehouses. This move would encourage the private
sector and bring in further investments in the logistics sector.”
All views are personal.