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 experts.

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 Internetsaid, “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 Servicessaid, "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."

Vishal 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 Sciencessaid, "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, Infrastructuresaid, "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 Advisorysaid, "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 post-COVID."

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, Automotivesaid, "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 policy.”

Rahul Mehta, Domain Leader, Transportation and Logisticssaid, "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.

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