Budget Musings: Hopes and Expectations of Budget 2021

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The upcoming budget session from February is drawing huge attention of the people and the financial experts with the government proposing massive reforms resulting in the rise of expectations.

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The following the state of affairs that led the rise in the expectation.

Negative Points

  1. First budget after the unexpected pandemic Virus.
  2. The Fiscal Deficit has already touched Rs.10.50 lakh crore and estimated to touch around Rs.13.00 lakh crore by March-end, which is above the estimated level of Rs.10 lakh crore compare to Rs.7.10 lakh crore fiscal Deficit in 2019-20.
  3. Huge expenditure is awaiting for inoculation of Covid vaccine to at least 80 crore poor people with two doses each.
  4. RBI warning last week that NPA s in banks may rise from present 7.5% to 13.5% due to rescheduling of and low employment opportunities, as some of the industries and service sector not yet picked up the momentum.
  5. Loss jobs to thousands of people in many metropolitan and urban centres resulting in the huge number of cheques returned unpaid for many loans.
  6. Increased Defence expenditure due to border tensions created by China which made our country to the huge amount for purchasing arms and ammunition from Russia and Israel for. Rs.1.25 lakh crores.
  7. increased inflation due to the huge increase in Petrol and Diesel prices. It resulted in an increase in prices in a vital sector of Steel, Cement, transportation and tourism apart from Health Cate.
  8. No package declared for Airlines, Tourism and hotel industry.

Positive Points

  1. The manufacturing sector has shown good results during December quarter ended 31-12-2020. Even though its production was around 10% less in some sectors and 20% less in some other sectors for nine months ended 31-12-2020 showing signs of good pick up.
  2. IT sector and Pharma have shown positive compare to last year sales for three quarters continuously with a growth of 10% through Pandemic virus was ruling and lockdown affected other industries.
  3. Govt has taken good decision to go ahead with Railways renewals of track and improving signalling and Speed up new line works and construction of the third line in Golden Quadrilateral and diagonals. Similarly, a huge amount spent on National Highways projects during the last nine months to generate rural employment.
  4. Forex reserves zoomed to USD 590 Billion now compared to USD 340 Billion in 2014.
  5. Though new recruitments were low, the majority of lay off the staff were recruited now in all most all companies.

Suggestions by some experts

  1. Govt spending to be further increased in FY 2021, though Fiscal deficit increases to provide more employment.
  2. Exports incentives to be increased further.
  3. Petrol and diesel along with cooking gas to be brought down to control inflation, which is raising now.
  4. Airlines and the tourism industry to get a good package for Rs .50,000 crores each.
  5. Stake in Govt Banks to be reduced to 35% only in share capital.
  6. Loss-making Public Sector banks and Units to be privatized. To disinvestment of LIC, Dredging Corporation, BSNL. VSNL etc. All airports to be privatized by 2023.

Govt Priorities

  1. To improve medical facilities with an expenditure of 5% GDP. That means doubling the allocation for the Health Department.
  2. To make more activities and industries under Productivity Linked Scheme with a good outlay in the budget.
  3. More medical colleges and diagnostic centres to be established.
  4. Pending Construction works in Railways and Highways to be completed to generate more employment. At least Rs 1.50 lakh crore to be allocated in the budget.
  5. Steps to be taken to improve the performance of banks and the financial sector.
  6. All poor people to be inoculated by December 2021. It is a costly program.
  7. Fiscal deficit to be maintained at 5% of GDP compared to 7.5% now.
  8. Low-interest rates to be managed, even though some govt banks incur huge losses.

Measures to be Initiated

  • Tax collection will increase to an estimate of Rs.20 lakh crore and fiscal deficit of Rs.10 lakh crore. So put together budget size will be around Rs.30 lakh crore.
  • Rural employment guarantee scheme (MGNREGA) will continue by paying Rs.200 per day for rural unemployed workers for 20 days in a month for existing 15 days wages.
  • Public Distribution System will be strengthened further by adding pulses and oil for poor people.
  • Liquified Gas Pipeline for all major towns in the coastal areas and surrounding cities with a huge allocation of Rs.100,000 crore from Govt.
  • People above 70 years or 65 years having only pension income and interest income of Rs.150,000 per year may be exempted from IT filing.
  • The defence will be allocated with Rs.3.75 lakh crore of which Rs.1.0 lakh will be for purchases of arms and weapons including warplanes.
  • Though no new taxes will be levied on the existing sectors, there is a possibility of laying a new tax on Ecommerce companies as most of them posting losses only.
  • Export incentives will be increased from 2% to 3% for manufactured goods. But not for services.
  • Production Linked Incentives scheme will be extended for toys manufacturer, Fertilisers manufacturer, except Urea, chappals and smartphone manufacturers.
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