By Vivek Tuteja, Chairman and mentor, Endeavor Careers.
Indian Budget 2021 comes at an anvil of COVID led lockdown dismantling years of effort to create a business ecosystem followed by a renewed effort to create a fresh ecosystem on the existing framework in a completely new environment with new Norms.
The government of India prudently stayed away from providing fiscal stimulus in 2020 post-Covid 19 after mar allowing the market forces to find a balance assisted by monetary stimulus provided by Government and RBI. This in a way ensured struggling / inefficient units already in bad shape post demonetization and GST rollout to wind up shop, further leading to a swarm of bad loans in NBFC Books. Big Corporates flushed with funds and capability to raise funds swiftly created new structures & entered new product lines leading to capturing of larger mind and market share, palpably visible by the excitement of the stock markets at the anvil of the most destructive year in GDP growth rate terms in our recorded economic history.
2020 also gave India a Trade Surplus and by the end of the year GST collections also started touching record numbers indicating that is more likely to be a V shape recovery, further giving confidence to the finance minister to deliver what has the potential to be a landmark budget in comparison to what we have seen in some time.
As expected, the top Agenda would be to drive domestic production and push “atmanirbhar bharat”, yet another effort to boost domestic production and manufacturing. We have seen similar such efforts in the past 50 years unable to push Manufacturing sharing in GDP beyond the early two digits. This should also pave way for Sops for EOUs across industries trying to position India as an alternative manufacturing hub for the world.
Skilling which saw its entire previous year’s outlay go unutilized, would see a special impetus from government and we are looking at historic allocation in “skilling” as the process of reskilling and bringing back the unemployed to the labor market assumes prime focus.
Pharma and Healthcare should further get special SOPs. In an ideal environment, the public outlay on healthcare would increase substantially and a slew of new schemes be launched to upgrade our rural and urban healthcare system which though has gone significant improvement last year still needs greater attention for any future threat of similar nature.
Infrastructure will see a major push and major fund allocation will go in mega infrastructure projects. NREGA will further, see record budget allocation and some specials sops for Real Estate sector might be in for offering to improve the sentiment of realty sector in the country.
The service sector has seen a varied impact in the previous year with IT, telecom, healthcare, eCommerce gaining significant momentum whereas traditional hospitality, travel, tourism, education sectors taking a serious hit. This presents an opportunity for a special sop for these lagger sectors responsible for providing a host of white-collar jobs. Services also took the biggest hit in the GST transition and the sector would be hoping for some respite in form of significant tax cuts/incentives. This is less likely, but we may see some directional announcement letting the ball rolling for the future GST Council meets to take forward.
Corporates have received big doles in the form of Corporate tax cuts in previous years which in turn significantly boosted their reserves and valuations. In this Budget the Finance Minister might trim those gains by levying a few cess to consolidate more revenues. On the positive side, Corporates will expect the Government to push FDI in multiple sectors. A stress to promote innovation and incubation via start-up route will be visible to promote entrepreneurism and create a sustainable ecosystem to create unicorns of the future.
Middle Class has been hoping for tax breaks and this year might be the year for Government to do some overhaul providing much-needed relief to the taxpayer’s pocket and further intensive being rolled out for home buying and /or long-term saving instruments. Rich and Ultra rich might have to bear a bit more in form of cess and innovative taxes as government creates newer long-term revenue avenues.
Education will see the government pushing NEP roll out and incentivize ed-tech. The Government should not let this go of this opportunity and push larger public-private partnerships in both education and healthcare and create incentives to drive CSR Budgets in this direction.
Banking is an area we can further see a set of reforms with the government swiftly moving forward to further capitalization of banks in turn leading to reduction of PSU banks to 4 as envisioned. A major impetus in setting up Bad Bank and resolving the challenges of NBFC will be seen and might create the foundation for a fresh start to Modern India’s Financial Institutions.
On Agriculture, Defence and Energy the government will continue increasing the outlay and promoting the pre-set it has set course of the previous year with a cautious increase in spends to ensure they are well funded for the nature of their strategic importance.
In all, we can expect a prudent, practical and a positive budget!