Can Budget 2021 give the boost India has been waiting for?
The focus of the Budget on privatisation and infrastructure will improve the overall productivity and push the Indian economy to its potential growth.
As Finance Minister Nirmala Sitharaman presented the highly-anticipated Union Budget 20201, the BSE Sensex gave a thumbs up and rocketed over 2,300 points led by gains in banking and financial stocks.
The Finance Minister unleashed a budget that, if implemented correctly, could send the country into an orbit of its own. Her speech pulled at the heartstrings of the private sector and was surely well-received by the equity markets.
The biggest allocation was rightfully done to the health and wellness sector which was long overdue, and now puts it into focus for this financial year.
Is privatisation the key?
There was no doubt about the intent of the government to privatise PSU’s and increase spending on infrastructure. However, I would take this with a pinch of salt as this is not anything new and the government has been dragging its feet, especially when it comes to privatisation. Having said that, there was nothing veiled in the budget and it clearly puts out that the government wants to pursue this aggressively.
Some of the strong moves made by the government include increasing the FDI in the insurance sector, disinvesting two public sector banks, and announcing the most awaited IPO of LIC in 2022.
The government seems to be wanting to cut its losses by closing down non-performing assets and creating a greater inflow of capital by selling ports, airports, roads, and pipelines.
More confident, and more committed?
The announcement felt as if the government was reading the minds of investors and private equity players. As compared to the last two budgets, the tone and the government’s position this time was totally different and more confident.
The government has largely been business-friendly but on February 1, it was evident that it wanted, or rather needed, to be completely clear on their intent to facilitate businesses and get India back on its feet.
A missed opportunity for small businesses
Considering that 2020 was a pandemic year, the country needed a clear idea on where it was heading this year and the Finance Minister did not disappoint.
I found that the budget catered more to big businesses and bigger initiatives, which was needed this year, but it was a missed opportunity for the government which could have put more support for the small businesses and startups. But if the big guns fire, the numbers for small businesses would not matter.
Help from a weakening pandemic and the vaccination drive
The total expenditure budgeted for FY22 is just 0.95 percent more than in the revised estimates for FY21, and capital expenditure is budgeted to go up by only 4.8 percent. However, the government has made it clear that it is going to support businesses and the economy despite the good numbers that were reported in December 2020.
We already have two vaccines that are currently being administered, and another two vaccines may be ready in the coming months. With the pandemic weakening and the vaccination drive on full steam, it surely seems that India can and will exceed growth expectations this year, and this budget will provide the boost the economy needs in terms of the all-round growth and development.
It is indeed the time for India to rise
If we stick to the plan, India will perform well in the long term too. The focus on privatisation and infrastructure will improve the overall productivity and push the Indian economy to its potential growth. It all boils down to how the budget is implemented and that is where our risk lies. In the end, the budget is just an estimated plan but to make it real, it needs follow-through.
We will know how this goes in time but the announcement was well-received. This is what India wanted, it is what India got and while there may be nit-pickers, the Union Budget ticked almost all the boxes.
For YourStory's multimedia coverage of Budget 2021, visit YourStory's Budget 2021 page or budget.yourstory.com.
Edited by Kanishk Singh
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)