Budget 2021: FM delivers Indian bazooka for a growth decade, writes SoftBank's Manoj Kohli
The euphoric investor reaction was telling. India needed an expansionist budget to recover from the pandemic induced worst economic contraction in modern history. Finance Minister Nirmala Sitharaman has delivered an Indian bazooka, spending on infra build-up, boosting healthcare, shoring up human capital and unleashing innovation among others.
India has rapidly stemmed losses from the once-in-a-century public health crisis and is taking lead in doing reparations to the economy and livelihoods. While pundits have praised it for the bold reformist agenda, it has a singular focus on renewed growth.
In hindsight, history might record it as a pivotal event in shaping up a disciplined, transparent approach to shaping up the New India.
This sets up India for a crucial decade of accelerated investments, productive livelihoods and new age consumerism. Driven by the 600 million-plus mobile internet users, the biggest digital market in the making, India along with China are the only major economies attracting positive FDI inflows currently.
Growth, economic revival and job creation
The Union Budget is bold and courageous as it focuses on growth, economic revival and job creation. Aggregate capex of Rs 5.54 trillion ($76 billion) marks a 26 percent increase year-on-year and will provide a huge boost to infrastructure and linked commodities.
The sharp increase in budgetary allocation for roads, highways and railways will have a multiplier effect on economic growth over the medium term. The continued focus on augmenting physical infrastructure and economic corridors will lend impetus to contiguous manufacturing activity.
Another important theme of the budget was employment generation: job creation through increased capital spending, healthcare spending, as well as the creation of textile parks, disinvestment of public sector enterprises and enhancement of the emergency credit line to MSMEs.
Manoj Kohli, Country Head, Softbank
Integrated healthcare and increased spending
The health care sector received the much-needed attention, the budget provided outlay to health and wellbeing to nearly Rs 2.24 trillion ($30.7 billion), an increase of more than 137 percent over last year.
The objective is to look at healthcare in an integrated manner that includes nutrition, sanitation, clean drinking water and pollution control. It is certainly a positive step and will provide long term benefits.
The allocation of Rs 350 billion ($4.8 billion) towards COVID-19 vaccination along with the nationwide rollout of the pneumococcal vaccine with a view to bring down child mortality rates is also a very welcome step.
Long rope for startup and technology sector
For the startup sector, a slew of positives stood out with the move for providing social security benefits for gig workers being the highlight. This will ensure sustainable growth of the gig economy driven digital services, which could be the mainstay of job creation in the coming years.
Incentivising incorporation of one-person companies with no paid-up capital restrictions is a tangible move in acknowledging the power of entrepreneurship in delivering economic multipliers.
The startup ecosystem and investors will benefit from extended tax holidays and increasing the threshold for small businesses to Rs 20 million. By reducing the residency requirements and the proposal to notify rules for removing hardship for double taxation, the flow of talent will be ensured.
The allocation of Rs 80 billion ($1.1 billion) for National Mission on Quantum Computing & Technology, and building data centre parks is another positive step towards the fulfilment of the Digital India vision.
The Budget both challenges and incentivises those who rise to the occasion of making India the next hub for innovation.
Boost for Make in India and rural infrastructure
Domestic manufacturing will get a thrust from this budget, which sought to boost MSMEs and aid the Atmanirbhar Bharat initiative. The Budget has more than doubled the allocation for the MSME sector along with increasing custom duty on a few products in order to help domestic manufacturing.
Additionally, the proposal to strengthen the NCLT framework to create an MSMEs specific framework and establishing e-courts is bound to uplift the small-scale sector.
The government’s intention to push for Make in India is evident. This time, the focus is only integrated India’s smaller manufacturers into the global value chains and help them attain scale. This playbook, if executed well, could be an orbit shifting one for local manufacturing.
The textile parks will boost the flagging competitiveness of Indian exporters in their slugfest with Bangladesh and Vietnam. India’s share of readymade exports to the US and Europe has been stagnant for years.
The 34 percent higher allocation under Rural Infrastructure Development Fund to Rs 400 billion ($5.5 billion) will hasten the development of infrastructure for agri and allied activities, social sectors and rural connectivity.
Budget of hope and opportunities
Amid global uncertainty and financial distress, this budget, which was presented digitally, brings positives for individuals, investors and the industry. The focus has been on boosting both wealth and wellness.
And it builds firmly on the path of steady growth in infrastructure and ease of doing business with a stable tax regime and higher borrowings. The Budget is well aligned with the Prime Minister’s vision of self-reliance, raising the hope that 2020s could be the Indian Decade.
It is an honest Budget underscoring the need for a productive economy over populist piety. It marks an opportunity in adversity.
For YourStory's complete multimedia coverage on Budget 2021, visit www.budget.yourstory.com.