Budget 2021-22: A gadget to reel covidised economy

The first-ever digital Budget (paperless) outlined six pillars of proposals viz., namely health and wellbeing, capital and infrastructure, inclusive development, reinvigorating human capital, innovation and R&D and minimum government and maximum governance. The digital Budget also envisaged first-ever digital census of India with an outlay of Rs 3,768 crore. This move helps in accuracy in census data.

Agriculture and animal husbandry

Agricultural Infrastructure Funds made available to Agricultural Produce Market Committees (APMCs), enhancing agricultural credit target to Rs 16.50 Lakh crore with focus on animal husbandry, dairy and fisheries, expand the growth of the agricultural sector. Hither to budgetary allocation was a challenge but the agriculture infrastructure development cess is a move towards addressing the challenge.

The inclusion of Visakhapatnam among the five locations (the others being at Kochi, Chennai, Paradip and Petuaghat) in the country to build a major modern fishing harbour will enhance Visakhapatnam's position as a prominent seafood destination in the country. A modern fishing harbour with upgraded infrastructure will enhance productivity and lead to increased aqua exports. This is good for the long term as it will build the necessary infrastructure and lead to more aqua food companies setting up a base in the city. These will lead to creation of new local jobs besides improving the living standards of people.

The development of a modern fishing harbour also has the potential to improve livelihoods of fishermen. Fish is a highly perishable commodity and the development of a cold chain infrastructure as part of harbour modernisation will reduce wastage and ensure the quality of the landed catch. This will improve productivity across the aqua food value chain and position Visakhapatnam as a premier seafood destination not only in the country but in foreign markets as well.

Micro, small and medium enterprises

MSMEs are the growth engines of any economy. India is no exception. The rationalisation of customs duty on products mostly manufactured by MSMEs, and the increase in tax audit limit from Rs 5 crore to Rs 10 crore, special framework for MSMEs, conciliation mechanism for quick resolution of disputes with Government or Central Public Sector Enterprises (CPSEs) will instil confidence in doing business in the country and will certainly be a great relief to MSMEs that are already hammered by the Covid lockdown measures last year. MSMEs would have expected to see some financial incentives from the government, but the measures introduced in the Budget should further strengthen the role of MSMEs in nation-building.

Indirect taxes

Due to rationalisation of customs duty the prices of iron and steel, semi-finished steel items may come down. This move will help in restoration of existing infrastructure projects that are stalled due to rise in prices of iron and steel. Lower iron and steel prices will also help the government achieve its mission of making housing more affordable in the country. The coming summer months may be hotter than earlier as the prices of air conditioners, refrigerators will be costlier due to customs duty rationalization on compressors. LED bulbs and PCB will also be costlier and may affect investment in houses.

Direct taxes

However, a tax holiday extended to affordable housing projects until the end of March 2022 will make housing accessible to more people especially from the lower income groups. The government has attempted to make available housing for all by allowing for an income tax deduction of Rs 1.50 lakh for loans taken up to 31 March 2022. These measures could lead to increased demand for affordable housing as more people seek to take advantage of the tax holiday and income tax benefit. However, enough people need to be aware to take advantage of these benefits.

Ease of doing business

Decimalisation of LLP Act 2008 and amending the definition of small companies by increasing threshold limit for paid-up capital from Rs 50 Lakhs to Rs 200 Lakh and turnover from Rs 2 crore to 20 crore further to removing restrictions on One Person Companies (OPC) relating to paid-up capital and turnover is a big boon in terms of ease of doing business for smaller entities. The strengthening National Company Law Tribunals (NCLT) and the implementation of e-courts will hopefully enable speedy resolution of commercial legal disputes. If this move is successful, it would position India more favourably among investors, and could lead to a good jump in Ease of Doing Business rankings globally.

Infrastructure

The new Rs 18,000-crore public bus transportation envisaged in the Budget strengthens urban transport network. In addition, the new technologies Metro Lite and Metro Neo rail systems proposed in Tier-II and suburbs of Tier-I cities improve the quality of transport and reduces the cost of transportation significantly. Particularly cities like Visakhapatnam get an added advantage of low-cost transportation across the coast.

A record allocation of Rs 1.10 lakh crores to railways with Rs 1.07 crores towards capital expenditure of dedicated Freight Corridor (DFC) projects connecting East, West, North and Southern parts of the country strengthen the freight network, lesser lead time in transportation of goods and reduction of freight cost, is a welcome move.

Power sector

Power sector reforms including giving an option to consumers to choose their Power Distribution Company will lead to a healthy competition among various DISCOMs. Ultimately consumers may end up being the winners as they will be able to get clean power at cheaper rates. DISCOMS have been provided with Rs 3.06 Lakh crores for infrastructure creation.

Health sector

Health is Wealth and wealth is an indicator of nation's strength. Keeping this in view the Budget earmarked an amount of Rs 2.24 Lakh crores towards health and well being; in addition to that Rs 35,000 crores provided for Covid-19 vaccine will help in improving the health index of the country.

Education

Strengthening schools, identifying 15,000 schools to provide quality education establishing 100 more Sainik schools improves the quality of education and encourages parents to admit their children in government schools.

Infrastructure credit

Infrastructure financing is the need of the hour to improve infrastructure facilities in the country. Keeping in view of this, the proposal to setup Development Financial institution (DFI) exclusively to provide infrastructure finance up to Rs 5 Lakh crores in the next three years augments the infrastructure and creates employment in the field.

Banking and insurance sector

Increased Foreign Direct Investment (FDI) in insurance from 49 per cent to 74 per cent, allowing foreign ownership with certain controls and safeguards, consolidation of SEBI Act, 1992, Depositories Act 1996, Securities Contracts (Regulations) Act, 1956 and Government Securities Act, 2007 strengthen financial sector.

(The authors are practicing Cost Accountant & Management Consultants at Uppalapati & Associates LLP, Visakhapatnam).

Kalavalapalli Sanyasi Rao & Udandrao Lakshmana Rao