As the Finance Minister Nirmala Sitharaman entered in the Parliament house having a tablet in her hand to announce the most-awaited budget, which was highly expected to be a stability-oriented, one thing was clear that Indian administration is turning tech-savvy now. Other participating members were having anxiety as a budget in times of Covid-19 must have taken blood and sweat to code. The Indian economy has been through a lot of bad blood due pandemic situation and GDP has been hit hard. In this scenario, heavy tax burden, less tax incentives and less capital expenditure was expected from the administration. However, the announcements made in the budget were not akin to expectations and healthy growth-oriented announcements were made. Right from the procurement of funds to its multiplication, every variable was clearly mentioned. One can easily state that the onset of the 2021 decade is building on strong grounds.
Following are the major announcements which have onset the bull rally in the Indian equities:
- Scrapping Policy: In order to phase out old and unfit vehicles to encourage eco-friendly automobiles, discourage oil-import bill and reduce pollution from vehicles, the administration has announced a voluntary vehicle scrapping policy.
- Hike in FDI limit for Insurance sector: The government has increased the permissible FDI limit from 49% to 74% in insurance sector. Under the new gamut, majority of directors and key management persons will be resident Indians and at least 50% will be Independent directors.
- Recapitalization of PSU banks: To enhance the loan disbursement capacity of PSU banks, an amount of Rs. 20,000 crores has been proposed.
- Roads and Highway Infrastructure: The administration seemed more focused on enhancing the physical connectivity infrastructure. In order to augment road infrastructure, more economic corridors are planned under which 8,500 Kms road will be awarded and 11,000 Kms of national highways will be constructed.
- Railway Infrastructure: Means of railways has always been considered a core part of budget. This time the administration has seen more focused on reducing the logistics cost. The government will commission Western and Eastern Dedicated Freight Corridor in June 2022.
- Power Infrastructure: A shift in the ongoing paradigm has been observed as the government has decentralized the power of selecting the electricity distribution companies (Discoms.) in the hands of general public to avoid monopoly. The administration will give assistance to power distribution companies in pre-paid smart metering for which an outlay of Rs. 3,05,984 crores has been sanctioned.
- Disinvestment and Strategic Sale: In the fiscal year 20-21, the government has taken disinvestment plans for BPCL, Shipping Corporation of India, Container Corporation of India and IDBI Bank. For this year, two PSU banks and one general insurance company will be privatized. The government would bring IPO f Life Insurance Corporation in the upcoming financial year.
- No tax on Invits: In order to bring more funds through Invit plans and other foreign portfolio investors on board, the administration has decided to eradicate taxes on dividends, which will be received from Invits. This tax initiative by the government will push institutional investors inject more funds through Invit plans.
It seems that the administration has used their all weapons to fight against the falling GDP numbers and cascading effect of pandemic. Rising custom duties on various imports, targeted Fiscal Deficit at 6.2%, discharge of funds for infrastructure, no tax on senior citizen and tax holidays on various sectors will charge for spurring the growth in the economy. However, injection of sufficient money into the system is expected to call for inflation and its targeted range is likely to affect very much. This budget will always be remembered for being highly transparent, simple and non- introduction of new taxes.
The author is Founder & CEO of INVEST19
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