The budget recognises that the multiplier effects of public investment, especially in infrastructure, crowd in private investment and raise medium-term productive capacity and growth potential. Capital expenditure budgeted outlay for FY2022 has, accordingly, been raised by 34.5% over 2020-21, with a focus on roads, railways, telecom, textiles and affordable housing, as well as the continued emphasis on the National Infrastructure Pipeline (NIP). This is besides the above Rs 2 lakh crore that will go to states and autonomous bodies with central grants.
The capital expenditure of central public sector enterprises (CPSEs) that should also see a big increase will add up to the booster dose of infrastructure spend. To fund the latter, innovative measures, including a new development finance institution (DFI), public infrastructure asset monetisation pipeline, public-private partnership (PPP) in urban transport and ports, debt financing of infrastructure investment trusts (InvITs) and real estate investment trusts (REITs), and zero-coupon bonds by infrastructure debt funds (IDFs), have been envisaged.
Various progressive steps for the financial sector, including a single securities market code, privatisation of public sector banks (PSBs) and general insurance company, setting up of asset reconstruction and management companies to address stressed loans of banks, and increasing FDI limit in insurance from 49% to 74%, have been taken. These measures on banks and insurance companies will increase independence, bring in a professional approach, and improve operational and financial efficiencies within the banking and insurance industries. A bold reforms-based, result-linked power distribution scheme to equip distribution companies (discoms) and promote competition in the power distribution sector has also been planned. The productionlinked incentive (PLI) scheme in the Aatmanirbhar Bharat Yojana is now further strengthened with close to `2 lakh crore allocation over the next five years. A reinvigorated disinvestment programme with a clear delineated role for PSUs in four strategic sectors further evinces GoI’s resolve to enhance the allocative and productive efficiency of invested capital.
The direct tax proposals also induce investment through reducing compliance burden, faceless assessments and appeals. These steps, along with increasing exemption for startups and ‘one-person companies’, should promote ‘ease of doing business’ and encourage investments. An expected fiscal deficit of 9.5% of GDP in 2020-21and 6.8% in 2021-22 is testimony to GoI’s resolve to lend transparency to its accounts. This also reflects its decision to clear food and fertiliser subsidy arrears, and to finance them through budgetary outlays. The extra-budgetary resources for 2021-22 have been reduced to nil. These figures are based on realistic estimates of a nominal growth of GDP at 14.4% and gross tax revenue growth of 16.7%, lending further credibility to the fiscal numbers. The return to fiscal consolidation is envisioned steadily to reach a fiscal deficit of 4.5% of GDP by 2025-26 on the back of higher realisation of disinvestment and asset monetisation proceeds, improved management of expenditures and increased compliance on taxation front.
Budget 2021 aims to rejuvenate growth not only via enhanced spending, but also by targeting it towards the more productive capital investment that generates both employment and boosts output in the medium to long term. Keeping personal and corporate taxes unchanged is a step towards policy consistency and supporting consumption demand. The swift roll-out of the Covid vaccine would further ignite revival in contact-sensitive sectors. The budget treads a fine balance in incentivising all stakeholders in the economy to propel growth and realise Aatmanirbhar Bharat.