By Rajeshree Sabnavis, Disha Jain
Union budget 2021: The Finance Minister, under tremendous pressure of presenting the first budget of the decade and in the year of an unprecedented global pandemic, announced the Union Budget of India 2021. With the slowdown that the economy had suffered this year, not much hope was pinned on the Budget. It was expected that due to the mounting fiscal deficit, there may be some increase in tax rates. Huge bets were also being placed upon introduction of a new cess or surcharge to facilitate the COVID-19 vaccination program and somehow reduce the brunt of slow tax recoveries of the year. Healthcare sector was expected to be the focus area. Providing an impetus to investments was also much needed.
With this background, the FM stepped up on the podium and the 2300-point surge in the Sensex on the Budget day is reflective of what she has delivered. The overall market has reacted to the Budget with a “no negatives mean positive” mindset. The absence of a new cess or surcharge, or no increase in capital gains tax or tax rates appealed to the market while investment in infrastructure and the much needed financial sector reforms (although just a few of the initial steps taken) was welcomed by India Inc. With Atma Nirbhar being the key principle of the Budget, one did see changes proposed both on the regulatory and some of the procedural front for small to midsize companies including start-ups which was long overdue but was this enough is a question that one could ask.
Minimum Government maximum Governance being one of the six pillars is also evident in some of the announcements made but one miss was the fact that today the small to midsize companies are reeling under the compliance burden for the past year given the on ground reality of no access, no travel and no sophisticated digital support not because the companies don’t see the need but it’s just that they either are not ready (old school style of functioning) or they cannot afford it and in these circumstances if one were to simply extend a moratorium on the interest and penalty charges for the late filings you probably could see a better and more positive group of people who really want to rise from the current economic situation and move forward. The Government definitely has extended a helping hand but maybe could have provided a platform to stand (past years closures) as an alternative to simply extend the filing deadlines.
While most and if not all the policy announcements do act as propellers to growth, for e.g., the announcements of setting up of the ARC would deserve full marks but what needs to be seen is the implementation and that is something which is key in making this a success.
The FM clearly has not lost sight of the USD 5 trillion economy and at the same time has taken certain pragmatic steps to get there. While the real estate sector too which was reeling under the economic downturn has some reason if not all to cheer especially on the claim of the input tax credits under GST on the construction costs which was clearly a miss, some stimulus has been provided in the affordable housing sector clearly giving the message that it is the demand at the domestic level which is required and that could stir up economic development. Growth in turn would lead to more tax revenues and which is clear from this year’s budget as well where the investments in capital assets are to be raised from non tax revenue.
A bit for the middle class where one was expecting measures which would lead to increase in disposable income in their hands was missing and while one could also argue that if economic activity is led by Government spending in the real and capital sector would automatically create jobs and thereby increase in disposable income, immediate relief is not on the table as of today clearly indicating it was a tightrope walk and the finish line was not very easy but we are almost halfway there and the implementation is what will get us to the finish line which is the dream of USD 5trillion economy. Cheers to that!
(Rajeshree Sabnavis is Founder and Disha Jain is Senior Manager at Rajeshree Sabnavis & Associates. Views expressed are the authors’ own.)