Union Budget 2021: High D-Street expectations; investors hope relief measures for these sectors

Updated: January 19, 2021 2:38 PM

Union Budget 2021 India: The impact of pandemic was different on different sectors and each sector responded to it differently. All eyes are on the Budget 2021 in order to know the amount of aid they are going to get this financial year.

The rating agency last week said India's gross domestic product (GDP) would expand by 11 per cent in the financial year 2021-22, after witnessing a 9.4 per cent contraction this fiscal ending March 2021.The rating agency last week said India's gross domestic product (GDP) would expand by 11 per cent in the financial year 2021-22, after witnessing a 9.4 per cent contraction this fiscal ending March 2021.

By Prem Prakash

Indian Union Budget 2021-22: The expectations, from the Budget 2021, have been increased after the Finance Minister’s quote that this budget shall be ‘unlike anything in the past 100 years’. The lockdown in Q1 of FY21 and prolonged restrictions have pushed India into a technical recession which is evident from its GDP numbers. India’s GDP has fallen for two successive quarters. However, the Q2 earnings and Q3 earnings so far have shown a sign which indicates a recovery sooner than expected. Still, the government, through its general budget, is going to play a very important and pivotal role in making sure that India remains strong in its path towards a steep recovery.

The impact of pandemic was different in different sectors and each sector has also responded to it differently. All eyes are on the Budget 2021 in order to know the amount of aid they are going to get this financial year. Hospitality and Entertainment are some sectors which were worst hit due to the pandemic.

The Indian Hospitality industry has witnessed strong and consistent growth in recent years until the pandemic happened. This sector has the potential to bring foreign currency and create a lot of employment at the grass root level. The government has already cut the GST rates in the previous year. It might look at strengthening its initiatives to create sustainable growth in the hospitality sector. It is expected to focus on issues around infrastructure, licensing, approvals and inconsistent regulations that are imposed by various states.

The crisis of ideas in traditional media has been exposed due to the pandemic. Theatres were shut down and advertising was hugely disrupted. That’s when digital media and streaming services picked up the pace and took over the screens. Any stimulus package centric to the industry overall would help it bounce back.

Investors’ interest in banking sectors, especially public sector banks, remained muted in recent times due to concerns over increasing credit growth. Public banks still account for 2/3rd of the banking sector credit. ICRA expects that the budgeted capital of Rs 20,000 crore along with the external equity raise of around Rs 7,500 crore by a few public sector banks will be sufficient for public banks for the current financial year.

Healthcare sector has been facing issues due to unavailability of input tax credits. Therefore, the government is expected to revisit GST rates for healthcare services with full eligibility of input tax credit. Many pharmaceuticals giants are also expecting a reduction in GST rates for clinical trials.

The government is expected to focus on rural economy, agri-infrastructure and infrastructure spend in the upcoming budget though the overall allocations would be constrained by the limited available fiscal space. The recently announced production-linked incentive (PLI), the details of which are expected during CY2021, has the potential to kick-start significant investments in the automotive industry.

Apart from this, the government is likely to focus on MSMEs and the housing sector as well as these sectors would have a multiplier effect on the economy and can play a vital role in economic recovery post pandemic.

In order to cheer retail investors FM may look for these particular issues:

  • Relaxation in Dividend Distribution Tax in the hands of investors
  • Indexation benefit to equity investments would cheer up long term investors as it would create real wealth and safeguard the value of their investments.
  • House owners should be allowed to claim a fixed sum in a definite period in order to ease the burden on the exchequer.

The overall expectations of the street from the budget are high. The budget 2021 will indeed be a special one given the special circumstances. The government may have to cast away the concerns of fiscal deficit and may have to concentrate more on relief measures for the foreseeable future in order to establish a firm ground for sustainable growth of the economy.

(Prem Prakash is CEO at CapitalVia Global Research Limited. Views expressed are the author’s own.)

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