Tag Archives: Covid-19

Union Budget 2021 Overview – A Budget for Everyone?

The Budget 2021 can be widely considered as one of the most difficult times in Humankind (owing to COVID 19). While presenting her third budget (by far the most challenging), Honourable Finance minister, Nirmala Sitharaman has delivered a budget, that is expected to lay the groundwork for Indian growth and development for years to come.

Budget 2021

The FM budget speech this year was economical in terms of time spent. A shade under an hour and 50 minutes as compared to 2 hr and 40 minutes last year.  In her speech, Honorable FM laid mentioned the budget which is built on the following six pillars:

  • Health and well-being
  • Physical and financial capital and infrastructure
  • Inclusive development for aspirational India,
  • Reinvigorating human capital
  • Innovation and R&D
  • Minimum government-maximum governance

The primary focus of this budget was to create jobs primarily through big infrastructure announcements. Now, let us give you a brief Union Budget 2021 Overview.

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Budget 2021 Overview – Major Budgetary Announcements

Here are some of the key announcements in this budget included:

  • Since the last budget, the nominal GDP has reduced to Rs. 1.94 from 2.24 lakh crore. This is owing to the increase in expenditure to handle the situation of Pandemic, COVID-19
  • For the first time ever, the budget went paperless and it was presented on Made In India tablet. 
  • The total COVID support measures amounted to nearly 13% of the GDP and total COVID-19 support measures by the government and RBI amount to Rs 27.1 lakh crore
  • The PM Atmanirbhar Swasth Bharat Yojana is projected to outlay Rs 64,180 crores over the next six years. The aim of this scheme is to develop the overall healthcare system and develop institutions for the detection and cure of new and emerging diseases
  • The Jal Jeevan Mission Urban to be launched and it has an outlay of Rs. 2.87 lakh crores. The aim of this scheme is to provide Universal water supply, 2.86 crores household tap connections and liquid waste management 500 AMRUT cities
  • A grant of Rs. 35000 crores have been provided for COVID vaccines for the year 2021-22. And if required then the government is committed to spending more.
  • For Railways, a total amount of Rs. 1,10,055 crores have been committed. And this money will be used for overall railway infrastructure development and for 100% electrification of railway broad gauge by 2023
  • The government to allot Rs 1.03 lakh crore for National Highway Projects in Tamil Nadu. Rs 65,000 core for National Highway Projects in Kerala; Rs 25,000 crore for National Highway Projects in West Bengal. The government will also allot additional Rs 34,000 crore for National Highway Projects in Assam.
  • The FM also proposed to divest two PSU banks and one general insurance company in FY22. Further, divestments of BPCL, CONCOR, Pawan Hans, and Air India will be completed in FY22. FY22 Divestment target is at Rs 1.75 lakh crore.
  • The Government also aims at doubling the ship recycling capacity by 2024. More seven port projects worth more than Rs. 20,000 crores to be undertaken in FY 2022 via PPP
  • Social security benefits to be extended to gig and platform workers. Women to be allowed to work in all categories in night shift also
  • The ‘1 Nation 1 Ration Card’ plan is under implementation by 32 States & UTs. The Centre will launch a portal to collect data on migrant workers.
  • Senior citizens to be benefitted. The ones who are having income sources as Interest and Pension income are exempted. The age limit is for citizens above 75 years. Further, the timeline for re-opening of tax returns has been reduced to three years from six years.
  • To reduce hassle for small taxpayers a dispute resolution committee has been proposed. This will be faceless to ensure efficiency and transparency. Anyone with a taxable income up to Rs 50 Lakhs & disputed income up to Rs 10 Lakhs are eligible to approach the committee.
  • Custom duties are aimed at promoting domestic manufacturing and to promote that following steps have been taken: 1)Cutting duty on Copper scrap to 2.5 %, 2) Plan on bringing nylon at par with polyester with respect to taxation, 3)Duty on Naphtha reduced to 2.5%, 4)The plan is to rationalize custom duties on Gold and Silver
  • The power distribution companies across the country are monopolistic and a need to provide choice to the consumers. A framework will be put in place to give consumers alternatives to choose from among more than one distribution company.

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Budget 2021 Overview: Major Reactions on the Budget

According to PM Narendra Modi, Budget Will Give Major Boost To Agriculture, Create Employment

Congress leader Anand Sharma said that the “nation needed a bold budget and more direct transfers to the weaker sections to revive demand, restart job creation.”

Union Defence Minister Rajnath Singh hailed Budget 2021 as the budget for an AtmaNirbhar Bharat that will strengthen the economy.

According to Tapati Ghose, Partner, Deloitte India, The budget speech had an undertone of the Government’s focus on ease of doing business in India. Towards the FM reiterated that tax systems to be transparent, efficient and promote investments in our country. The tax rates, surcharge, cess etc. have been left untouched. Even the much-debated Covid Cess was not brought out. This brings stability and certainty to the tax framework. Definitely a positive move.

According to Adar Poonawala, CEO, Serum Institute of India, “Great Budget 2021 announcements, Nirmala Sitharaman ji, especially on healthcare and vaccines; this is the best investment any country can make. A healthier India is a more productive India

According to Harsh Goenka, Chairman of RPG group, “Cong-anti poor,anti-farmer, unimaginative. BJP-innovative,pro-farmer, help all sections of society CII, FICCI-will kickstart economy, encourage investment

Some TV channels-wasted opportunity, will increase inflation Businessmen-pathbreaking, 10/10”

Indian GDP Shrunk by 23.9% in First Quarter 2020

Hit by the Covid-19 pandemic, India, the world’s fifth-largest economy has been turned into the second-worst performer in the Covid-19 hit the quarter of the financial year 2020-21. India’s Gross Domestic Product (GDP) has shrunk by 23.9% in the first quarter of the financial year 2020-21.

quarter

Generally in forecasts, it is of rare occurrence to find the negative performances beating the downward trends. But that is exactly what has happened in the first quarter as although a negative GDP was predicted but nothing close to wiping out 1/4th of the GDP. Today, we take a look at the reasons behind the decline and the possible future.

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Why did the Indian GDP Shrunk by 23.9%?

Earlier, when this issue of the state of the economy came up at the 41st GST Council Meeting on Friday, Finance Minister Nirmala Sitharaman looked into the celestial factor and stated:

“This year we are facing an extraordinary situation…we are facing an act of God which might even result in the contraction of the economy.” – Nirmala Sitharaman, Finance Minister

Now, let us look into some of the hard facts. The Indian economy suffered due to the nationwide lockdown imposed. This was during the April- June quarter of which the lockdown covered a major portion. India had one of the longest and strictest Covid-19 lockdowns in the world. And unfortunately enough also suffered is suffering through the worst economic consequences. In comparison to other countries around the globe, India has been one of the worst-hit.

In order to understand how exactly the GDP was affected and how it can recover, we must first take a look at the components that form a part of the growth. These are consumption, government expenditure, investment, and the nation’s current account deficit (imports – exports).

  1. Consumption generally has the greatest impact on GDP. In the last quarter, consumption accounted for 56.4 percent of the country’s GDP. But when compared to figures from 2019 there is a drop of Rs 5,31,803 crore in private consumption or 27 percent. This has been one of the major reasons as to why the GDP has contracted. This is because people simply are not willing to consume more as most expect tougher times ahead.
  2. The Investment portion made up 32 percent of India’s GDP. This portion too fell by Rs 5,33,003 crore in comparison to last year. When coupled consumption these two components made up for 88 percent of the total GDP shrinkage
  3. The government expenditure share of the GDP stood at 11 percent. This component rose by 16% due to the relief measures provided by the government. This increase in expenditure, unfortunately, could not make up for the total decline from the consumption and investment portion.
  4. The current account deficit which historically has always been in negative recorded positive rates. But this too was not due to exports exceeding regular imports. It was simply due to the lack of imports due to a lack of demand.

The National Statistical Office (NSO) in an official statement released that “The GDP has shrunk from Rs 35.35 lakh crore in Q1 of 2019-20 to Rs 26.90 lakh crore in the first quarter of Q1 of 2020-21, showing a contraction of 23.9 percent as compared to 5.2 percent growth in Q1 2019-20,”.

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What does the future hold for the Indian economy?

The future of the Indian economy depends on how well is the purchasing capacity distributed among the general public. This is generally spread out by the income earned by the citizens.

But the pandemic has rendered millions jobless forcing them to cut back on their spending habits. This reduces the consumption portion. When there is a fall in consumption businesses avoid making investments as they already are aware of the lack of demand. These two portions, unfortunately, depend on individuals as they cannot be forced to spend. One factor that can be controlled is government expenditure in order to boost the GDP.

But unfortunately, enough even prior to the pandemic the government had already exceeded their resources by borrowing. The only option remains is to keep borrow from the RBI which has maintained amounts close to 18% of the GDP as a reserve. An infusion will provide some relief and may get the consumption portion moving as long as inflation is kept on check.

For the remaining quarters to come analysts have predicted that even though the GDP will improve but will still keep performing negatively. This recovery phase is expected to also likely extend into the first half of 2022. But these estimates depend on current figures and will change depending on how deeply COVID-19 outbreaks occur throughout the country.

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