Introduction
Finance Minister Ms. Nirmala Sitharaman announced the Union Budget 2021 to the parliament on February 1, 2021. As per the key highlights addressed in her speech, start-ups, MSMEs and research & innovation are likely to be covered by two key themes—first, boost the ‘Atmanirbhar Bharat’ initiative (self-reliant India) by promoting domestic producers and second, enable technological developments to increase productivity, access and quality across stakeholders.
The Union Budget 2021 aims to augment Atmanirbhar Bharat's (self-reliant India) target by enhancing India’s production capacity to become a cross-sectoral global manufacturing hub. The Union Budget for FY22 is focused on the following six pillars:
The government aims to leverage the power of technology to improve productivity in governance, access to services and the quality of goods and services in a range of areas.
Major Allocations
Union Budget 2021-22 |
Budget allocation (Rs. crore) |
Budget allocation (US$ billion) |
Ministry of Defence |
478,196 |
66.95 |
Ministry of Consumer Affairs, Food and Public Distribution |
256,948 |
35.97 |
Ministry of Home Affairs |
166,547 |
23.32 |
Ministry of Rural Development |
133,690 |
18.72 |
Ministry of Agriculture and Farmers' Welfare |
131,531 |
18.41 |
Ministry of Road Transport and Highways |
118,101 |
16.53 |
Ministry of Railways |
110,055 |
15.41 |
Ministry of Education |
93,224 |
13.05 |
Ministry of Health and Family Welfare |
73,932 |
10.35 |
Ministry of Housing and Urban Affairs |
54,581 |
7.64 |
Source: indiabudget.gov.in website
Key Announcements
Investments in health infrastructure were increased by 2.37x, or 137%, in the Union Budget 2021. The emphasis on strengthening three areas—preventive health, curative health and well-being—with a total health sector allocation of Rs. 223,846 crore (US$ 30.70 billion) will be of immense assistance to the country.
Key interventions under Pradhan Mantri Aatmanirbhar Swasth Bharat Yojana (PMANSY) are as follows:
The government plans to launch ‘Mission Poshan 2.0’ to merge the supplementary nutrition programme with the ‘Poshan Abhiyan’ (Nutrition Mission) and improve nutritional outcomes across 112 aspirational districts.
By increasing the defence capital spending by 18.75%, the Union Budget 2021 has made a historic drive for defence enhancement.
In the budget, defence allocation was increased to Rs. 478,195.62 crore (US$ 65.64 billion) for FY22. The total allocation for defence services and other organisations/departments under the Ministry of Defence for FY22 is Rs. 362,345.62 crore (US$ 49.74 billion) (excluding defence pension), an increase of Rs. 24,792.62 crore (US$ 3.40 billion) over FY21.
In collaboration with NGOs/private schools/state-owned schools etc., the budget proposed to establish 100 new ‘Sainik’ schools in the country. The goal is to provide educational opportunities in the 'CBSE Plus' model of educational environment by involving government/private schools/NGOs to partner with culture, value system and the national pride of ‘Sainik’ schools in the establishment of their system.
In the Union Budget 2021-22, Ms. Sitharaman, announced that agricultural produce marketing committees (APMCs) will become eligible beneficiaries to utilise the financing facility under Agriculture Infrastructure Fund (AIF), worth Rs. 1 lakh crore (US$ 13.73 billion) to enhance infrastructure at regulated markets, commonly known as ‘mandis’. The scheme will be valid from FY20 to FY29.
Farmers, FPOs (Farmer Producer Organization), PACS (Primary Agricultural Credit Societies), marketing cooperative societies, SHGs, joint liability groups (JLG), multipurpose cooperative societies, agri-entrepreneurs, start-ups and public-private partnership ventures funded by the central/state agency or local body, and now by APMC mandis, will be the primary beneficiaries.
To rationalise the duty structure of gold and silver, the government reduced the import duty on gold and silver to 7.5%, from 12.5%.
In the budget 2021, the government proposed to increase FDI’s (foreign direct investment) limit in the insurance sector to 74%, to attract greater overseas capital inflows and help enhance insurance penetration in the country.
Conclusion
The overall increased spending in budget allocations has garnered considerable attention among international investors, especially among American companies. “They (US firms) are excited. They feel like India’s budget that offers less government fine-tuning for the first time in many, many years. It is a well- defined budget that attracts a lot of foreign investment”, said Mr. Mukesh Aghi, President of US–India Strategic and Partnership Forum (USISPF).
The Budget 2021 represents an approach that focuses more on regenerating demand and attracting investments to generate supply from India. For example, changes in policy in sectors such as insurance is aimed at attracting large institutional investors.