Understanding This Year’s Budget
After a tough year (in terms of literally everything), the government finally announced the Budget for the financial year 2021–22 on 1st February. It was one of the most anticipated Budgets in the history of India due to the financial troubles brought about last year by the pandemic. Although Sensex gained a few points right after the Budget was announced, which reflects the positive public sentiment regarding the budget, it is not safe to assume that this Budget is the best ever. This is because the government only proposes the estimated revenue and expenditures in the Budget, and these may differ from reality. Also, because after a punishing financial year in which the growth rate dropped to -23.9%, the government does not wish to disappoint the public and neither does it wish to give false hopes. So, surely, achieving a middle ground would have been a Herculean task for the government.
For the first time, the budget was presented in a digital form using a tablet and not read out from paper. To prevent inconsistency in tax rates, the government hasn’t increased or decreased the income tax rates this year. As unemployment rose and national output fell, as many businesses shut down, millions of Indians expected a tax cut. The government is aiming for consistency in tax rates, which will result in people being able to calculate their tax returns with ease. The government plans to spend Rs. 34.83 lakh crore in the FY 2021–22, which is approximately 4 lakh crores more than what was proposed in the previous budget. So, a revenue crunch owing to the pandemic and a plan to increase expenditure means that the government cannot compromise on tax revenues. This is also why the prices of diesel and petrol have been allowed to remain so high of late despite a drastic fall in the global prices.
Senior citizens above the age of 75 need not file their income tax returns themselves. The banks providing them their pension can do it for them, making their life easier.
Healthcare sector: Spending on the healthcare sector has been doubled to Rs. 2.2 lakh crore, of which Rs. 35,000 crores will be allocated for vaccinating the entire country against Covid-19. The government announced a new scheme,the Prime Minister Atmanirbhar Swasth Bharat Yojana, under which Rs. 64,180 crores will be spent over six years to build new primary health care centers and improve existing healthcare infrastructure.
Farmers Protests: The ongoing farmer’s protests increased anticipation for and expectations from this Budget as the government was expected to change the Farm Bill laws. They announced that a Minimum Support Price (MSP) that is 1.5 times the cost of production will be given to the farmers. But the problem of very few farmers actually benefiting from MSP remains unsolved.
Gig economy: For the workers in the gig economy, the government plans to make an online portal that will contain all the relevant information about the people working in the unorganized sectors. Taxi drivers, Delivery workers for companies like Zomato and Swiggy, or people working for a short time without any formal agreement in place make up the gig economy. This portal will require them to register themselves to benefit from the social security schemes, insurance and pension benefits. Along with gig workers, construction, labour and migrant workers will also benefit from the various credit, housing, food and insurance schemes proposed.
Privatization of various PSUs (Public Sector Undertakings): The government has planned for disinvestment for many public sector companies. Disinvestment means selling a part of the government-owned company to the private sector. Companies like Air India, Shipping Corporation of India, Bharat Petroleum, IDBI Bank, etc. can get disinvested. Privatization of these nationally owned companies can result in increased efficiency and better running of the company by private players and some of these companies, such as Air India, which have been loss-making for a long time, can even become profitable. But it may give private players a lot of power as they will have ownership of national assets. Disinvestment can also result in the public criticizing the government for granting favors to capitalists. Clearly, privatization has its own advantages and disadvantages. Also, the government plans to bring the Initial Public Offering (IPO) of LIC of India, which is the country’s biggest insurance company. In the insurance sector, the government also plans to increase Foreign Direct Investment (FDI) and has increased the permitted ownership of non-government parties from 49% to 74%. Infrastructure development: The government plans to spend 34.5% more than last year on infrastructure development. Highway construction work has been proposed in Kerala (1,100 km), Tamil Nadu (3,500 km), West Bengal (675 km), and Assam (1,300 km) all of which have elections soon. Improved infrastructure and road connectivity is always welcome as it improves the logistics of the country. FASTag, a national electronic toll collection system in India, has also been made mandatory for all vehicles. The vehicle owner is given a barcode which can be put on the car as a sticker, and a bank account is linked to each vehicle. Each time a vehicle crosses a toll booth, the toll tax will automatically get deducted from the registered bank account of the user. Only a prepaid balance is required to be maintained in the bank account. This will ensure that nobody is able to exempt themselves from the toll tax and will surely lead to an increase in the revenue of the government.
What will become expensive:
- Imported agricultural products like apples (35% cess), peas (30% cess), chickpeas (50% cess), lentils (20% cess)
- Urea (a fertilizer, will have a cess of 5%), Crude, soyabean and sunflower oil (20% cess), cotton (5% cess + custom duty)
- Cell phones (due to a 2.5% increase in custom duty on mobile parts and components), air conditioners, fridges
- Custom duty of 15% on automobile parts will make vehicles more expensive, leather products, solar inverters and lanterns (although this may discourage people from using renewable sources of energy).
Imported goods are being made more expensive to promote the Aatmanirbhar scheme of the government in which it wants to reduce its reliance on imported products.
What will become cheaper:
- Nylon products, iron, copper, platinum, gold and silver
- Electricity — government will allow people to choose their power supplier. Multiple power supplying companies will be allowed to supply in an area, which will increase competition and efficiency, and can result in customers choosing the power supplier which provides the best service at reasonable rates. Across India, private sector companies are blamed for charging exorbitant rates. So, this policy may make things better.
New developments for the future: As Bitcoin reaches its all-time high, the Finance Ministry has finally decided to take some action. The Supreme Court of India lifted the ban on Cryptocurrency in India on 4th March 2020, two years after the Reserve Bank of India issued it. The government is planning to introduce The Cryptocurrency and Regulation of Official Digital Currency Bill 2021 soon, which will regulate the use of cryptocurrency in India. Finance Minister Nirmala Sitharaman said that an Inter-Ministerial Committee has suggested the introduction of an official digital currency which will be regulated by the Reserve Bank of India. As per reports, approximately 70 lakh Indians hold cryptocurrencies worth over $1 billion. As the popularity and acceptance of crypto around the world is rising, it is right to say that more Indians will want to invest in it. Hence, a proper legal framework and more regulation should be introduced by the government so that illegal trading does not happen, and Indians can start trading cryptocurrencies in INR rather than in USD$.
The government has also decided to capitalize on the benefits of sea-weed farming in fighting climate change. Seaweed or sea vegetables, a form of algae commonly found in Asian cuisine, are edible plant-like organisms. The government is planning to set up a multi-purpose seaweed plant in Tamil Nadu. Seaweed absorbs Carbon Dioxide (CO2) and thus, will help to fight climate change. It can also be used as animal and livestock food, as a fertilizer, in beauty products, and can help in reversing the process of acidification in oceans. It is a wonderful natural resource and can be used in combating quite a lot of global environmental problems.