What is a budget really?
It sounds fancy but it is pretty straight-forward. Assume you live in a joint family where there is a head of the family who is also the decision maker. At the beginning of each year, she analyses the income sources for the upcoming year (from various bread earners in the family) and the expenditures. She also looks at various loans/deficit numbers from the previous year and the wants of various family members (the kids need new phones?) for the upcoming year.
Ultimately, she comes up with a proposal on how to efficiently spend the money so that every member of the family has their needs fulfilled and the family can progress. After she comes up with the budget, there’s a general discussion within the family around the same.
What makes the budget of 2021 special?
This is a budget post the 2020 disaster. Last year, GST collections hit an all time low during the pandemic completely disrupting all income predictions for 2020. The joint family had a tough previous year. The bread earners were sitting at home making Dalgona and birthday videos for the most part of the previous year. The previous budget and revenue forecasts took a hit. However, things have started improving slowly and all the family members are looking forward to some budget allocation for their demands.
Key takeaways
1. Healthcare:
The Finance Minister has reserved INR 64180 Cr. (compared to INR 33400 Cr. in 2019-20) for improving the healthcare infrastructure over the next six years. Nearly 17000 rural and 11000 urban healthcare centres will be opened up.
A huge sum of INR 35000 Cr. is dedicated for vaccine production, research and development. Indians can expect free Covid vaccines (at least in the election bound states).
2. Infrastructure
Huge investments have been announced in building roads and related infrastructure in Tamil Nadu, Kerala, West Bengal, Assam. Great news for bikers. Good roads will also ensure that the old Maruti 800 passes the fitness test.
A huge sum of INR 1.15 lakh Cr. is provisioned for Railway infrastructure growth and privatization of airports. With Indian Railways already peaking, this will take the commute experience in India to new levels. Privatization of Airports would come as a boost to Tier II+ cities where airports are essentially like bus stations. Sadly, airport food will still remain unaffordable.
3. Consumers
Urban Swachh Bharat 2.0 Mission will be launched. INR 1.41 lakh Cr. (compared to INR 12,300 Cr for Swachh Bharat Abhiyaan) has been reserved for the mission over 5 years.
Private Vehicles will undergo fitness tests after 20 years and commercial vehicles after 15 years. This means that the old Maruti 800 will now be scrapped if it does not pass a fitness test. All the environmentalists out there will surely welcome this news.
Consumers will now have a choice to opt for more than one power distribution channel. Basically you can opt for the government electricity board and simultaneously opt for services from a private player.
Probably the most relevant news for the readers: INR 300 Cr. to be given the Government of Goa to celebrate 50 years of independence from the Portuguese. Another motivation to plan a trip to Goa (and cancel it).
4. Financial Updates
LIC will go for an IPO this fiscal year. Additionally, the government will invite privatization in two public sector banks. This means no long lines in Punjab National Bank?
There are no changes in tax slabs or income tax exemptions.
The fiscal deficit is expected to be pegged at around 6.8% (compared to previous year’s target of 3.5%) for the upcoming year. (Fiscal deficit: Assume the family earns 10 lakhs a year and spends 11 lakhs in the same year. This means that the expenditure was 10% more than the income ~10% fiscal deficit.)
Safe to say, the markets liked the budget today and responded positively. Sensex finished 5% higher with banks leading the way.
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