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Budget 2021: Physical, Financial Capital and Infrastructure

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Fahid Fayaz Darangay

As per Article 112 of the constitution, a union budget is basically the statement of the estimated receipts and expenditure of the government. It is also known as the annual financial statement of the government. Department of Economic Affairs, Ministry of Finance is the nodal body responsible for preparing the Budget.
Budget 2021-22 is the first budget of the new decade 2021-30 and is also the first ever digital union budget. This budget which comes in the backdrop of unprecedented COVID-19 crisis reflects the firm commitment of the Government to boost economic growth by investing in infrastructure development.
Budget proposals for 2021-2022 rest on 6 pillars:
1. Health and Wellbeing
2. Physical & Financial Capital, and Infrastructure
3. Inclusive Development for Aspirational India
4. Reinvigorating Human Capital
5. Innovation and R&D
6. Minimum Government and Maximum Governance۔
Physical and Financial Capital and Infrastructure
1. AatmaNirbhar Bharat-Production Linked Incentive (PLI) Scheme:
 Rs. 1.97 lakh crore in next 5 years for PLI schemes in 13 Sectors.
 To create and nurture manufacturing global champions for an AatmaNirbhar Bharat.
 To help manufacturing companies become an integral part of global supply chains, possess core competence and cutting-edge technology.
 To bring scale and size in key sectors To provide jobs to the youth.
2. Textiles
To enable Textile industry to become globally competitive, attract large investments and boost employment generation & exports;
 Mega Investment Textiles Parks (MITRA) scheme will be launched in addition to PLI.
 7 Textile Parks to be established over 3 years.
2. Infrastructure
National Infrastructure Pipeline (NIP) has now expanded to 7,400 projects. Budget proposes three ways to address increased funding requirements for NIP:
 By creating the institutional structures;
 By a big thrust on monetizing assets, and
 By enhancing the share of capital expenditure in central and state budgets.
4. Creation of institutional structures
Infrastructure Financing:
 Rs. 20,000 crore to set up and capitalise a Development Financial Institution (DFI) – to act as a provider, enabler and catalyst for infrastructure financing.
 Rs. 5 lakh crore lending portfolios to be created under the proposed DFI in 3 years.
 Debt Financing by Foreign Portfolio Investors to be enabled by amending InvITs’ and REITs’ legislations.
5. Asset Monetisation
 A “National Monetization Pipeline” of potential Brownfield infrastructure assets will be launched. An Asset Monetization dashboard will also be created for tracking the progress and to provide visibility to investors.
 Other asset monetisation measures include: monetisation of railway infrastructure assets/sports stadiums/dedicated freight corridor assets etc.
6. Sharp Increase in Capital Budget:
 Rs. 5.54 lakh crore capital expenditure in BE 2021-22 – sharp increase of 34.5% over Rs. 4.12 lakh crore allocated in BE 2020-21.
7. Roads and Highways Infrastructure:
 More economic corridors are being planned.
 Advanced Traffic management system in all new 4 and 6-lane highways.
8. Railway Infrastructure:
 National Rail Plan for India (2030): to create a ‘future ready’ Railway system by 2030.
 Western Dedicated Freight Corridor (DFC) and Eastern DFC to be commissioned by June 2022, to bring down the logistic costs – enabling Make in India strategy.
 Measures for passenger convenience and safety:
• Aesthetically designed Vista Dome coach on tourist routes for better travel.
• High density network and highly utilized network routes to have an indigenously developed automatic train protection system, eliminating train collision due to human error
9. Urban Infrastructure:
 Raising the share of public transport in urban areas by expansion of metro rail network and augmentation of city bus service.
 Rs. 18,000 crore for a new scheme, to augment public bus transport.
 ‘MetroLite’ and ‘MetroNeo’ technologies to provide metro rail systems at much lesser cost with similar experience in Tier-2 cities and peripheral areas of Tier-1 cities.
10. Power Infrastructure:
 A framework will be put in place to give consumers alternatives to choose from among more than one Distribution Company.
 To improve viability of Distribution Companies, a revamped reforms-based result-linked power distribution sector scheme will be launched.
 The scheme will provide assistance to DISCOMS for Infrastructure creation including pre-paid smart metering and feeder separation, upgradation of systems, etc., tied to financial improvements.
 A comprehensive National Hydrogen Energy Mission 2021-22 to be launched.
11. Ports, Shipping, Waterways:
 7 projects to be offered in PPP-mode in FY21-22 for operation of major ports.
 A scheme to promote flagging of merchant ships in India will be launched by providing subsidy support to Indian shipping companies in global tenders floated by Ministries and CPSEs.
 This initiative will enable greater training and employment opportunities for Indian seafarers besides enhancing Indian companies share in global shipping.
12. Petroleum & Natural Gas:
 Extension of Ujjwala Scheme to cover 1 crore more beneficiaries.
 To add 100 more districts to the City Gas Distribution network in next 3 years.
 An independent Gas Transport System Operator to be set up for facilitation and coordination of booking of common carrier capacity in all-natural gas pipelines on a non-discriminatory open access basis.
13. Financial Capital:
 A single Securities Markets Code to be evolved.
 Support for development of a world class Fin-Tech hub at the GIFT-IFSC.
 A new permanent institutional framework to help in development of Bond market by purchasing investment grade debt securities both in stressed and normal times.
 Setting up a system of Regulated Gold Exchanges: SEBI to be notified as a regulator and Warehousing Development and Regulatory Authority to be strengthened.
 To develop an investor charter as a right of all financial investors.
 Capital infusion of Rs. 1,000 crore to Solar Energy Corporation of India and Rs. 1,500 crore to Indian Renewable Energy Development Agency.
14. Stressed Asset Resolution:
Asset Reconstruction Company Limited and Asset Management Company to be set up to consolidate and take over the existing stressed debt and then manage and dispose of the assets to Alternate Investment Funds and other potential investors for eventual value realization.
15. Recapitalization of PSBs:
To further consolidate the financial capacity of PSBs, further recapitalization of `20,000 crores is proposed in 2021-22.Investment Funds and other potential investors for eventual value realization.
16. Deposit Insurance:
 Amendments to the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, 1961, to help depositors get an easy and time-bound access to their deposits to the extent of the deposit insurance cover.
 Minimum loan size eligible for debt recovery under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 proposed to be reduced from Rs. 50 lakh to Rs. 20 lakh for NBFCs with minimum asset size of Rs. 100 crore.
17. Company Matters:
 To decriminalize the Limited Liability Partnership (LLP) Act, 2008.
 Easing Compliance requirement of Small companies by revising their definition under Companies Act, 2013 by increasing their thresholds for Paid up capital from “not exceeding Rs. 50 Lakh” to “not exceeding Rs. 2 Crore” and turnover from “not exceeding Rs. 2 Crore” to “not exceeding Rs. 20 Cr”.
 Promoting start-ups and innovators by incentivizing the incorporation of One Person Companies (OPCs).
 To ensure faster resolution of cases by;
• Strengthening National Company Law Tribunal (NCLT) framework.
• Implementation of e-Courts system.
• Introduction of alternate methods of debt resolution and special framework for MSMEs.
 Launch of data analytics, artificial intelligence, machine learning driven MCA21 Version 3.0 in 2021-22.
18. Disinvestment and Strategic Sale:
 Estimated Rs 1,75,000 crores as receipts from disinvestment in BE 2021-22.
 New policy for Strategic Disinvestment approved; CPSEs except in four strategic areas to be privatized.
 NITI Aayog to work out on the next list of CPSEs to be taken up for strategic disinvestment.
 Incentivizing States for disinvestment of their Public Sector Companies, using central funds.
 Special Purpose Vehicle in the form of a company to monetize idle land Introducing a revised mechanism for ensuring timely closure of sick or loss making CPSEs.
19. Government Financial Reforms:
 Treasury Single Account (TSA) System for Autonomous Bodies to be extended for universal application.
 Separate Administrative Structure to streamline the ‘Ease of Doing Business’ for Cooperatives.
(The author is currently pursuing Masters in Financial Economics from Madras School of Economics, Chennai)

 


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