Finance Minister Nirmala Sitharaman, who will present the Union Budget 2021-22 today has earlier said that the government will endeavour to script India's growth narrative by focusing on infrastructure and reforms .
Budget 2021 needs to address crucial challenges regarding growth, especially in manufacturing as it generates more economic activity than other sectors. Amid the coronavirus pandemic which has adversely impacted all segments of the economy, the upcoming budget is going to be a challenging one for FM Sitharaman.
The government is reportedly planning a massive public spending boost in the Budget 2021, which will focus on job creation and post-COVID economic revival. The ramped-up public spending will spur demand leading to revival across sectors, especially manufacturing, which consists of a large group of MSMEs (Ministry of Micro, Small and Medium Enterprises), that are the second-largest employment generators after agriculture.
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According to reports, the Centre is mulling the highest ever capital expenditure (CAPEX) outlay of around Rs 7 lakh crore. The government had earlier budgeted a CAPEX of Rs 4.13 lakh crore for FY21 which has been increased by Rs 35,200 crore as announced by FM Sitharaman in October and November as part of the several Aatmanirbhar Bharat packages.
Besides capital expenditure, the upcoming budget is also likely to significantly increase the outlay for grants in order to create capital assets, funds to states under specific schemes and health expenditure. The Centre has identified 50 projects from the National Infrastructure Pipeline (NIP) into which it intends to pump CAPEX to generate employment.
The 50 identified projects comprise JNPT port Terminal 4, Jewar International Airport in Greater Noida, Ahmedabad Metro Rail, Navi Mumbai International Airport, Vadodara-Mumbai Expressway among others.
The industry has also sought incentives from the government to create demand in the auto and housing sectors. Since demand is necessary to get the economy back on growth track, the budget, as the industry demands, can do this by giving a GST offset for voluntarily scrapping vehicles that are over 15 years old and concomitantly buying a new vehicle. For the housing sector, the upcoming budget, according to experts, could also permit margin money loans to help borrowers buy their first home.