Union Budget 2021: Focus on making tax systems transparent

Dinesh Kumar Khara,  SBI Chairman

The Budget is a pathbreaking one as it focuses on providing a road map which will potentially alter India’s physical as well as financial infrastructure to greater heights going forward. As is well known, infrastructure has been the foundation of AtmaNirbhar Bharat. With this ambitious thrust to infrastructure, the capital expenditure for FY22 is pegged at `5.54 lakh crore, which is 34.5% more than the BE of 2020-21. Over and above this expenditure, the Budget also provides additional `2 lakh crore to states and autonomous bodies for their capital expenditure.

Pandemic having exposed the vulnerability of the population to health shock, augmentation of health infrastructure was on cards. Even the Economic Survey described it as a proposal whose time has come. In this backdrop, the Budgetary thrust to rural health infrastructure is significant.

The stated policy of Make in India, to attract more investment in PLI sectors and vocal for local, needs sound support for industry by bringing down logistics costs. The government has committed significant resources to create infrastructure such as roads, railways, metro railways under Bharatmala Pariyojana, National Rail Plan for India – 2030, metro rails in Tier 1 and Tier 2 cities and operational management of major ports on a PPP basis.

The pressing issue of infrastructure financing has been addressed covering debt component, asset monetisation and foreign participation through the InVITs and REITs routes. In order to facilitate funding of infrastructure, it is proposed to make zero coupon bonds issued by notified IDF eligible for tax benefit.

On the financial infrastructure side, the proposal to consolidate various acts governing different segments of the financial market under the Securities Markets Code is a good move. Utilising the infrastructure at GIFT City to promote fintechs and strengthening the existing infrastructure at GIFT are progression in right direction. The proposal to create an institutional mechanism to address liquidity in secondary markets for corporate bond has tried to address the stress emerged due to Covid-19.

The fiscal deficit for FY21 is pegged at 9.5% of the GDP. To ensure that the economy is given the required push, the BE 2021-22 for expenditure is `34.83 lakh crore, which includes `5.54 lakh crore as capital expenditure, an increase of 34.5% over the BE 2020-2021. Assuming a 14.4% growth in the nominal GDP, the fiscal deficit in BE 2021-2022 is estimated to be 6.8% of the GDP. The gross borrowing from the market for the next year would be around `12 lakh crore.

The tax proposals have made reasonable demand with Agriculture Infrastructure and Development Cess (AIDC) on a small number of items, as the revival of rural demand is critical for overall growth revival and doubling farm income.

The medium-term fiscal consolidation path envisages to reach a fiscal deficit level below 4.5% of the GDP by 2025-2026. The consolidation will rest on increasing the buoyancy of tax revenue through improved compliance, and secondly, by increased receipts from monetisation of assets, including PSEs and land and strategic disinvestments.