Budget 2021: Balanced combination of reforms with eyes on jobs creation, demand revival

By Manish Sharma

Against the backdrop of the coronavirus pandemic, which impacted the economies around the world, Budget 2021 exhibits resilience. This year’s Budget is a cumulative effort of the five mini budgets announced during the previous few months. Setting the growth target of 6.8% for 2021-2022 when we ended the year with a 9.5% fiscal deficit is a conscious and calibrated approach. In fact, the focus around six key pillars, including Health & wellbeing, Infrastructure, Inclusive Development, Human Capital, Innovation and R&D, Minimum Government & maximum governance showcases the strategic intent of the Govt. 

From an appliance and consumer electronics (ACE) industry perspective, the recently launched production-linked incentive (PLI) scheme continues to strengthen the manufacturing industry by promoting healthy backward integration and push domestic manufacturing. With an endeavour of creating manufacturing global champions across 13 sectors with nearly Rs 1.97 lakh crore in the next 5 years, it will further revitalize the ‘Atmanirbhar’ agenda for the ACE industry. Also, an increased focus on – health and well-being of citizens and physical infrastructure allocations will provide the essential thrust.

While the Union Budget presented on February 1 reflects a progressive vision for the roadmap to faster economic recovery through focusing on six key pillars, but in hindsight, the industry is expecting the efficient implementation of these measures. For instance, the PLI scheme aims at creating jobs and to address local demands but, we further await implementation details. Correspondingly, National Infrastructure Project (NIP) pipeline has been expanded to 7,400 projects. This along with new economic corridors, expansion of public transport, highways, and investment across Railways to name a few will help improve the physical infrastructure and provide easy access to raw material. Similarly, Govt. ensured not to burden the common man by levying any new taxes on corporates or, individuals. 

On the other hand, given the unprecedented circumstances, the focused measures in accordance with a clear roadmap to raise funds in form of strategic disinvestments, tax compliance and borrowings compensate the downsides. To elaborate, the creation of Asset Management Company and Asset Reconstruction Company Limited will aid in resolving the stressed assets problem of PSBs. Additionally, there have been an array of initiatives to benefit both individuals and industries alike In terms of taxation. For example, barring senior citizens (75 years and above) from filing tax returns on income from pension and interest, no change in direct taxes, extended eligibility for claiming tax holiday for startups by one more year (to encourage entrepreneurs) to will improve consumer sentiments. Likewise, emphasis on education and skills will significantly drive India’s human capital. Formation of Higher Education Commission, realigning National Apprenticeship Training scheme for graduates and diploma holders in engineering and partnership with Japan and UAE in the area of skill development and recognition to name a few, will have a direct impact on skill development. These collective initiatives will foster a positive impact on the overall consumer sentiment. 

In my view, this is a vital move towards the re-imagination of a New World Order post-pandemic. And, the Budget 2021 – 22 clearly outlines Government’s principal purposes i.e., to “Revive the Economy”. Most importantly, while presenting the budget, the announcements displaced the lingering fear of corporates, entrepreneurs, and individuals at-large as it did not introduce any new tax. 

To summarize, the Budget 2021 portraits the idea of resilient India as the government reiterated its objective of strong economic recovery after significant contraction due to the pandemic. It is a balanced combination of reforms and regulations that will drive Jobs, Demand & Spending, which in turn, boost various sectors along with manufacturing, contributing positively to India’s growth story.

(Manish Sharma is the President & CEO of Panasonic India and South Asia. The views expressed by the author are his own.)