Union Budget 2021 Gives Infrastructure Push to the Indian Economy
On 1st February 2021, Indian Finance Minister Nirmala Sitharaman presented the Union Budget for FY 2021-22, the first ever digital Union Budget for India.
While presenting the Budget 2021 in the Indian Parliament, FM, Shrimati Nirmala Sitharaman said “The preparation of this Budget was undertaken in circumstances like never before. We knew of calamities that have affected a country or a region within a country, but what we have endured with COVID-19 through 2020 is sui generis”.
Finance Minister has proposed capital expenditure of ₹ 5.54 lakh crore for FY22, which is 34.5 % higher than FY21.
Keeping in-focus the-need-of-the-hour, Budget 2021 has given emphasis to Health and Infrastructure to boost India’s post-Pandemic economic recovery. Indian industry has reacted in very positive manner to the Budget. Industry thinks this to be a balanced budget as the announcements made in sectors like Information Technology, Infrastructure, Agriculture, Renewable Energy will help in raising the investor spirit & boost growth.
Major Announcements in the Indian Union Budget 2021 that shall Boost Infrastructure
National Infrastructure Pipeline (NIP)
Government has expanded the NIP to 7,400 projects from 6,835 projects that were announced in December 2019.
Highways and Roads Infrastructure
Highway infrastructure is a proven tool for economic activity. FM announced economic corridors in the state of West Bengal, Tamil Nadu, Kerala and Assam which total to 6,575 Km of highway corridors.
FM also announced major Expressways/Corridors some of which are Bengaluru–Chennai, Delhi-Dehradun, Kanpur-Lucknow Expressway, Chennai–Salem corridor, Raipur-Vishakhapatnam, Amritsar-Jamnagar and Delhi–Katra. For Delhi-Mumbai Expressway remaining 260 Km will be awarded before 31st March 2021.
Under Bharatmala Pariyojana 8,500 Km length of roads will be awarded by March 2022.
Metro Railway Development: Finance Minister announced that MetroLite and MetroNeo will be introduced in Tier 2 cities and peripheral areas of Tier 1 cities.
The following Metro Rail Projects have been allocated funds: Rs. 1,957 crore for Kochi Metro Rail Phase-2. Rs. 63,000 crore for Chennai phase-1, Rs. 14,788 crore for Bangalore Metro Phase-2, Rs. 5,976 crore for Nagpur Metro Phase-2 and Rs. 2,092 crore for Nashik Metro Phase-1
Regional Rapid Transit System: Finance Minister has allocated Rs. 4,472 crores for India’s first, Delhi-Meerut RRTS Project which is double the allocation provided in previous budget.
Smart Cities Mission: Rs 13,750 crore have been allotted for Smart Cities Mission / Atal Mission for Rejuvenation and Urban Transformation (AMRUT).
Road Transport: A new scheme will be launched at a cost of Rs 18,000 crores to support augmentation of public bus transportation services.
Indian Railways: Finance Minister has provided a sum of ₹ 1,10,055 crore for Railways, of which Rs 1,07,100 crore is for capital expenditure. Indian Railways has prepared a ‘National Rail Plan’ for India: 2030 which aims to create a “future-ready” Railways system by 2030. 100% electrification of Broad-Gauge routes is to be completed by December 2023.
Vijay Karia, Vice President, IEEMA and CMD Ravin Group said “Project imports Benefit is also being extended to All High-Speed Railway projects, which will boost the electrical equipment sector and bring new opportunities for electrical equipment manufacturers”.
Dedicated Freight Corridors: Finance Minister announced that Western DFC and Eastern DFC will be commissioned by June 2022. Railways will monetise Dedicated Freight Corridors assets for operations and maintenance after commissioning.
Petroleum & Natural Gas Sector: 100 more districts will be added in next 3 years to City Gas Distribution network. A gas pipeline project will be taken up in Union Territory of Jammu & Kashmir. An independent Gas Transport System Operator will be set up for facilitation and coordination.
Power Sector: A framework will be designed to give consumers alternatives to choose from among more than one Distribution Company. In order to aid ailing discoms, a revamped, reforms-based Power distribution sector scheme will be introduced with an outlay of ₹ 3,05,984 crore over 5 years.
Anil Saboo, President, IEEMA, said “Rs. 3.05 lakh crore will be invested in discoms for improvement of feeder separation, prepaid smart metering and upgradation of systems. This investment will improve the functioning of Discoms and help in improving their health and viability”.
Hydrogen Energy Mission shall be launched in 2021-22 for generating Hydrogen from green power sources. This shall not only help reduce India’s carbon footprint but also provide much needed impetus to R&D in Hydrogen Energy field.
Solar Energy: Capital infusion of ₹ 1,000 crore to Solar Energy Corporation of India (SECI) and ₹ 1,500 crore to Indian Renewable Energy Development Agency (IREDA) shall be provided.
Duty has been raised on solar inverters from 5% to 20%, and on solar lanterns from 5% to 15%
Health and Wellbeing
Finance Minister set aside ₹ 35,000 crore for the COVID-19 vaccination program, which shall help revive the industrial growth. Under Urban Swachh Bharat Mission 2.0 a budget of ₹ 1,41,678 crore has been allotted for a period of 5 years from 2021-2026, which shall include sludge management and waste water treatment, source segregation of garbage, reduction in single-use plastic and more.
The overall Budget outlay for Health and Wellbeing is ₹2.23 lakh crore, marking a 137% rise over 2020-21.
Budgetary Allocations for Other Major Sectors
Under Ministry of Micro, Small and Medium Enterprises (MSME) sector government has made a provision of ₹ 15,700 crore in the Union Budget 2021-22.
The Defence sector has got a budget of ₹ 4.78 lakh crore for FY21-22 which includes capital expenditure worth ₹ 1.35 lakh crore.
Announcements for Cables Industry: The FM announced change in custom duty for Specified insulated wires and cables used in electronics from 7.5% to 10% to promote value addition in Electronics.
Industry’s Upbeat Reaction to Indian Union Budget 2021
Mr Uday Shankar, President, FICCI said, “Today we saw an outstanding, clear-headed and growth-oriented budget that lays a strong foundation for an Atmanirbhar Bharat. The fact that government chose growth over fiscal consolidation is indeed heartening. There is a sharp focus on capital expenditure“.
Mr Uday Kotak, President CII said “Delivering on her promise of unveiling a ‘Budget Like No Other’, the Finance Minister announced a raft of prudent measures aimed at rejuvenating government spending towards critical areas of increasing allocation on infrastructure expansion, education, housing and health“.
Mr Sanjay Aggarwal, President, PHD Chamber of Commerce and Industry and Chairman, Paramount Communications said “It is appreciable that the Indian Railways has prepared a national railways plan by 2030, with the aim to bring down the logistics cost. This is crucial to bring down the cost of doing business in the country”.
Indian Electrical & Electronics Manufacturers Association (IEEMA) said in its press release on 2nd February 2021 “The Finance Minister had an onerous task to kick start the economy and her emphasis on infrastructure spend reflects the classical Keynesian model (demand-side)“.
Mr Seshagiri Rao, Joint Managing Director & Group CFO, JSW Steel commented “The Union Budget for FY21-22 is not only historic but also path-breaking with counter cyclical fiscal policy calibration with an emphasis on building modern infrastructure”, as reported in projects today dated 3rd February 2021.