By Rakesh Nangia, Sudin Sabnis
Chief Economic Advisor Dr Subramanium just after unveiling the Economic Survey, 2021 commented that apropos cricket, timing is vital in Finance as well and the proposals to be introduced by the Finance Minister would have a mix of each Pujara and Pant’s style of batting. This proved to be a worthy precursor to the Budget proposals introduced by the Finance Minister. While this was a Budget of a lot of firsts – 1st Budget of the decade, 1st just after a international pandemic, 1st just after a huge contraction of the economy and so forth. all eyes had been on the Finance Minister to ascertain the methods which would be introduced to bring the economy back on track. Whether it would be a judicious mix of Pujara’s caution and Pant’s aggression or a prolonged spell of caution (offered fiscal constraints) was a matter of debate in the run-up to the Budget. The Finance Minister, luckily so, adopted the former.
Aatmanirbhar Bharat was a theme embraced by the government through the many packages announced through the Covid instances. Aatmanirbhar Bharat not only demands infrastructure but also some other crucial components like skilled manpower, availability of ecosystem and so forth. Despite the fiscal deficit of 9.5% and income generation constraints, the Finance Minister has produced sizeable allocations to infrastructure and nation-developing projects. Railways, port privatizations, road and highway infrastructure (Bharatmala project), energy and urban infrastructure and so forth. received priority from the Finance Minister. Along with the production linked incentives announced across more than 10 sectors, spending on such essential infrastructure would assist generate a base for an ecosystem for Make in India system. Some highlights from the spending budget are captured as beneath:
Revamping Healthcare System – A powerful realization particularly through the pandemic was our more than reliance on other nations for a host of solutions which includes on simple API’s in pharma solutions. As a concentrate for India to be self-reliant in healthcare and health-related requires, the Budget has focused on strengthening capacities of major, secondary and tertiary care wellness systems, strengthen current national institutions and generate new institutions to cater to detection and remedy of new and emerging ailments.
Vehicle Scrappage Policy – Introduction of the car scrappage policy was one of the extended outstanding demands of the sector. The government has announced “Voluntary Vehicle Scrapping Policy” to phase out old and unfit cars. Vehicles would undergo a fitness test in automated fitness centers just after 20 years in case of private cars and just after 15 years in case of industrial cars. This policy would encourage plying of fuel-effective, atmosphere-friendly cars, thereby lowering vehicular pollution and savings on foreign currency outgo additional boosting auto sector.
Banking Sector – Introduction of an asset reconstruction business and asset management business in order to consolidate and take more than current stressed debt and handle and dispose of the assets to alternate investment funds and to tap on other prospective investors for eventual worth realization was a welcome addition. The Government has also felt the require of recapitalization of public sector banks in the coming fiscal.
Revenue Generation – Though, mopping up collection via tax measures has been a historical focal point of most governments, the finance minister has resisted from introduction of an added cess (e.g. covid cess) or added tax and has concentrated to income streams like disinvestments, setting up SPV’s for monetizing land parcels and escalating tax base. Also, rationalising customs duty in line with Make in India initiatives would also assist the government bridge the gap to a specific extent. Despite these methods the government is staring at a shortfall of Rs. 80,000 crores for which it plans to strategy the markets, which could have an influence on expense of capital.
Make in India – Skilled and employable manpower along with R&D are some of the essential elements essential for Make in India campaign to be a achievement. Reinvigorating the human capital by revamping National Education Policy and realigning with National Apprenticeship Promotion Scheme (which contains giving post education apprenticeship, instruction of graduates and diploma holders in engineering and so forth.) would assist increase availability of skilled manpower to industries and lower unemployment. Allocation of Rs. 50,000 crores to National Research Foundation more than 5 years is an additional welcome step. Though the key concentrate of this foundation seems to concentrate on investigation institutions, a private public partnership may perhaps be explored in future. The Finance Minister has also strategically rationalized custom duty prices on specific essential elements to additional encourage Make in India.
Tax Proposals – The direct tax proposals concentrate on reduction of compliances to specific categories of taxpayers like senior citizens (filing of tax returns in specific situations), little taxpayers (tax audit eligibility threshold elevated) and introduction of next step of faceless appeals to Tribunals. This could be revolutionary offered the boost in attain of Tribunals to taxpayers as nicely as boost in transparency and achievable reduction in litigation time owing to distribution of work-load amongst many benches of Tribunals. Introduction of alternate dispute resolution mechanism for little taxpayers and a revamp of advance ruling authority would also increase self-assurance in taxpayers to lower litigations and accomplish certainty. Tax holidays to economical housing segments and Start-ups had been extended by 1 year. Indirect tax proposals as well focused on reduction of compliances like lowering the GST audit specifications but also strengthened the norms for availability of input tax credits.
While the Budget appears to have hit the suitable notes, what is now of paramount value is the implementation of the many proposals, the path although seems steady with the suitable concoction of Pujara and Pant.
(Rakesh Nangia is the Chairman and Sudin Sabnis is a Partner at Nangia Andersen LLP. The views expressed by the authors are their personal.)