“This moment in history is the dawn of a new era – one in which India is well-poised to truly be the land of promise and hope,” Finance Minister Nirmala Sitharaman said while presenting her third Union Budget amid the unprecedented Covid 19 induced economic contraction.

This year’s Union Budget generated unprecedented curiosity among common citizens as well as investors—both domestic and foreign.

The outbreak of the pandemic derailed government’s fiscal math as the Centre thrashed out a stimulus package of Rs 29.87 lakh crore—equivalent to 15 per cent of the GDP—in a bid to contain the impact of the virus on health and economy.

As expected, besides healthcare, the focus of the Union Budget has been on the Atmanirbhar Bharat with the much required fillip to infrastructure, manufacturing and agriculture sectors.

Government’s target of touching $5 trillion economy

Importantly, despite the Covid 19 pandemic, the government’s aim to take the economy to a $5 trillion level remains in place, though experts said that it could take longer for India to reach the set target.

With an eye on growth and job creation, Sitharaman proposed a 34.5 per cent hike capital expenditure spending in the new financial year. This is expected to boost the infrastructure sector which will have a multiplier effect on other sectors of the economy as well. A Development Finance Institution (DFI) is also in the pipeline with a capital of Rs 20,000 crore apart from the seven textile parks which are slated to come up in the next three years.

“For a $5 trillion economy, our manufacturing sector has to grow in double digits on a sustained basis. Our manufacturing companies need to become an integral part of global supply chains, possess core competence and cutting-edge technology,” Sitharaman said.

“The priority in this budget has been to stimulate consumer demand with large allocations towards infrastructure, manufacturing and healthcare and not worrying much about the fiscal deficit slippage,” Nirupama Soundararajan, senior fellow and head of research, Pahle India Foundation (PIF) told Indianarrative.com.

Industry body Ficci termed the Budget as growth-oriented. “The fact that government chose growth over fiscal consolidation is indeed heartening. There is a sharp focus on capital expenditure. The fact that no new taxes have been levied shows government’s recognition of the stress different sections of society have been going through and the need to support them at this critical juncture,” Uday Shankar, President, FICCI said.

Is fiscal deficit target of 6.8% in 2021-22 achievable?

While the fiscal deficit for the current financial year is pegged at 9.5 per cent of GDP, it is estimated to improve to 6.8 per cent in 2021-22.

“We plan to continue with our path of fiscal consolidation, and intend to reach a fiscal deficit level below 4.5% of GDP by 2025-2026 with a fairly steady decline over the period,” the finance minister said while presenting the Budget.

Soundararajan said that credit must be given to the Centre for managing to contain the fiscal deficit target at a single digit level.

With no change in direct taxes, the thrust primarily will be on disinvestment and asset monetisation to bridge the yawning fiscal deficit.

The path to fiscal consolidation will depend much on the disinvestment programme and monetisation of funds with no change in tax slabs. Soundarajan added that the initial public offer (IPO) for Life Insurance Corporation in the next financial year will also boost revenue for the Centre. Notably, the Centre’s collection of goods and services tax has also shown an increase.

The disinvestment target has been set at Rs 1.75 lakh crore for 2021-22, lower than the Rs 2.1 lakh in 2020-21.

“Privatisation of banks is a great change of mind-set and the strategic disinvestment policy should prove to be game changer,” Anand Rathi, Chairman, Anand Rathi Financial Services Ltd added.

Industry happy

Analysts and Industry pundits said that the Budget announcements would have positive impact on the economy.

“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 as India rolls out a vaccine drive to inoculate 1.3 billion people”, Kotak said.

With further easing of foreign direct investment in sectors such as insurance, infrastructure, manufacturing and healthcare sectors, India will be better prepared to integrate in the global economy chain, the UK India Business Council said.

Meanwhile, Sitharaman increased allocations by a whopping 137 per cent for healthcare with specific Rs 35,000 crore towards Covid 19 vaccine rollout. In addition, the finance minister announced the PM Aatmanirbhar Swasth Bharat scheme with a resource allocation of Rs 64,180 crore to build string healthcare facilities.