Union Budget 2021-22 to propel growth and employment: FICCI

On Feb 1, 2021

NEW DELHI, 01 February 2021: Commenting on the Union Budget 2021-22, 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. 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. It’s heartening the Finance Minister has taken concert steps to improve the Ease of Doing Business and encourage compliance.”

There has been a strong emphasis on infrastructure development be it social, physical, or financial infrastructure. This will not only help propel growth in the economy but also prepare us better to face adversities similar to those seen during the COVID times.

Given the need to garner more funds to meet the social and economic needs of the country, the government has shown commitment to augment resources through several bold and strategic measures. The disinvestment agenda has been clearly defined. Also, the plan to monetize the land banks has been in discussions for a long time but it was only in this budget we saw the government showing its resolve to go ahead with the plan, he added.

In context of raising resources, an equal emphasis was placed on attracting capital from abroad. The proposed simplification in REITS and InVITS alongside the announcement of InVITS by NHAI and PGCIL will help attract foreign investments in these areas. The setting up of a Development Finance Institution as well as raising the FDI cap from 49% to 74% in the insurance sector will also help draw long term funds for meeting the investment requirements of the infrastructure sector. While these moves are welcome and in sync with FICCI’s suggestions, we do hope that going ahead government will look at expanding the remit of the proposed DFI to financing sectors other than infrastructure, said Mr Shankar.

In the realm of the financial sector there were many reform-oriented measures that were announced. The decision to privatize two public sector banks and one public sector insurance company underlines government’s commitment to limit its presence even in the strategic sectors and give a larger role to be played by the private sector. To further release capital for growth and strengthen the banking system, FICCI for long has been advocating the need to set up a National Asset Management Company. It is heartening to see this idea moving forward with the government’s announcement to set up an Asset Reconstruction and Management Company. This will help banks to unlock stuck capital and use it for more productive purposes. This measures along with the decision to recapitalize Public Sector Banks to the tune of Rs 20,000 crore will prepare banks well to meet the credit requirements of a growing economy, he said.

With innovation and R&D being the key differentiator for determining growth, there was a need to incentivise R&D in the country. While FICCI appreciates the government’s decision to set up a National Research Foundation with an allocation of Rs 50,000 crore, we reiterate the request to bring back weighted deduction of 200% for investments made by private sector towards innovation and R&D.

The budget proposals also laid a renewed thrust on promoting the principle of ‘minimum government, maximum governance’ as well as improving the ease of doing business and ease of living in the country. It is heartening to see continuation of measures towards easing the life of taxpayers and this is reflective of government reposing greater faith and trust in the taxpayers.

While many sectors got support in the budget, a few sectors were conspicuous by their absence especially at a time when they need the support most. FICCI hopes that sectors like tourism, hospitality, aviation etc. will see some announcements coming forth in near future.