Can Budget 2020-2021 replace China with India?

Not quite. Claims of last year have not been encased in this Budget. It offers enough to float us through a year, without complaining. As inspiration for business, India is in abeyance. Atleast 5-7 years away. Couched on 6 pillars strength, Budget 2021-2022 did not disturb or surprise many. Indians on status quo, distracted to long term gains and a better future.

Touching relevant cornerstones without fleshing nuances, it’s a budget of potentialities if substantiated with India’s reform renaissance. Hard to deny promise of a better future!

Capital expenditure spend at INR 5.54 crores, is up by 34.5% more than the preceding one, makes me wonder “you can run through a runner’s block, can you also, spend through an economic block?” Perhaps.

1. Healthcare

Healthcare on pivotal focus, but it still is the lowest in the world at little over 1% than the GDP. Atmanirbhar Swasth Bharat Yojana receiving an outlay of 64,180 crores over 6 years at a leap of 137% through 2026.

Long term- Does GoI intend to put this at the hands of the masses?  

  • Liberalisation of Insurance, would in the long run, steer it. Some integration of this outlay towards food under the Food Security Bill, with dispensing through the One Nation One Ration initiative would stream it back to health and wellness.
  • Incentives for allied services in food distribution is worth exploring.
  • Roping in development sector for elderly healthcare service system would generate employment, support and security in the required segment.

2. Insurance FDI limits increased to 74%.

Mobilisation of benefits through corporate accountability under employer sponsored healthcare.

3. Voluntary vehicle scrappage policy against fitness of vehicle. With private(15) and commercial(20) under environment initiative.

  • Opportunity to engage Start-Up innovation in EVs, giving instant employment, Existing liberalised FDI limits in automobile sector and technology would support this.
  • With Apple EV moving towards reality, he move is to EVs. This is where India should be looking for a few reasons-
    – India has the technological inclination; and
    – Very mentorable pool of eager start-ups.

This is where the world wants to go and would have been more efficient compared to re-industrialisation of textiles.

4. Aircraft Leasing Tax holiday and exemptions, extremely intelligent manoeuvre.

The business is expected to grow to about USD 62,221.8 million by 2023.

  • Aircraft leasing is set to grow significantly and be an area for quick revenue, for several reasons-

i. jagged global commercial and trade lines;

ii. tanking global fuel prices; and

iii. need to transport vaccines demand for low-cost carriers will increase.

  • India can gain from in-roads in wet-leasing, revive the sector, no investment in up-skilling required.

In its current state, India is deficient in laws and regulations to compete globally in the space. Ireland and China dominate the business. India will have to be make a steep leap if it wishes to gain out of this.

5. MSME / Company law amendment/ Strengthening NCLT/ Incentivising OPC / faceless IT dispute resolutions.

  • Alignment to digital vision but will fail to make the “show stopper” impact it claims.
  • Amendment to the Companies law flows from last year’s MSME limit modification. A compliance relaxation through increased turnover and capital base thresholds to Rs 20 crore contributes to some liquidity, but in supply oriented market, liquidity may result in stagnation.
  • Faceless IT resolutions clouds a slight risk of inefficiencies and lag. Convincing a BOT about compliance and non-violation will be a challenge!

6. Paving path for NRIs to set up OPC and reduction in residency limit to 120 from 182 days are not roomy enough for business.

  • Navigating local nuanced laws and bureaucracy do not provide enough milage for it to make meaningful dents.
  • Also, the segment of independent entrepreneurs need something to grow and be capitalised, which the OPC does not cater to.

7. Bad Bank concept to mobilise fresh loans will be cumbersome and administrative burden.

  • With IBC and another ARC in simultaneous operation, possibility of debt cycles.
  • The PSU disinvestment will require floating effective VRS schemes with potential employment issues.

8. Affordable Housing additionally exempted 1.5 lakhs for interest and tax rebate till March 2022.

  • Short term relief to recover Real Estate, hard to sustain.
  • COVID 19 still looms in versions, the exemption for first self-occupied, could be made either absolute or for 4 years at least.
  • The benefit for the 2nd / 3rd could have been withdrawn. Taxing the correct income group should have been the objective.

9. Ports, railways, power, gas, balance spread to infrastructure.

  • This was a chance to attributed infrastructure outlay to Agriculture.
  • A 7 port project deployment will concentrate employment and resource at specific cities.
  • Choice at the hands of consumer in power distribution provider, Gas line to UT of J&K, are all long term offerings.

10. Education under 15,000 school projects Higher Education Commission of India requires partnership incentives with growing Edtech entities.

The Edtech companies hold know-how and subscriptions, GoI can offer digitisation learning support to rural India through such partnerships.

11. The Investor Charter and unified SEBI code is constructive for increasing credibility of govt. borrowing and transparency.

Consolidation of power in the hands of SEBI. Coupled with creation of Gold Exchange for spot Gold exchange, empowers SEBI in ways.

12. Senior Citizen Tax exemption

Senior Citizen Tax exemption, could be extended for 4-5 years or determined based on number/ volume of tax being filed by the family as a unit.

Research support – Aman Ahmed

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