"I borrow the words from Rabindranath Tagore, Faith is the bird that feels the light and sings when the dawn is still dark," is what Nirmala Sitharaman said as she started her speech to present the Union Budget for 2021-22. Well, how effective was the economic revival vaccine? Let's find out-

What is a budget after all? Having seen this word at every possible place over the past week, we’ll break it up for you. Think of it as the prescription for the economy to stay healthy and achieve more, simple as that. Wherein, the doctors are replaced by economists and financial experts and the cabinet ministers sign it off. There are always two parts to a budget. How we’ll make money and where we will spend it. Let’s look at where did the government decide to spend the money?

Capital expenditure:
The Union Budget 2021 bet huge on capital expenditure, increasing it by 34.5% to ₹5.54 lakh crore. What does it stand for? Creation or acquisition of new fixed assets such as land, building, machinery, equipment, buying shares. Basically, anything that adds to the country’s asset portfolio.

Defense:
Let’s start at Defense, where the budget spends its largest share, about one third. The defense budget saw a mere 1.4% overall increase from ₹4,71,378 crores last year to ₹4,78,196 crores for 2021-2022. But the government did spend an additional unbudgeted  ₹20,776 crores on emergency arms procurements in the current fiscal in face of China’s ongoing belligerence on northern borders, especially in Eastern Ladakh.

Healthcare:
Coming off a year in which major world economies saw their resources depleted and economies halted to an extent, the Union Budget 2021 addressed the issue at hand, proposing ₹35,000 crores for COVID-19 vaccination, and made commitments for more citing it as a major factor in the economic revival. Healthcare spendings were increased 137% amounting to ₹2,23,846 crores putting the health expenditure at 1.8% of the country’s GDP. The government proposed schemes to develop primary, secondary and tertiary healthcare, and clean water sanitation, both of which were given an arsenal of more than ₹60,000 crores each as well as to build 17 new public health units at entry points.

Education:
Now, let’s talk about education. It is a two-way picture here. The government has announced its plans to integrate its NEP (New Education Policy) announced last year in 15,000 schools, building 100 Sainik schools, a Central University in Ladakh as well as 750 Eklavya model residential schools for tribals. Scholarships, Kendriya Vidyalaya, and mid-day meal schemes saw their capital increased. International collaborations with UAE and Japan were announced on vocational training and benchmarking skilled qualifications. While all these schemes were progressive, the government on the other hand cut down the education ministry’s budget by over ₹6,000 crores. Similarly, Samagra Shiksha Abhiyaan and schemes for girls’ secondary education experienced haircuts.

Business:
MSMEs (Micro, Small, and Medium Enterprises) might rejoice as the government will allocate over ₹15,700 crores to the sector, more than double of last year, while not increasing taxes. The way this helps a lot more people than expected is because the government redefined ‘small businesses’. Now any business with a turnover of fewer than ₹20 crores is in this category which assures ease of compliance under the Companies Act. In a big boost for startups, the government incentivized the incorporation of one-person companies. Such companies will be allowed to grow without any restriction on paid-up capital or turnover and can convert into any other type of company at any time.

Textile:
The government plans to set up 7 Mega Investment Textile Parks (MITRA) by 2024 along with the proposed PLI schemes positioning India as a global manufacturing and exporting hub to compete with other Asian producers in the space like China, Vietnam, Bangladesh. So far, 22 of the 59 sanctioned have been complete. The customs duty on nylon products was set at 5% and that on cotton was raised to 10%.

Technology:
The government proposed the first digital census of India in 2021 allocating over ₹3,000 crores for the same. It’s part of a wider push for local businesses to adopt digital means for driving growth. Plus, you’ll be exempted from an audit if 95% of your business’ transactions are digital up to ₹5 crores, driving the incentive to go digital even further.

Agriculture:
The budget received by the agriculture and farmer’s welfare ministry saw a 5.63% increased allocation at ₹1,31,531 crores and around half of it will be made available for the PM-KISAN scheme, while the other half is to be used on infrastructural projects in agriculture for APMCs and irrigation programs. Moreover, over 1000 more Mandis to be integrated into the E-NAM marketplace which already has over 1.68 crore farmers registered.

Infrastructure:
This is where the budget made big strides. The finance minister announced ₹2.27 lakh crore highway projects in four poll-bound states - Tamil Nadu, Assam, West Bengal, and Kerala. The states are scheduled to go to the polls this year in April-May. Railways budget aims to bring down logistics cost with ‘Make In India’ at heart. It also set an ambitious target of 100% electrification of Railways by 2023. Metro rail network is planned to be expanded as major funds were allocated for it in urban areas as well as technologies like ‘MetroNeo’ and ‘Metrolite’ in Tier 2 cities. Setting up the National Infrastructure Pipeline (NIP) is a first-of-its-kind project in the country. The government proposed three ways to pay for all the development, by creating the institutional structures, monetizing assets, and enhancing capital expenditure, state and central. More on these later. Other projects include doubling the recycling capacity of ports, a gas pipeline in J&K, and an LPG scheme extension among others.

DFI:
The Development Financial Institution has been set up for lending over ₹5 lakh crores over the next 3 years to the Infrastructure sector. The government also ordered the creation of an Asset Management Company to buy and manage stressed assets, meaning restructuring assets (like companies, holdings, etc.) that are bleeding money to fix them and eventually move towards making money.

Debt Financing of InVITs and REITs are clever infrastructure and real estate vehicles where investors can invest in revenue-making assets without owning them. System regulations are eased for foreign investors which will help provide funds for infrastructure plans.

Finance:
First, a few important points mentioned in the budget are as follows:

1. No tax for single income pensioners aged 75 or above.
2. A Unified Securities Market Code to be created, consolidating provisions of the Sebi Act, Depositories Act, and two other laws.
3. Proposal to allow States to raise borrowings to 4% of GSDP this year.
4. An IPO for LIC is scheduled for this fiscal year.

Now, to compensate for all these spending projects, we need to make money to fuel it. Let’s see how the government plans on doing that.

Disinvestments:
Not wanting to hold on to underperforming CPSEs (companies govt own), The government is raising money by disinvesting them (in simple terms, selling) to private investors and foreign entities. The Finance Minister stated, “transactions namely BPCL, Air India, Shipping Corporation of India, Container Corporation of India, IDBI Bank, BEML, Pawan Hans, Neelachal Ispat Nigam limited among others would be completed in 2021-22.” Two public sector banks and one General Insurance company are added to this list as well.

Asset Monetization:
A move that’s been dubbed bold and brave is one of how the government aims to bring the fiscal deficit below 4.5% before 2025-26. Finance Minister Nirmala Sitharaman, in her Budget speech, said: “Idle assets will not contribute to Atmanirbhar Bharat. The non-core assets largely consist of surplus land with government ministries/departments and public sector enterprises.” She put forth a plan to launch ‘A National Monetization Pipeline’ with a dashboard for investors to track these assets. Idle assets like land and infrastructure will be monetized to help the government with revenue growth. So far, operational toll roads on highways, transmission assets of PGCIL, a Dedicated Freight Corridor (DFC) by railways, oil and gas pipelines of GAIL, IOCL, and HPCL, sports stadiums, warehousing assets of CPSEs, airports, and other railway infrastructure assets have been added to this dashboard.

Foreign Investments:
The Foreign Direct Investment recorded a sharp spike in the second quarter of 2020 with $24.60 billion invested rebounding from the disappointing first quarter. The government proposed to increase the FDI limit in the insurance sector to 74% aiming to attract greater overseas capital inflows to help enhance insurance penetration in the country. The government eased up regulations on the 100% tax exemption for sovereign wealth funds investing in India.

Fiscal Deficit: The Big Gun
Before we dive in, let us first understand what do you mean by fiscal deficit and why is important. ‘Fiscal’ pertains to anything government finances. When the revenue of the government, from taxes, etc is lesser than its expenditure, there is a deficit. Calculated as a difference between the government expenditure and revenue, or a percentage of the GDP. A rising fiscal deficit can pose a risk in the long term. In the short term, in a growing economy like India’s, the government borrows money by issuing bonds, and the deficit ends up being a means to growth. The government initially plotted the fiscal deficit to be as low as 3.5% of GDP. However, it has shot up to 9.5% owing to the lockdown economy of the past year. The finance ministry has pegged the deficit to 6.8% for the upcoming year.

Concluding Thoughts:
So, we’re borrowing more, churning money out of assets, scrapping loss-bearing businesses and investing in real estate, infrastructure, financial services, and attracting foreign capital. It’s an ambitious target, but like every successful athlete ever said - ‘Ambition is the first step to success. The second is action.’