When the world’s largest democracy’s Union Budget is presented by the country’s first full-time woman finance minister, few can afford to not pay attention. Nirmala Sitharaman had everyone’s ear, and in her two-hour-long speech, she sure had everyone listening to every word she said.

Sitharaman outlined that the Budget proposals rested on six pillars. These were health and wellbeing, physical and financial capital, infrastructure, inclusive development for an aspirational nation, the reinvigoration of human capital, encouraging innovation, R&D, and minimising government and maximising governance.

She said the Budget proposals sought to consolidate the Central Government’s vision of an Aatmanirbhar Bharat by focusing on its Sankalp (determination) of putting India first, doubling farm income, encouraging robust infrastructure creation and expansion of healthcare and good governance.

“Now, just as it had happened after the two World Wars, there are signs that the political, economic, and strategic relations in the post-COVID world are changing. 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,” she told the house.

“I want to confidently state that our Government is fully prepared to support and facilitate the economy’s reset. This Budget provides every opportunity for our economy to raise and capture the pace that it needs for sustainable growth,” she added.

At the base of Sitharaman’s proposals lie the creation and the overhaul of existing infrastructure from physical, administrative to digital to boost growth and create jobs. That is one of the reasons why the Budget speech largely avoided region or state-specific allocations. This was first amplified by prime minister Narendra Modi in his speech while launching the Aatmanirbhar Bharat Abhiyan (self-reliant Indian programme) in May last year.

In a major announcement, the government has also tried to address the challenge of raising capital for physical infrastructure projects through the formation of a Development Finance Institution (DFI).

However, aatmanirbharta or self-reliance is not about returning to a protectionist era, started during the country’s first prime minister, Jawaharlal Nehru. It is rather about reclaiming India’s historical position as the world’s manufacturing and services hub. According to renowned economic historian Angus Maddison, India, together with China, used to lead the world in GDP numbers till the 1600s. In fact, despite the socio-political upheavals witnessed during much of its later medieval history, the country was the world leader in manufacturing, producing a quarter of the global industrial output until about the mid-18th century. However, colonisation and the resulting de-industrialisation led to the country’s share in the global industrial output decline to a measly 2% by 1900.

A New Deal for a New India

Therefore, this emphasis on self-reliance invites comparison with former US president Franklin Delano Roosevelt’s New Deal programme during the Great Depression in the 1930s. In an article published in the January 2017 issue of the magazine, Popular Mechanics, author Matt Blitz noted, “Roads were built where there once was only dirt. Bridges connected lands that were once separated. Airports and runways made people airborne. Power lines brought light where there once was only darkness after sunset. And most importantly, the unemployed were once again hard at work. It was the greatest infrastructure project in this country’s (US) history, the likes of which we’ll never see again.”

However, contrary to popular belief, Roosevelt’s New Deal wasn’t a socialist programme. It was a chain of evolving schemes, public work projects, financial reforms and regulations aimed at reviving the US economy.

Prime minister Modi has tried something similar first with the three stimulus measures announced last year and Budget 2021-22.

Roosevelt is among the few foreign leaders that Modi most likely admires. His month-end Mann Ki Baat (roughly translating as ‘Matter of Contemplation’) radio programme is inspired by the American leaders’ ‘Fireside Chats’ to address the fears and concerns of fellow Americans. After all, Modi’s aatmanirbhar deal is also for what he often refers to as a “New India”.

Reacting to the finance minister’s proposals, an enthused managing director of the Mumbai-based wealth management firm, Emkay Global Financial Services, Krishna Kumar Karwa, told EastMojo, “Hats off to the finance minister for sticking to her promise of a Budget that will be remembered for 100 years. The revival in the economy seen in the last four-five months will be further enhanced with the various Budget proposals.”

Jagannarayan Padmanabhan, director of transport at CRISIL Infrastructure Advisory, observed to a news portal, “The Central Government has directionally given the much-needed guidance for heavy lifting the infra spends, which could act as a cue for some of the state governments to follow. Policy announcements in the area of infra financing and aircraft leasing augur well for the development of institutional support in realising the projects as set out by the national infrastructure pipeline (NIP).”

Infrastructure to Lead Revival

The finance minister proposed to substantially increase investment in health infrastructure, with the outlay for health and wellbeing at Rs 2,23,846 crore in before estimate (BE) 2021-22 as against the current fiscal’s BE of Rs 94,452 crore, an increase of 137%.

There is also a provision of Rs 35,000 crore for the COVID-19 vaccine in BE 2021-22. The launch of two more ‘Made in India vaccines’ shortly is expected to provide further thrust to the country’s vaccine diplomacy globally.

The Finance Minister announced the launch of Jal Jeevan Mission (Urban) in all 4,378 urban local bodies with 2.86 crore household tap connections as well as liquid waste management in 500 Atal Mission for Urban Rejuvenation and Urban Transportation (AMRUT) cities. The schemes will be implemented over five years, with an outlay of Rs. 2,87,000 crore. Moreover, the Urban Swachh Bharat Mission will be implemented with a total financial allocation of Rs 1,41,678 crore over five years from 2021-2026.

“The increase in healthcare budget from Rs 94,500 crore to Rs 2.23 lakh crore is driven in large part by budgetary allocations for COVID vaccinations – Rs 35,000 crore, accounting for 27% of the increase – and an increase in water & sanitation costs – Rs 74,500 crore, accounting for 58% of the increase,” observed director, White Oak Capital, Manoj Garg from Mumbai.

Also, to tackle the burgeoning problem of air pollution, the government has proposed an allocation of Rs 2,217 crore for 42 urban centres with a million-plus population. A voluntary vehicle scrapping policy to phase out old and unfit vehicles was also announced.

The finance minister emphasised that to make the country a USD 5 trillion economy by FY2025-26, the manufacturing sector had to grow in double digits on a sustained basis, with Indian companies becoming an integral part of global supply chains, possessing core competence and cutting-edge technologies. The Central Government had committed nearly Rs 1.97 lakh crore over the next five years under the Productivity Linked Scheme (PLI) for 13 sectors.

To enable the textile industry to become globally competitive, attract large investments and boost employment generation, a scheme of Mega Investment Textiles Parks (MITRA) will be launched in addition to the PLI scheme. The Government proposes to establish seven textile parks in three years.

This is an important area as the country is currently ranked the third-largest exporter of garments behind China and Bangladesh. In the last few years, it has also been facing stiff competition from Vietnam. The Budget proposals, therefore, focus not just on readymade garments but also on high-value industrial textiles.

Acknowledging that infrastructure creation required long-term debt financing, Sitharaman announced a professionally managed DFI to act as a provider, enabler and catalyst for infrastructure financing. The Government had provided a sum of Rs 20,000 crore to capitalise on this institution, with a targeted lending portfolio of at least Rs 5 lakh crore in three years.

Since monetising operational public infrastructure assets is a very important financing option for new infrastructure construction, a National Monetisation Pipeline of potential brownfield infrastructure assets is in the works. An asset monetisation dashboard will also be created for tracking the progress and to provide visibility of such projects to potential investors.

The Budget document also mentioned more economic corridors, a ‘future-ready’ railway system under the Indian Railways’ National Rail Plan for India: 2030 and deployment of the MetroLite and MetroNeo technologies to provide urban rail transit at a significantly reduced cost in Tier-2 cities and peripheral areas of Tier-1 cities.

“It is evident that the Budget plans to give a big boost to both manufacturing and infrastructure with some path-breaking steps like the creation of DFI to fund the ambitious NIP, setting up of National Asset Monetisation Pipeline that will free up idle resources including surplus land with PSUs, and monetisation of various assets of railways like dedicated freight corridors, power transmission lines, roads, and oil & gas pipelines for fund mobilisation,” said managing director, Dalmia Bharat Group, Puneet Dalmia.

“We welcome the proposals of the continued development of economic corridors. These road and highway projects will boost the economy by creating thousands of jobs that are much needed during these times and attracting greater investment along the corridors because of the improved infrastructure. Additionally, the soon to be tabled bill on DFI is a much-awaited step which will provide funding to construction in the infrastructure sector,” remarked Kshitish Nadgauda, managing director Asia at the US-based engineering consultancy, Louis Berger.

Robust power infrastructure is yet another important prerequisite for a rapidly industrialising nation. Sitharaman expressed her concern over the viability of distribution companies. She proposed the launch of a revamped reforms-based result-linked power distribution sector scheme with an outlay of Rs 3,05,984 crore over five years. The scheme will assist distribution companies in infrastructure creation including pre-paid smart metering and feeder separation, upgrading of systems, etc., to improve efficiency.

Welcoming the announcement, Tata Power’s president transmission & distribution, Sanjay Banga, said, “We also welcome the scheduled discussion on the Electricity Amendment Act 2021 during the ongoing Budget session as when implemented in its true letter and spirit, the Act will provide the much-needed independence to the regulatory mechanism for an effective and timely decision making. It will also pave the way for speedier implementation of the National Tariff Policy, a must for the tariff rationalisation across all segments of consumers. This is very crucial for overall industrial development for the realisation of Aatmanirbhar Bharat.”

Exiting Non-Strategic Assets

In another bold move, Sitharaman also proposed to amend the Insurance Act, 1938, to increase the permissible FDI limit in insurance from 49% to 74% and allow foreign ownership and control with safeguards. Under the new structure, the majority of directors on the board and key management persons would be resident Indians, with at least 50% of directors being independent and a specified percentage of profits being retained as a general reserve. The Central Government will also bring the IPO of LIC for which the requisite amendments will be made in this session itself.

Importantly, the finance minister stated the Government had approved the policy for strategic disinvestment of public sector enterprises under the Aatmanirbhar Package. The policy provides a clear roadmap for disinvestment in all non-strategic and strategic sectors. The Government had kept four areas that were strategic where bare minimum CPSEs will be maintained and the rest privatised. In the non-strategic sectors, Central Public Sector Enterprises (CPSEs) will be either privatised or closed. She said that to fast forward the disinvestment policy, the government think-tank NITI Aayog will work out the next list of CPSEs that would be taken up for strategic disinvestment. The government had estimated Rs 1,75,000 crore as receipts from disinvestment in BE 2020-21.

Focus on Rural Infrastructure

Sitharaman said that the Government was committed to the welfare of farmers. To provide adequate credit to farmers, the Government had enhanced the agricultural credit target to Rs 16.5 lakh crore in FY 2022. Similarly, the allocation to the Rural Infrastructure Development Fund increased from Rs 30,000 crore to Rs 40,000 crore. Similarly, the Rs 5,000 crore corpus for Micro Irrigation Fund, which had been created under National Bank for Agriculture and Rural Development (NABARD), will be doubled.

In an important announcement to boost value addition in agriculture and allied products and their exports, the scope of ‘Operation Green Scheme’ that is presently applicable to tomatoes, onions, and potatoes, will be enlarged to include 22 perishable products.

Given the role played by the National Agricultural Markets or e-NAMs in improving transparency and competitiveness, 1,000 more mandis will be integrated with them. The Agriculture Infrastructure Funds would be made available to Agricultural Produce Market Committees (APMCs) for augmenting their infrastructure facilities.

Also, for the first time globally, social security benefits will be extended to gig and platform workers. Minimum wages will apply to all categories of workers, and they will all be covered by the Employees State Insurance Corporation (ESIC). Women will be allowed to work in all categories and also in the night-shifts with adequate protection. At the same time, the compliance burden on employers will be reduced with a single registration, licensing and online returns.

Upskilling Human Resources, Encouraging Innovation and R&D

On the skilling front, Sitharaman said an initiative was underway in partnership with the UAE, to benchmark skill qualifications, assessment and certification, accompanied by the deployment of a certified workforce. The Government also has a collaborative Training Inter Training Programme (TITP) between India and Japan to facilitate the transfer of Japanese industrial and vocational skills, technique and knowledge, and the same would be taken forward with many more countries.

The finance minister said that the outlay for the National Research Foundation (NRF), first announced in her Budget speech of July 2019, will be Rs. 50,000 crore over five years. This will work towards strengthening the overall research ecosystem of the country, with a focus on identified national-priority thrust areas.

The finance minister also announced a new initiative, the National Language Translation Mission (NTLM). This will enable the wealth of governance-and-policy-related knowledge on the internet available in major Indian languages.

Sitharaman informed that as part of the Gaganyaan mission activities, four Indian astronauts were being trained on generic space flight aspects, in Russia. The first unmanned launch was slated for December 2021. India has already emerged as the leading low-cost hub for the launch of satellites into space. The successful launch of a human space flight in the next couple of years will help firmly entrench the country as a major force in the global space race.

“The finance minister’s focus on healthcare, infrastructure, power and the financial sector will have a positive, broad-based impact on the economy. By increasing Capex spending significantly without hiking taxes, and instead focusing on expanding economic activity, the finance minister has set the groundwork for a sharp and sustained economic recovery over the next several years,” averred chairman & managing director at the country’s leading renewable energy independent power producer, Sumant Sinha.

Moreover, the emphasis on self-reliance is also about preparing the world’s largest democracy to compete with China as the world’s manufacturing hub in a post-COVID-19 environment. Other than the deployment of more troops along the Sino-India border in Ladakh, Sikkim and Arunachal Pradesh, Budget 2021-22 is an important part of New Delhi’s economic arsenal against an increasingly belligerent Beijing.

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