Published
3 years agoon
By Mr. Milind Gowardhan, Managing Director (MD) and CEO of LEAF Fintech.
The financial sector was steady and robust until the timeline coincided with the year 2020. Isolation from one another was the key factor in humanity’s battle with the deadly virus. This translated into many work sectors bearing the brunt of the non-availability of staff. The GDP of the country manifested the worst performance since independence, quantifying itself at an insubstantial 7.3% in 2020-21. This opened the floodgates for a restructured budget in 2021 to fix-gap the frailties in the financial sector.
The government has worked tirelessly to boost economic growth to pre-pandemic levels. The various initiatives to add propulsion to the stagnant economy bearing the brunt of lockdown-induced restrictions seem to have worked. Official data suggests that 19 of 22 high-frequency indicators (HFIs) in September, October and November crossed their pre-pandemic levels in the corresponding months of 2019. Amidst an accelerated vaccination drive, a prosperous festive season and a gradual emboldenment in consumer and industry sentiments, the Indian economy has found a spring in its step. A solid budget plan aided in the revival.
Bullseye budget: The hits of 2021
The infrastructure industry is a section that constitutes a major part of the budget. Numerically, it manifests the intense focus that the government provides on this strata of development. The industry has seen a 35% increase in expenditure, quantifying itself at a whopping INR 5.5 lakh crores. The sector covers a wide range of sub-groups, namely power, roads, ports, railways, and telecommunications, amongst others. This investment will make sure that the industry becomes a churner of more jobs
To keep the promise made to the banking sector and ease their load, the budget also announced the establishment of asset reconstruction and asset management companies. These entities will help to deal with the non-performing assets and take over the bad loans.
Some of the highlights from budget 2021 were:
Dissecting the numbers of the budget
The pandemic has had a negligible effect on the numbers that the nation has had for fiscal deficit and disinvestment over the years. The finance minister has announced a fiscal deficit target of 6.8% for 2021 to 2022. The deficit once ballooned to 9.5% of the GDP, well above the expected range of 3.5%. Ms. Nirmala Sitharaman, has promised to shrink the deficit to 4.5% of the GDP by 2025-26. The task would be completed by increasing steam tax revenues over time through increased tax compliance and asset monetization.
In a refreshing change, Ms. Sitharaman carried a red-cased “made in India” tablet that signified an ingress into the deeper folds of digitization, augmenting PM Modi’s Digital India Mission. The digital tablet replaced the traditional ‘bahi khata’.
Real estate market becomes the real benefactor
One of the biggest gainers in the market with the announcement of the budget was the real estate industry. The market for affordable housing is presenting a lot of potential, and the government is supplementing it by extending tax relief for the affordable housing segment. The backing for budget housing started with the announcement of an interest deduction of up to Rs. 1.5 lakhs in 2019. This provision was also extended for another year until March 2022 on a home loan taken to buy an affordable house. This presents the best opportunity for many aspiring home buyers to get their dream homes. Specific fintech companies are catering to various customers in the market, especially to those who have informal incomes. They are assisting in the acceleration of affordable housing solutions across the country by providing them with easy-to-access and cost-effective home loans.
Financial misses of 2021
Whilst there were many gains throughout the year, there were some areas where the budget snagged: