02 02 2021 Delhi - Lecture notes 2 PDF

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P ri n ted at . Ch en n ai . Co i m bato re . Ben gal u ru . H y derabad . M adu rai . N o i da . V i sak h apatn am . Th i ru van an th ap u ram . Ko ch i . V i j ayawada . M an gal u ru . Ti ru ch i

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follow us:

tuesday, february 2, 2021

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P ri n ted at . Ch en n ai . Co i m bato re . Ben gal u ru . H y derabad . M adu rai . N o i da . V i sak h ap atn am . Th i ru van an th ap u ram . Ko ch i . V i j ayaw ada . M an galu ru . Ti ru ch i

Manufacturing

Senior citizens

To help achieve the goal of making India a $5 trillion economy, the government has committed to provide 1.97 lakh crore over five years for the PLI scheme to boost domestic manufacturing

Pensioners aged 75 and above, having only additional interest income, will be exempt from filing income tax if the tax amount has been deducted by the paying bank

Recovery VEHICLE Vikas Dhoot NEW DELHI

Union Finance Minister Nirmala Sitharaman loosened the exchequer’s purse strings in an eort at an expansionary Budget for 2021-22 on Monday, with a push for infrastructure and healthcare spending, even as she sought to reduce the scal decit from an estimated 9.5% of the GDP this year without ostensibly raising the tax burden. While there was no direct support for the middle class, there was some relief as the Budget refrained from levying a COVID-19 cess or surcharge. The Finance Minister set aside 35,000

crore for the COVID-19 vaccination programme, with a promise to provide more if the need arises. The overall Budget outlay for ‘Health and Well-being’, she said, is 2.23 lakh crore, marking a 137% rise over 2020-21. Direct succour for some of the sectors and sections worst-aected by the pandemic may be short, but the government is betting on a real GDP growth of 10%-10.5% in the coming year after the estimated 7.7% decline in 2020-21. It hopes to ride on the multiplier eect of infrastructure spending, which the Minister said would also spur demand and job creation.

Invoking Rabindranath Tagore’s aphorism ‘Faith is the bird that feels the light and sings when the dawn is still dark’, Ms. Sitharaman compared the Budget to Team India’s successful comeback in the Test series against Australia, and said it provided every opportunity for “our economy to raise and capture the pace that it needs for sustainable growth”. “I want to condently state that our government is fully prepared to support and facilitate the economy’s reset,” she said, before unveiling a few big-ticket reform signals for global investors. The foreign direct investment limit in the insurance sector will be raised to 74% from 49% and a “bare minimum” number of public sector enterprises will be retained even in strategic

States allowed enhanced 4% of GSDP borrowing

‘Record’ allocation of 1.1 lakh crore for Railways

Interest on PF contributions over 2.5 lakh to be taxed

Special Correspondent

Special Correspondent

Special Correspondent

NEW DELHI

NEW DELHI

NEW DELHI

The government has

Union Finance Minis-

The Union Budget has

sectors su der an am ic disinve will kick o two public general in 2021-22. A new nance inst up to fund jects unde frastructu an asset r or ‘bad ba with takin of public s with risin just 20,0 earmarked

accepted the 15th Finance Commission’s recommendation to maintain the States’

ter Nirmala Sitharaman proposed a “record” allocation of 1.1 lakh crore for Indian

proposed taxing the income on Provident Fund contributions of more than 2.5 lakh a

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TAXES

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Tax slabs remain unch Those aged 75 or above with only pension, interest income Lalatendu Mishra MUMBAI

Stake sale expected to fetch 1.75 lakh crore Four sectors to be strategic sectors Press Trust of India New Delhi

The government on Monday budgeted 1.75 lakh crore from stake sale in public sector companies and nancial institutions, including two PSU banks and one general insurance company, in the next scal year beginning April 1. The amount is lower than the record 2.10 lakh crore which was budgeted to be raised from CPSE disinvestment in the current scal year. Impact of pandemic However, the COVID-19 pandemic impacted the government’s CPSE stake sale programme, and the target has been lowered to 32,000 crore in the Revised Estimates. So far this scal year, the government has mopped up 19,499 crore from CPSE stake sale and share buyback. For FY22, out of the total 1.75 lakh crore, 1 lakh crore is to come from selling government stake in public sector banks and nancial institutions. About 75,000 crore would come as CPSE disinvestment

minerals; and Banking, Insurance and nancial services — would be strategic sectors. In strategic sectors, there will be bare minimum presence of the public sector enterprises. The remaining CPSEs in the strategic sectors will be privatised or merged or subsidiarised with other CPSEs or closed. In nonstrategic sectors, CPSEs will be privatised, otherwise shall be closed. In her 2021-22 Budget speech, she said strategic disinvestment of BPCL, Air India, Shipping Corporation of India, Container Corporation of India, IDBI Bank, BEML, Pawan Hans, Neelachal Ispat Nigam Ltd, among others would be completed in 2021-22. “Other than IDBI Bank, we propose to take up the privatisation of two public sector banks and one general insurance company in the year 2021-22. This would require legislative amendments and I propose to introduce the amendments in this session itself,” she said. Also the legislative amendments required for

Without making any changes to the personal income tax slab, the Union Budget 202122 has provided relief to senior citizens in the ling of I-T returns; reduced the time limit for I-T proceedings; announced the setting-up of a Dispute Resolution Committee and faceless Income Tax Appellate Tribunal proceedings; provided relaxations for Non-Resident Indians (NRI); oered an increase in the exemption limit from audit; and accounted for relief for dividend income. To reduce the compliance burden on senior citizens aged 75 years or above, such taxpayers with only pension and interest income will be exempted from ling an I-T return — the paying bank will deduct the necessary tax on their income. Easing complexity In her Budget speech, Union Minister for Finance and Corporate Aairs Nirmala Sitharaman committed to reduce the complexity that NRIs face, on their return to India, on the issue of accrued incomes in their foreign retirement account. The Budget proposes to notify rules governing it.

The Minister, while presenting the Budget, also announced steps to attract foreign investment into infrastructure; relief for affordable housing and rental housing; tax incentives to the International Financial Services Centre (IFSC); relief to small charitable trusts; and steps for incentivising start-ups in the country. The Budget has proposed to make dividend payments to REIT (Real Estate Investment Trusts) / InvIT (Infrastructure Investment Trusts) exempt from TDS (tax deducted at source). For Foreign Portfolio Investors (FPI), the Budget has proposed the deduction of tax on dividend income at a lower treaty rate. As per the proposal, advanced tax liability on dividend income will arise only after the declaration or payment of dividend. Aordable housing Towards housing for all, the FM has proposed to extend the eligibility period for claim of additional deduction for interest of 1.5 lakh on loan taken for the purchase of an aordable house to March 31, 2022. For increasing the supply of aor-

dable houses, she also a nounced the extension of a eligibility period for claimi a tax holiday for aordab housing projects by on more year to March 31, 202 To promote supply of a fordable rental housing f the migrant workers, the F announced a new tax e emption for notied aord ble rental housing projects “Amid the prolonged pa demic scenario, this exte sion was needed to suppo the latent housing d mand in the country said Shishir Baija CMD, Knight Frank I dia. “Further, the r laxation on tax com pliance for REI investors will further im prove the marketability such products, considerin we are likely to witness ne REITs this year.” To reduce litigation in t system, a Dispute Resolutio Committee for small ta payers facing litigation is be set up. “Anyone with a taxable come up to 50 lakh and d puted income up to 10 lak shall be eligible to approa the committee, which will b faceless to ensure ecienc transparency and account bility,” the Minister said. She also announced th

receipts. Unveiling the Disinvestment/Strategic Disinvestment Policy, Finance Mi-

launching the IPO of LIC would be brought in in the ongoing session of Parliament. To fast-track the dis-

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THE HINDU

DELHI

INVESTOR

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VIEWPOINT NIRMAL JAIN, Founder & Chairman, IIFL

A Budget to boost economic recovery We should thank our Finance Minister and congratulate every Indian for this excellent Budget, as it is good for everyone and a step in the right direction. The best part of the budget is that there is no taxation announcement such as COVID-tax, long-term capital gains tax, or wealth tax as was expected by the market. On the Finance Minister’s part, this was a masterstroke as she ensured that the sentiment is not aected as it is essential to raise money for disinvestment as well as for privatisation. There were important announcements on the infrastructure front such as the establishment of a Development Finance Institution (DFI) to boost long-term nancing for the country’s infrastructure sector, allow Foreign Portfolio Investors to debt nance REITs and InvITs after necessary amendments to the law. The budget has allocated 20,000 crore for the DFI, with an ambition for the lender to have a portfolio of 5 lakh crore in three years. Another positive is the 34.5% increase in the capital expenditure target in this year’s Budget to 5.54 lakh crore for nancial year 2021-22. The Finance Minister also announced 2 lakh crore for States and autonomous bodies. This is very good because in the last few years we had seen that the government’s capital expenditure declined to 16% from 18% earlier. This is important as it will boost investment, create jobs and aid economic recovery. The 1.75 lakh crore divestment target, which includes divestment of two PSBs and one general insurer, is achievable. FDI in insurance will be increased to 74%. These are decisive moves and will go a long way in pushing economic growth to a higher trajectory.

Centre to amalgamate market laws into single ‘Move to improve ease of doing business, remove friction be Lalatendu Mishra MUMBAI

The Centre on Monday announced setting up of a Single Security Market Code by consolidating the provisions of SEBI Act, 1992, Depositories Act, 1996, Securities Contracts (Regulation) Act, 1956 and Government Securities Act, 2007. This was announced by Union Minister for Finance and Corporate Aairs Nirmala Sitharaman, while presenting the Union Budget 2021-22 in Parliament. According to analysts, this move will improve ease of doing business in the country’s nancial markets, cut down compliances, reduce cost and do away with friction between various stakeholders. In order to instil condence among participants in the corporate bond market during times of stress and to generally enhance secondary market liquidity, the Budget has proposed to create a permanent institutional framework. The proposed body would purchase investment grade debt securities both in stressed and normal times and help in the development

The move will also

< > help to reduce the

volatility in secondary market yields of relatively lower rated bonds in the AA and A category

SUMAN CHOWDHURY, CHIEF ANALYTICAL OFFICER, ACUITÉ RATINGS & RESEARCH

of the bond market, the Finance Minister said. “While further details on the modus operandi for such a framework is awaited, it will clearly help to deepen the corporate bond market

which continues to face quidity challenges,” Sum Chowdhury, chief analytic ocer, Acuité Ratings & R search said. “In our opinion, this w be fairly positive for debt mutual funds particularly credit funds which had witnessed signicant outows last year due to poor liquidity in certain corporate papers,” he added. “This will also help to duce the volatility in seco dary market yields of re tively lower rated bonds the AA and A category,” M

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ECONOMY

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VIEWPOINT ASHOK P. HINDUJA Chairman, Hinduja Group of Companies (India)

‘Consumers will not be Finance Minister reiterates the levy will ensure enhanced re Special Correspondent NEW DELHI

Unmatched times, extraordinary Budget It is an unprecedented time; an extraordinary Budget was expected to put the economy back on track quickly with health and livelihood of people as the priority. The Finance Minister deserves to be complimented on presenting the best of what can be done under the circumstances. At the same time, situations as this serve as an opportunity for high-impact reforms, and we hope to see more of it coming during the year. The Finance Minister has presented a holistic, integrated and interconnected approach to health, livelihood and economic development without losing sight of making India a $5-trillion economy. The experience of handling COVID-19 successfully has given the Modi government high condence to do all the right things to help the economy recover, even by keeping the decit levels high for a short window of time. The COVID-19 situation has taught us and the rest of the world to being self-reliant in essential technologies and production capacities. So, building an Atmanirbhar Bharat is a logical next step. India has the potential to be the factory for the world. Manufacturing and the logistics infrastructure like warehousing, roads, rail network and the ports need to move to global standards of scale and eciency. Manufacturing and infrastructure can bring millions of jobs to our people. The Budget has addressed several enablers in this direction, like,

Pointing at an immediate need to improve agricultural infrastructure in the country, Finance Minister Nirmala Sitharaman on Monday announced an Agriculture Infrastructure and Development Cess (AIDC) on select items such as petrol, diesel, apples and alcohol. However, she stressed that this will not lead to an additional burden on the consumers. During the post-Budget interaction with the media, the FM said basic Customs Duty rates have been reduced on most items where AIDC is being imposed, so as to not put a burden on the end con-

sumer. She added that this would ensure enhanced remuneration for the farmers. “It is just a restructuring we’ve done. We reduced the Customs Duty and we levied a disproportionate amount of cess. So, it was not the exact amount of reduction in Customs Duty that we levied in the form of cess. For example, 10% was brought down for Customs, we have only added 5-6% [in AIDC], so the price for the end consumer has been reduced or in some cases has remained the same,” she said. She added that this has been done only to make sure that there is a dedicated amount coming out to the

Budget to improve agricul ral infrastructure. Additionally, AIDC of  per litre has been levied petrol and 4 per litre on d sel. However, the Basic E cise duty and Special Ad tional Excise Duty rates them have been reduced that there is no addition cost to the consumer. Siraj Hussain, former Ag culture Secretary, noted t Customs Duty was shar with the States, while t cess would go entirely to t Centre. It would have an i pact on sharing of resourc between the Centre and t States, and more clari would emerge once the  print of the Budget doc

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Voluntary vehicle

specialised manufacturing parks, infrastructure as in highways, railways and

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THE HINDU

DELHI

ECONOMY

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VIEWPOINT KUMAR MANGALAM BIRLA, Chairman, Aditya Birla Group

Govt. hopes to cut sca FY21 decit is seen at 9.5%; road map includes asset moneti Priscilla Jebaraj NEW DELHI

A vision statement for the country Over the years, we have seen bold budgets, pragmatic budgets, reformist budgets and workmanlike budgets. But Budget 2021 goes far beyond. This is the vision statement of a country on the cusp of real economic change. The Budget is built around the government’s credo of minimum government and maximum governance. It lays out an action plan to deliver on the Prime Minister’s clarion call for an ‘Atmanirbhar Bharat’. The Budget talks to the economic and business realities of the post-COVID world and gives primacy to reviving growth. The expansionary scal stance that enabled this growth push does not come as a surprise. The scal decit target of 6.8% for FY22 is reasonable and acknowledges the changed global economic landscape. The medium-term glide path of bringing down the scal decit to 4.5% of the GDP by FY26 is realistic and creates the scal space for more growth-enhancing measures. More importantly, the government has not been reckless in using this scal space. It is commendable that the Budget has targeted to reduce revenue expenditure in FY22 < > vis-à-vis the current Beyond the year, even while admirable and boosting the capex much-needed signicantly. This marks an improved quality of infrastructur...