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Nirmala Sitharaman’s Budget 2021 Focuses on What the Economy Needs—Investment in Infrastructure

Nirmala Sitharaman presents Union Budget 2021 in the Lok Sabha.

Nirmala Sitharaman presents Union Budget 2021 in the Lok Sabha.

A key takeaway from Finance Minister Nirmala Sitharaman’s Budget speech is the government’s focus on disinvestment, a major source for raising money for infrastructure investment.

The Budget 2021 presented by Union Minister of Finance Nirmala Sitharaman is expected to reinvigorate the economy post-pandemic. It has stressed on disinvestment and focused on infrastructure development and investment.

One of the most important points, in my opinion, is the government's focus on infrastructure in post-pandemic times—a major need of the economy. This is the main takeaway. This is because we have already suffered a contraction of the economy—an expected 7.7 per cent for 2020-21. For the next year, 2021-22, the GDP growth projection varies between 11-11.5 per cent. But practically speaking, we are looking at nearly 3 per cent increase by the end of two years. As a result, there is already a problem of unemployment, and a need to give the economy a boost—both these issues can be addressed with major investment in infrastructure.

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Further, the government has announced the capex budget will be up over 34 per cent to Rs 5.54 lakh crore and, in addition to this, there is a substantial allocation for roads and railways. Building the infrastructure requires men and material. It means more employment. It means encouragement to industries, which are struggling with low-capacity utilization.

We also have to appreciate the announcement made by the finance minister regarding the proposal for setting up of a new Development Financial Institution (DFI). The government will provide Rs 20,000 crore capital, but it is supposed to raise 5 lakh crore over the next three years for funding infrastructure. Our chambers’ recommendation has been on a much higher scale of fund raising for infrastructure through the DFI.

That the government is taking the issue of DFI seriously is a good start and a positive development.

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The other key takeaway from Finance Minister Nirmala Sitharaman’s Budget speech is the government’s focus on disinvestment, a major source for raising money for infrastructure investment. While strategic divestment of PSUs like BPCL, Air India will be completed in 2021-22, the plan to announce an IPO (initial public offering) for LIC is huge. Other plans include monetizing assets of power grids, railways, gas authorities and national highway authorities through InvITs (Infrastructure Investment Trust). With this, investors too can generate revenue.

The disinvestment plan has not gone too well in the past. For the year 2018-19, the disinvestment mop-up was 6 per cent more than the target, but thereafter, in 2019-2020, the government missed the target by an estimated Rs 14,700 crore. The disinvestment targets for 2020-21 have been missed because of the pandemic. We expect this year’s target, Rs 1.75 lakh crore, to be met.

Disclaimer:The author is President, PHD Chamber of Commerce and Industry. Views expressed are personal.

As told to News18.com

first published:February 01, 2021, 22:48 IST