1.History of budget
The first budget of the India was submitted by James Wilson. P C Mahala Nobis and he is known as the father of Indian budget. The first Union budget of Independent India was presented by R.K. Shanukham Chetty and he is known as the father of the Independent Indian union budget. The budgets for the fiscal years 1959–61 to 1963–64, inclusive of the interim one for 1962–63, were presented by Morarji Desai and he was the only person who presented the union budget a greater number of times than anybody else.
Until 1999, the budget was announced at 5:00 pm on the last working day of the February of every year, the practice which was followed through the British colonial era. The budget in those days seems to raise the taxes and which gave an opportunity to work out change in the costs. This announcing budget in the evening was changed by Mr. Yaswant Sinha the then finance minister, who announced the budget at 11 am. This tradition has started from the year 2001.
Again in 2016, not following the colonial era tradition of presenting the budget on last working day of February has been changed to the 1st February of the year by the then finance minister Arun Jaitley from the Bharatiya Janata party led National Democratic Alliance government. And for the first time in Indian history Rail Budget was merged with the general budget which used to be presented separately until then.
The budget documents printing starts roughly a week before the actual presentation date in the parliament and Halwa Ceremony in which Halwa is prepared in huge quantities and served to the officers and support staff of the departments.
Until the year 2018, following the tradition, finance minister carried the budget in leather briefcase a tradition followed by R.K. Shanukham Chetty which was broken in the year 2019 by Nirmala Sitharaman the then finance minister who carried the budget in Bhai-Khata.
On 1st February 2021, Finance Minister Nirmala Sitharaman has presented the first ever paper less budget through an Indian made tablet due to the ongoing COVID-19 pandemic.
2. Budget comparison 2020-2021 Vs 2021-2022
- Total Expenditure: The government has proposed to spend Rs 30,42,230 crore during 2020-21 which is a 12.7% more than the revised estimate of previous budget. Of the total expenditure, revenue expenditure is estimated to be Rs 26,30,145 crore (11.9% growth) and capital expenditure is estimated to be Rs 4,12,085 crore (18.1% growth).
- Total Receipts: The government receipts (excluding borrowings) are estimated to be Rs 22,45,893 crore, which is an increase of 16.3% over the revised estimates of previous budget. The gap between these receipts and the expenditure will be plugged by borrowings, budgeted to be Rs 7,96,337 crore, an increase of 3.8% over the revised estimate of 2019-20.
- Transfer to states: The central government will distribute Rs 13,90,666 crore to states and union territories in 2020-21which is an increase of 17.1% over the revised estimates of the previous budget and includes devolution of Rs 7,84,181 crore to states, out of the centre’s share of taxes, and Rs 6,06,485 crore in the form of grants and loans.
- Deficits: Revenue deficit is targeted at 2.7% of GDP, and fiscal deficit is targeted at 3.5% of GDP in 2020-21. The target for primary deficit (which is fiscal deficit excluding interest payments) is 0.4% of GDP.
- GDP growth estimate: Despite the pandemic, the nominal GDP is estimated to grow at a rate of 10% in 2020-21 whereas the estimated nominal GDP growth rate for 2019-20 was 12%.
3. Biggest takeaways from the budget 2021-2022
- This is an expenditure budget as Finance Minister Nirmala Sitharaman has given space for imparting a fiscal impulse in the budget.
- Announcement of two public sector banks, one central government owned insurance company and LIC IPO is signaling this budget as a reform budget rather than populist centric one. Foreign Direct Investment in Insurance has been increased from 49% to 74%.
- COVID-19 pandemic has devastating effect on the common man. Despite that the Finance Minister has gone for any populist measures rather focused on the growth. Adjustment of the tax slabs which was the biggest takeaway from the previous budget for the common man was not altered in any manner which was again giving an indication that this government has focused on the growth.
- In the year which was significantly affected by the pandemic and health sector was the one which required the more focus that the other sectors, get its due in the current budget allocation. Health care budget allocation for the year 2020-2021 was Rs 94,452 crore which is significantly increased to Rs 2,23,846 crore for the year 2021-22, which is jump of 137%. A promise of Rs 35,000 crore for the COVID-19 Vaccine and further funds if required for the same.
- A decision which was pending for the last 6 years, The Bad Bank is to be set up which acts as asset reconstruction company that will take over the bad loans of banks, giving them flexibility to finance the economic recovery. Its hailed as good move by economic experts.
- Every government at the center will have an eye on the upcoming elections when it presents the budget which is natural allegation by opposition parties and this budget is not different too from the election centric ones. With the eye on the upcoming elections in key states like West Bengal, Tamilnadu, Kerala and Assam have been allocated with major road development projects, which may give the center a major political push that required to consolidate the power in the south and northeast region of the country.
4.BUDGET HIGHLIGHTS 2021
· DIRECT TAX PROPOSALS
Some of the direct tax proposals were introduced which provide relaxation to individual taxpayers and start-ups. The individual and corporate tax rates are unchanged from the previous year. The biggest move is that the limit for tax audits has been increased from Rs 5 crore to Rs 10 crore, which eventually provides relief for corporate houses. Below are the proposed amendments
Ø No tax for senior citizens of age 75 years or above – senior citizens of the given age and who have income source from pension and bank interests will be exempted from the tax deduction which could benefit them immensely.
Ø IT Proceedings processing time – assessment proceedings, in general, will be reopened only within three years but not six as it was earlier. However serious tax evasion is an exception to this time frame.
Ø Start-up tax incentive – In these difficult times of pandemic, govt has given a helping hand by proposing the tax holiday up to 31st March 2022.
Ø Proposal to remove double taxation for Non-Resident of India (NRI) – double taxation has been the hurdle for many NRI’s which is proposed to be removed.
- Indirect Tax Proposals
Items on which custom duty has been reduced. Below is the list of the items:
- Copper scrap duty has been reduced from 5% to 2.5%
- Basic and additional excise tax duty on petrol and diesel oil has been reduced both on branded and unbranded fuels.
- Raised duty on solar inverters from 5% to 20%
- Increased duty on solar lanterns from 5% to 15%
- On gold and silver, the basic custom duty has been reduced
- Concerned department will rationalize the duty on chemicals, textile and other products
- Agri Cess (Agriculture Infrastructure and Development Cess (AIDC)) has been imposed newly on diesel and petrol at Rs 4 and Rs 2.5 per litre respectively.
5. Does the budget address the income and wealth inequality?
The Narendra Modi led government is almost completed half its term and the economic miracle that people are expecting is nowhere to be seen. Across the world governments of respective countries blaming the COVID-19 pandemic for the economic slump, which may be the case even for India, however the economic policies of the current government are not great either.
The promise of jobs to the youth has never materialized, and economic growth has come down to 3.1% in march 2020. The only thing that has tremendous growth is in the wealth of billionaires. Their wealth rises by Rs 13 lakh crore, which is enough to give the poorest one percent almost a lakh rupee each.
Rising income and wealth inequality have been long term trends but there is little doubt that it has gathered momentum over the last six and half years of the Modi government as the centre of gravity of economic growth has shifted from bottom to the top. Trickledown economics in the time of COVID-19 surely means it would be a long time before consumption recovery reaches the people on the ground.
Even as the government says that the economic recovery will happen in next six months or so, there is loud chorus from the economic experts is that it may take few years because of the devastating effect of COVID-19 and economic policies of the current government. As far as the jobs are concerned for the young women and men, they may have to wait a few years to be able to find the better paying jobs, which would eventually help them lead better quality lives.
Overall, this budget may not plug the gap between the income and wealth between the poor and the rich as the previous ones, and most surprising fact is that the income and wealth of the rich people is significantly increased even during the pandemic.
6. Effects on common man
There will be direct effect on the common man due to the Agri cess imposed by the government on petroleum and disease products which is a daily use product, which would be a big burden for the people in middle and poor classes as the fuel cost is already making them pay high in their day-to-day activities. This Agri cess is only make their life difficult if not miserable. Even as the government is saying that they will reduce the other taxes so that this imposition of new cess will not affect the citizens is not likely the resolution aspect as far as this fuel price is concerned. People are not ready to pay the fuel price in the existing structure and increase of it may have serious effect on them.
Income tax slabs which were introduced in the previous has not been altered even in the current budget. Previous budget was without pandemic and people saw it as good move for the low wage employees. Employees have expected it to come down this time too, however dispensation at the centre is not ready to change it even with pandemic.
Reduction in the custom duty on gold and silver is a good move but in the pandemic world the buyers of these products are so less and which may be a benefit for the upper middle class, who may afford to buy gold and silver during these days.
7. WHAT BECOMES COSTLIER & CHEAPER POST UNION BUDGET 2021-22?
Well, every budget will have big-ticket announcements and it’s very hard to understand the terminology and big money figures for the general public. Our main understanding from the budget lies in the items or products which got cheaper or costlier to buy.
HERE IS THE LIST OF THE PRODUCTS WHICH BECOMES CHEAPER AFTER UNION BUDGET 2021-22
Iron and Steel melting scrapPrimary/Semi-finished products of non-alloy steel
Components or parts for aircraft manufacture by PSUs for Ministry of Defence
Waste & Scrap of Precious Metals
Gold and silver
HERE IS THE LIST OF THE PRODUCTS WHICH BECOMES COSTLIER AFTER UNION BUDGET 2021-22
- Petrol & Diesel: Agriculture Infrastructure & Development Cess (AIDC) of Rs 2.5 per litre & Rs 4 per litre to be imposed respectively
- Electronic items
- Mobile Phones
- Crude palm oil, soyabean & sunflower oil
- Apples, Peas, Kabuli Chana, Bengal Gram/Chick peas, Lentil
- Raw Silk and silk yarn
- Denatured ethyl alcohol for manufacture of excisable goods
- Prawn Feed
- Fish feed
- Flours, meals & pellets of fish, molluscs
- Maize Bran
- Carbon Black
- Leather, crust leather, finished leather of all kinds
- Tunnel Boring Machines
- Metal products – Screws, Nuts
- Compressor of Refrigerator & Air Conditioner
- Inputs and parts of LED lights
- Solar Inverters, lanterns or lamps
8. Politics and Union Budget
Every budget has its own merits and demerits based on the announcements by the government and finance minister. As a world largest democracy, we have seen a fair review of budget from which could be either favourable to the government or not. But the opposition parties which have freedom to express to their views on the budget will always react in negative way even without going into that.
Yesterday, immediately after the announcement of the budget, several political leaders across the party lines echoed their view in a negative way. There is strong point in their view that is the announcement of huge highway projects for the states which are going to the elections in the near future. Yes, this point is well accepted and the parties which are accusing the current administration for this have done the same mistake in the past may be in a different way. As far as politics around the budget are concerned, in multiparty democracy like India, every political party will try to consolidate their position in the key election states and in fact across the country. In that view the ruling Bharatiya Janata party led National Democratic Alliance is not different.
Finance minister Nirmala Sitharaman announced that this budget rests on the six pillars.
health and well-being,
physical, financial capital and infrastructure,
inclusive development for aspirational India,
reinvigorating human capital,
innovation and R&D
minimum government and maximum governance.
If these pillars are strengthened enough, the economy will automatically have a positive vibes and common man will have opportunities to have a better quality of life.
Article by = Srikanthreddy Gangireddy