Staving off recession: Big 8 proposals of Budget 2021

Desperate times need desperate measures. Here’s a look at some of the major announcements and why were they required

Representative photo: iStock

Union Budget 2021-22 introduced a slew of measures to lift up the economy, which is reeling under the negative impact of coronavirus pandemic.

The Federal gives a sneak peek into the proposals and how they can help turn the tide against an imminent recession.

  1. Production-linked incentive (PLI) scheme

Finance minister Nirmala Sitharaman has earmarked Rs 1.97 lakh crore for Production-linked incentive (PLI) scheme, whose scope has been expanded beyond the electronics segment.

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The funds, to be spent over the next 5 years, is beyond the Rs 40,951 crore already allotted for PLI in electronic manufacturing schemes.

The Centre clearly wants to draw global investment into manufacturing in India.

2. Health reforms

The Pradhan Mantri Atma Nirbhar Swasthya Bharat Yojana will support the National Health Mission. The new scheme has been given Rs 64,180 crore to build up primary, secondary and tertiary healthcare systems in the next six years.

The funds will also be utilized to set up centres for detection and cure of new diseases.

3. Power sector

To break the monopoly of power distribution companies (DISCOMS), the Centre has now given consumers the right to select the DISCOM of their choice.

The government hopes a healthy competition will improve the efficiency of DISCOMS and make them financially independent.

4. Divestment gets a boost

The government has set targets for strategic disinvestment of Container Corporation of India, Air India BPCL, Pawan Hans and IDBI Bank in the ensuing financial year. While these companies are being taken care of, Niti Aayog will identify more such public sector undertakings (PSUs) that are fit for divestment.

Understanding the financial stress that public sector banks are in right now, the government has decided to set up an Asset Reconstruction and Management Company for Stressed Assets to take over bad loans. Besides, the finance minister has made provision for a Rs 20,000 crore equity infusion to bail out public sector banks.

Also read: Boost for affordable housing: Additional tax cut of ₹1.5 lakh for interest extended

To shed its pro-corporate image and strengthen PSU banks, the Modi government has, for the first time since 2014, decided to set up a Big Bad Bank. The Asset Reconstruction Company will enable banks to improve its lending to productive sectors of the economy.

The FDI limit in insurance has been increased from 49% to 74%. Despite rolling out the red carpet for foreign investment, Indians will be in majority on board of directors.

Watch: What industry leaders are saying about Budget 2021

5. Development Financial Institution

A Development Financial Institution (DFI) will be set up with Rs 27,000 crore capital.

The funds will be used to finance social and economic infrastructure projects identified under the National Infrastructure Pipeline.

6.Voluntary scrapping of vehicles

Polluting vehicles can be taken off roads by the owner. A fitness test is mandatory for private vehicles beyond 20 years and commercial vehicles older than 15 years.

The decision will help the automobile sector sell more vehicles.

7. Gas transport

An autonomous gas transport system operator will ensure unbiased allocation of natural gas transportation capacity.

By doing so, the government wants to check biases in allocation of gas transportation capacity by companies that not just supply natural gas but transport it as well.

8. Ujjwala Yojana extended

The Modi government’s flagship Ujjwala Yojana, which aims to replace firewood as cooking fuel with LPG, will now be available for 1 crore additional families.

The yojana provides financial aid along with new LPG connections to poor households to promote clean cheap cooking fuel.

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