The Union Budget 2021-22 has been the most awaited, and most anticipated event in the country. Nirmala Sitharaman, the Finance Minister of India presented the Budget in parliament on 1 February 2021 amidst various expectations and speculations. The COVID 19 all through 2020 has brought a regime of doubts, uncertainty and speculations, and in the time people of India has been looking at the budget with great expectations. The Budget was pronounced and brought mixed reactions from the people. We spoke to the industry and some of the industry experts have passed their following points of view – some excerpts:
The Union Budget FY 2021-22 is a transformative budget with positive resolve for India to grow further with a vision of the Atmanirbhar Bharat Abhiyan that compliments the ‘Make-in-India’ initiative of the Government. Atmanirbhar Bharat is an expression of 130 crore Indians, who have full confidence in their capabilities and skills. The union budget has identified the six pillars of Atmanirbhar Bharat’s vision. On behalf of Prama Hikvision, we welcome the progressive and visionary budget and look forward to economic growth and stability.
The budget has sincere intent to provide momentum to strengthen local manufacturing capabilities. The production linked incentive scheme (PLI) is a welcome move by the government. The review of the customs duty structure is clearly seen as a move towards promoting the domestic manufacturing. We hope that the review of the custom duty structure will be done after extensive consultation with the key stakeholders.
As India is set out to become the third-largest security industry in the world, we are striving to accelerate and build on this momentum of local manufacturing. The Indian security industry has seen the self-reliance push in the union budget 2021. We are hopeful that the proposed customs duty hikes on key electronic components will further give boost to the ‘Make-in-India’ 2.0. Smart cities mission is an important driver of growth in the security industry, which has got a big boost in the union budget 2021-22 with allocation of Rs.6450 crore.
The move to strengthen the overall research ecosystem to boost innovation and R&D in the country, an outlay of Rs.50,000 crore has been announced for National Research Foundation. It is a big step for accelerating innovation and R&D in India. The budget clearly shows government’s mega thrust on developing infrastructure, road transport, waterways, airports, railway, metro rail, ‘MetroLite’ and ‘MetroNeo.’ It is commendable for its inclusive growth agenda, overall a gradual step toward Atmanirbhar Bharat.
Union budget 2021 presented by Nirmala Sitharaman, the Union Finance Minister of India on 01 February 2021 was a turning point and a landmark budget which is appreciated by all sections of industry acknowledging the bold initiatives, intent and paradigm shift in strategic planning to propel the growth of Indian economy on the vision of ‘Atmanirbhar Bharat’,‘Self Reliant India’ and ‘Digital India.’ Muted criticism in a democracy like India proves the degree of acceptance. To me, it gave a feeling of ‘1991 moment’ when India took unprecedented acceleration in reforms. The major structural shift in policy reflects Central Govt’s resoluteness and strong conviction to achieve strategic independence by reduction in imports; unlike in past most of the Govt’s drafted the budget with an eye on the vote bank.
Likely impact on the Private Security Industry (PSI)
The private security industry does not fall into the bracket of manufacturing segment; it is grossly a service industry. This union budget is likely to have a significant impact on the private security industry in the following ways:
- Huge investment in infrastructure development like highways, metro rail, air ports, SEZ and sea ports etc., is going to increase business opportunity for providing security and allied services like toll tax management.
- Disallowing delayed deposit of PF as expenses will compel us to ensure its timely deposit.
- Reduced time limit for reopening of tax assessments to 3 years and establishment of faceless Income Tax Tribunals would reduce harassment.
- Announcement of voluntary scrapping policy to phase out polluting vehicles is likely to impact all PSIs but more so those providing CIT services.
Impact of increase in custom duty on electronic items on PSI
PSAs use a large number of electronic items like mobile phones, surveillance equipment, PCs, servers and related equipment. The increase in import duty on these therefore is likely to increase the cost to the private security agencies. These cost increment would be mostly applicable to the procurement of new equipment. Existing electronic equipment already being held will have the impact only in their repairs or upgrading.
Rationale of Govt’s imposition of additional custom duty
The government proposed to impose import duty on components of mobile phones and chargers as a part of review of 400 exemptions in customs duty including those applicable on the mobile devices segment. Govt cited following rationale for its action:
- To enhance local value addition.
- To align the thrust on easy access to raw materials and exports of value addition.
- To ensure twin objectives of promoting domestic manufacturing and helping India get on to global value chain and exports.
Conclusion
The Central Govt’s move to make India a manufacturing hub by boosting domestic manufacturing and to transform it as part of global supply chain as an intent and strategy not only sounds good but appears to be viable. Domestic manufacturing is getting a leg up in allocation of funds and recent procurement orders for instance are TEJAS from HAL with LCH in pipeline and latest version of ARJUN from DRDO, ATAG gun from Bharat Forge, drones from a startup and ship building. Domestic manufacturers of mobile phones like DIXON Technology and household electrical appliances by Amber Enterprises are likely to scale up manufacturing and reduce share of imports. Even during COVID 19 pandemic Indian domestic manufacturers played vital and major role in manufacturing of PPEs, medical devices, ventilators and ICU beds to reduce dependence on imports. In my view, the rhetoric of ICEA which is umbrella body for the mobile manufacturers should be taken with a pinch of salt. India must be able to gain a position of strength in manufacturing to counter the coercive protectionist trade policies of China and other nations to safeguard its national interests.
The fiscal deficit for 2020-21 was estimated at 9.5% of GDP, the government’s aim is to bring it down by 5% of the GDP by 2025-26 which is ambitious and certainly a welcoming initiative. The highlight in this budget is the announcement of the asset reconstruction company and asset management company to help banks tackle bad loans which have been a call by economists for many years. The significance given to the investments and initiatives in the infrastructure development with a few coming under the PPP model will boost the overall development which includes increased investment opportunity from various sectors.
The government’s proposal to use data analytics, artificial intelligence, machine learning-driven tools for the Ministry of Corporate Affairs’ database is a boost to the digitalization where the version 3.0 of MCA-21 includes additional modules for e-scrutiny, e-adjudication, e-consultation and compliance management. Connecting more than 1,000 mandis into e-NAM is an excellent move. Setting up a separate administration structure for ease of doing business would help many organizations from various sectors. The faceless dispute resolution panel would help the citizens by keeping them safe from tax harassment. The importance given to healthcare sector to fight Covid and any future healthcare issues, the stress made in green energy projects like keeping aside Rs.1,000 crore for solar energy and Rs.1,500 crore for renewable energy along with voluntary scrapping policy and the weightage given to education has made this budget wholesome.
Budget 2021 is positive given the challenge around higher fiscal deficit due to lower income. It is great to see emphasis on growth front keeping fiscal deficit priority low for the next 2-3 years. The key highlights of the budget include additional allocation to health and well being in a Covid ravaged year with Rs.35,000 crore allocation to Covid vaccination with 4 Indian vaccines shortly. It is also great to see 35% enhancement of Government capital expenditure at Rs.5.54 lac crore to revive economy around road, rail and metro infrastructure. It is encouraging to see focus around disinvestment with 2 PSU banks and 1 insurance company being planned for the year with Rs.1.75 lac crore target. FDI in insurance enhancement from 49% to 74% augers well for a country with very low penetration. The voluntary vehicle scrapping policy is set to help auto sector and address the pollution challenges. While Rs.20,000 crore PSU bank recapitalisation looks on the lower side, reopening of IT assessment cases period reduction from 6 to 3 years should give comfort to tax payers on documentation. Planned LIC IPO should set the mood right on disinvestment. The government could have put more money in the hands of people to sustain the recovery along with sops to business on CapEx investments.
Regressive rules had certainly affected the ease of doing business for many organizations and start-ups. However, the government’s announcement of establishing a separate administrative structure especially for ease of doing business will help many organizations benefit in the future. Revision of the definition of small companies by raising the capital base to Rs.2 crore from the current limit of Rs.50 lakh will give a big boost to companies affecting their monetary status. Though not much of changes have been made in terms of income tax slabs, the move to make changes in tax evasion has instilled confidence in common man that they would not be facing tax harassment. Earmarking Rs.1,500 crore for promoting digital mode of payment and changing the tax audit limit from Rs.5 crore to Rs.10 crore will benefit many and will allow transparency. Hiking of FDI from 49% to 74% is a good move. The announcement that the forthcoming census would be digital shows the government’s initiative to practice what is being preached. On the other end, the emphasis on education, power and infrastructure sector will support the overall development of the nation.
The Finance Minister Nirmala Sitharaman really gave a booster shot to the sagging economy by announcing plenty of stimulus measures that will benefit various sectors. While the main thrust is on health, infrastructure, agriculture, rural developments multiple industries such as banking, housing, manufacturing, railways, realty, road transport also get large benefits in this positive and progressive budget.
Her budget proposals resting on the six pillars namely health & well being; physical, financial capital & infrastructure; inclusive development & aspirational India; reinvigorating human capital; innovation & R&D; and minimum government & maximum governance is indeed laudable for they have laid the foundation for the future growth.
Many takeaways such as FDI in insurance increased to 74% from 49%, no IT filing for people above 75 years who get pension and earn interest from deposits, tax relief & no double taxation for NRIs, new incentives & tax holidays for start-ups extended by one more year, Rs.1.75 Lakh crores target for Disinvestment, disinvestment of 2 PSBs, additional 11,500 kms highways, 13000 kms roads under construction, national railway plan by 2030 will spur the Indian economy.
Besides, measures like aid to farmers of Rs.75050 crore, paddy MSP more than double in current year, 1.5 crore farmers benefiting from increased MSP, 16.5 lakh crore for agriculture credit, 40,000 crore for rural infra, Rs.1,500 crore to promote e-payments, census to go digital, Rs.3768 crore for digital census will take India to a new level.
Now it is for the industries to make use of the ideal climate created by the Government and march ahead to make India strong and prosperous.
Increased spend on healthcare and infra are welcome moves – as this will have a cascading effect on the economy in the medium term. Whether it is highways or railways the enhanced allocation is very encouraging. Also interesting is the ‘bad bank’ which will help address the stressed assets through an ARC model. This will help keep the banking system insulated from the spike of bad loans that are expected now – thereby allowing them to do business as usual by giving the much-needed support of credit in the system. The MSME allocation has been doubled – this too will help SME businesses in general which is a big market for us in the country.
Support for furthering the idea of Digital India is also seen and it is very welcome – encouraging digital payments and the use of AI/ ML in governance is exciting. Emphasis on digital payment is very good as this will go a long way in bringing in financial inclusion. Provisions in the GST and customs duty rationalization is something we look forward to.
The Union Budget 2021 augurs well for the economy and markets overall. With the aggressive investment, monetization, and recapitalization initiatives, the Government is taking steps towards getting the economy back on the rails. The focus on infrastructure, public transport, and highways will see a jump-starting of multiple tracks of the economy. For the IT sector, this will translate into an increase in projects, business, and interventions that will be needed to support all these economic programs. Another good move for the IT sector was that the tax holiday for start-ups has been extended by one year and exemption on capital gains on investment in start-ups extended by one year. India has always been a resilient economy and these efforts will provide the elevation we need to take off and lead in the coming years.
Budget 2021 lays a strong foundation in infrastructure, health and education. It provides a big boost in making India a leader in the world economy and manufacturing hub of the world. Not only does it give an impetus to easing in doing business in India, it also gives a big push to rural development, which was impacted the most during the pandemic. The budget has a vision of Aatmanirbhar Bharat and will motivate Indian entrepreneurs to make products in India for the world. Overall it is a pro-growth budget and will further fuel the growth of Indian IT companies with its strong focus on Digital India.
