Union Budget 2021 | A Budget to boost economic recovery: IIFL’s Nirmal Jain

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 like COVID-tax, long-term capital gains tax, or wealth tax as was expected by the market.

On the Finance Minister’s part, I would say this was a masterstroke as she ensured that the sentiment is not affected as it is essential to raise money for disinvestment as well as for privatisation.

There were important announcements on the infrastructure front like establishment of a Development Finance Institution (DFI) to boost long-term financing for the country’s infrastructure sector, allow Foreign Portfolio Investors to debt finance REITs and InvITs after necessary amendments to the law.

Budget has allocated ₹20,000 crore for the DFI, with an ambition for the lender to have a portfolio of ₹5 lakh crore within three years’ time.

Another positive news is the 34.5% increase in the capital expenditure target in this year’s Budget to ₹5.54 lakh crore for financial 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 capex expenditure was reduced to 16% from 18% earlier. I believe the increase in capex is important because it will boost investments, create jobs and will aid economic recovery.

Broadly, if you see the Budget is drafted keeping in mind the needs of all sectors. On divestment front, I think the ₹1.75 lakh crore, which includes divestment of two PSU banks and one general insurance company is easily achievable. FDI in insurance sector will be increased to 74%. These are bold and decisive moves considering the crucial times we are in and will go a long way in pushing economic growth to a higher trajectory.

Also, if you look at execution, the government’s track record is good. From all these factors, I believe the V-shaped recovery could happen faster. Also, this will boost sentiment for foreign investors and they will start investing again with large flows likely to come into Indian equities.

Overall, this Budget is a step in the right direction. If India wants to create an economy at par or greater than China, we need to continue with our reforms like this for the next two decades. If we want to become the manufacturing base for the world, we need reforms at this scale and without any negative tax surprises. This Budget reflects the much needed intent and decisiveness. To take India to greater heights, all we need is that the momentum should continue.

(Nirmal Jain is Founder and Chairman of IIFL)