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IT Dept. conducts searches in Kolkata, deducts concealment of income amounting to Rs. 309 crore

Government of India

Department of Revenue

Ministry of Finance

Central Board of Direct Taxes

New Delhi, 1st February, 2021

PRESS RELEASE

Income Tax Department conducts searches in Kolkata

The Income Tax Department carried out search and seizure action on 29.01.2021 on the group based in Kolkata, engaged in the business of manufacturing of iron & steel and tea. The cases were developed based on the available data in the departmental database, analysis of their financial statements, on market intelligence and field enquiries. Search and seizure action was carried out at more than 25 premises of Kolkata, Jamshedpur, Bhubaneswar, Hyderabad, Mumbai and other places.

The search action has resulted in unearthing of incriminating evidences revealing various shell entities being used for raising bogus share capital/unsecured loans. Evidence of out of the books cash transactions has also been found. During the course of search proceedings, as a result of enquiries conducted, it is established that the persons of the group have used paper/shell companies to route back their own unaccounted money. A total concealment of income amounting to Rs. 309 crore has been detected so far. The assessees have made an admission of undisclosed income amounting to Rs. 175 crore.

Further investigations are in progress.

(Surabhi Ahluwalia)

Commissioner of Income Tax

(Media & Technical Policy)

Official Spokesperson, CBDT

Key Highlights of Union Budget 2021-22

Ministry of Finance

Key Highlights of Union Budget 2021-22

Dated: 01 FEB 2021

Presenting the first ever digital Union Budget, Union Minister of Finance and Corporate Affairs Smt. Nirmala Sitharaman stated that India’s fight against COVID-19 continues into 2021 and that this moment in history, when the political, economic, and strategic relations in the post-COVID world are changing, is the dawn of a new era – one in which India is well-poised to truly be the land of promise and hope.

The key highlights of the Union Budget 2021-22 are as follows:

6 pillars of the Union Budget 2021-22:

Health and Wellbeing
Physical & Financial Capital, and Infrastructure
Inclusive Development for Aspirational India
Reinvigorating Human Capital
Innovation and R&D
Minimum Government and Maximum Governance

Health and Wellbeing

Rs. 2,23,846 crore outlay for Health and Wellbeing in BE 2021-22 as against Rs. 94,452 crore in BE 2020-21 – an increase of 137%
Focus on strengthening three areas: Preventive, Curative, and Wellbeing
Steps being taken for improving health and wellbeing:

Vaccines

Rs. 35,000 crore for COVID-19 vaccine in BE 2021-22
The Made-in-India Pneumococcal Vaccine to be rolled out across the country, from present 5 states – to avert 50,000 child deaths annually

Health Systems

Rs. 64,180 crore outlay over 6 years for PM AatmaNirbhar Swasth Bharat Yojana – a new centrally sponsored scheme to be launched, in addition to NHM
Main interventions under PM AatmaNirbhar Swasth Bharat Yojana:

National Institution for One Health
17,788 rural and 11,024 urban Health and Wellness Centers
4 regional National Institutes for Virology
15 Health Emergency Operation Centers and 2 mobile hospitals
Integrated public health labs in all districts and 3382 block public health units in 11 states
Critical care hospital blocks in 602 districts and 12 central institutions
Strengthening of the National Centre for Disease Control (NCDC), its 5 regional branches and 20 metropolitan health surveillance units
Expansion of the Integrated Health Information Portal to all States/UTs to connect all public health labs
17 new Public Health Units and strengthening of 33 existing Public Health Units
Regional Research Platform for WHO South-East Asia Region
9 Bio-Safety Level III laboratories

Nutrition

Mission Poshan 2.0 to be launched:

To strengthen nutritional content, delivery, outreach, and outcome
Merging the Supplementary Nutrition Programme and the Poshan Abhiyan
Intensified strategy to be adopted to improve nutritional outcomes across 112 Aspirational Districts

Universal Coverage of Water Supply

Rs. 2,87,000 crore over 5 years for Jal Jeevan Mission (Urban) - to be launched with an aim to provide:

2.86 crore household tap connections
Universal water supply in all 4,378 Urban Local Bodies
Liquid waste management in 500 AMRUT cities

Swachch Bharat, Swasth Bharat

Rs. 1,41,678 crore over 5 years for Urban Swachh Bharat Mission 2.0
Main interventions under Swachh Bharat Mission (Urban) 2.0:

Complete faecal sludge management and waste water treatment
Source segregation of garbage
Reduction in single-use plastic
Reduction in air pollution by effectively managing waste from construction-and-demolition activities
Bio-remediation of all legacy dump sites

Clean Air

Rs. 2,217 crore to tackle air pollution, for 42 urban centers with a million-plus population

Scrapping Policy

Voluntary vehicle scrapping policy to phase out old and unfit vehicles
Fitness tests in automated fitness centres:

After 20 years in case of personal vehicles
After 15 years in case of commercial vehicles

2. Physical and Financial Capital and Infrastructure

Production Linked Incentive scheme (PLI)

Rs. 1.97 lakh crore in next 5 years for PLI schemes in 13 Sectors
To create and nurture manufacturing global champions for an AatmaNirbhar Bharat
To help manufacturing companies become an integral part of global supply chains, possess core competence and cutting-edge technology
To bring scale and size in key sectors
To provide jobs to the youth

Textiles

Mega Investment Textiles Parks (MITRA) scheme, in addition to PLI:

7 Textile Parks to be established over 3 years

Textile industry to become globally competitive, attract large investments and boost employment generation & exports

Infrastructure

National Infrastructure Pipeline (NIP) expanded to 7,400 projects:

Around 217 projects worth Rs. 1.10 lakh crore completed

Measures in three thrust areas to increase funding for NIP:

Creation of institutional structures
Big thrust on monetizing assets
Enhancing the share of capital expenditure

Creation of institutional structures: Infrastructure Financing

Rs. 20,000 crore to set up and capitalise a Development Financial Institution(DFI) – to act as a provider, enabler and catalyst for infrastructure financing
Rs. 5 lakh crore lending portfolio to be created under the proposed DFI in 3 years
Debt Financing by Foreign Portfolio Investors to be enabled by amending InvITs’ and REITs’ legislations

Big thrust on monetizing assets

National Monetization Pipeline to be launched
Important asset monetization measures:

5 operational toll roads worth Rs. 5,000 crore being transferred to the NHAIInvIT
Transmission assets worth Rs. 7,000 crore to be transferred to the PGCILInvIT
Dedicated Freight Corridor assets to be monetized by Railways, for operations and maintenance, after commissioning
Next lot of Airports to be monetized for operations and management concession
Other core infrastructure assets to be rolled out under the Asset Monetization Programme:
- Oil and Gas Pipelines of GAIL, IOCL and HPCL
- AAI Airports in Tier II and III cities
- Other Railway Infrastructure Assets
- Warehousing Assets of CPSEs such as Central Warehousing Corporation and NAFED
- Sports Stadiums

Sharp Increase in Capital Budget

Rs. 5.54 lakh crore capital expenditure in BE 2021-22 – sharp increase of 34.5% over Rs. 4.12 lakh crore allocated in BE 2020-21 :

Over Rs. 2 lakh crore to States and Autonomous Bodies for their Capital Expenditure.
Over Rs. 44,000 crore for the Department of Economic Affairs to provide for projects/programmes/departments exhibiting good progress on Capital Expenditure

Roads and Highways Infrastructure

Rs. 1,18,101 lakh crore, highest ever outlay, for Ministry of Road Transport and Highways – of which Rs. 1,08,230 crore is for capital
Under the Rs. 5.35 lakh crore Bharatmala Pariyojana, more than 13,000 km length of roads worth Rs. 3.3 lakh crore awarded for construction:

3,800 km have already been constructed
Another 8,500 km to be awarded for construction by March 2022
Additional 11,000 km of national highway corridors to be completed by March 2022

Economic corridors being planned:

Rs. 1.03 lakh crore outlay for 3,500 km of NHs in Tamil Nadu
Rs. 65,000 crore investment for 1,100 km of NHs in Kerala
Rs. 25,000 crore for 675 km of NHs in West Bengal
Over Rs. 34,000 crore to be allocated for 1300 km of NHs to be undertaken in next 3 years in Assam, in addition to Rs. 19,000 crore works of NHs currently in progress in the State

Flagship Corridors/Expressways:

Delhi-Mumbai Expressway – Remaining 260 km to be awarded before 31.3.2021
Bengaluru-Chennai Expressway – 278 km to be initiated in the current FY; construction to begin in 2021-22
Kanpur-Lucknow Expressway – 63 km expressway providing an alternate route to NH 27 to be initiated in 2021-22
Delhi-Dehradun economic corridor – 210 km to be initiated in the current FY; construction to begin in 2021-22
Raipur-Vishakhapatnam – 464 km passing through Chhattisgarh, Odisha and North Andhra Pradesh, to be awarded in the current year; construction to start in 2021-22
Chennai-Salem corridor – 277 km expressway to be awarded and construction to start in 2021-22
Amritsar-Jamnagar – Construction to commence in 2021-22
Delhi-Katra – Construction will commence in 2021-22

Advanced Traffic management system in all new 4 and 6-lane highways:

Speed radars
Variable message signboards
GPS enabled recovery vans will be installed

Railway Infrastructure

Rs. 1,10,055 crore for Railways of which Rs. 1,07,100 crore is for capital expenditure
National Rail Plan for India (2030): to create a ‘future ready’ Railway system by 2030
100% electrification of Broad-Gauge routes to be completed by December, 2023
Broad Gauge Route Kilometers (RKM) electrification to reach 46,000 RKM, i.e. 72% by end of 2021
Western Dedicated Freight Corridor (DFC) and Eastern DFC to be commissioned by June 2022, to bring down the logistic costs – enabling Make in India strategy
Additional initiatives proposed:

The Sonnagar-Gomoh Section (263.7 km) of Eastern DFC to be taken up in PPP mode in 2021-22
Future dedicated freight corridor projects –

East Coast corridor from Kharagpur to Vijayawada
East-West Corridor from Bhusaval to Kharagpur to Dankuni
North-South corridor from Itarsi to Vijayawada

Measures for passenger convenience and safety:

Aesthetically designed Vista Dome LHB coach on tourist routes for better travel
High density network and highly utilized network routes to have an indigenously developed automatic train protection system, eliminating train collision due to human error

Urban Infrastructure

Raising the share of public transport in urban areas by expansion of metro rail network and augmentation of city bus service
Rs. 18,000 crore for a new scheme, to augment public bus transport:

Innovative PPP models to run more than 20,000 buses
To boost automobile sector, provide fillip to economic growth, create employment opportunities for our youth

A total of 702 km of conventional metro is operational and another 1,016 km of metro and RRTS is under construction in 27 cities
‘MetroLite’ and ‘MetroNeo’ technologies to provide metro rail systems at much lesser cost with similar experience in Tier-2 cities and peripheral areas of Tier-1 cities.
Central counterpart funding to:

Kochi Metro Railway Phase-II of 11.5 km at a cost of Rs. 1957.05 crore
Chennai Metro Railway Phase –II of 118.9 km at a cost of Rs. 63,246 crore
Bengaluru Metro Railway Project Phase 2A and 2B of 58.19 km at a cost of Rs. 14,788 crore
Nagpur Metro Rail Project Phase-II and Nashik Metro at a cost of Rs. 5,976 crore and Rs. 2,092 crore respectively.

Power Infrastructure

139 Giga Watts of installed capacity and 1.41 lakh circuit km of transmission lines added, and additional 2.8 crore households connected in past 6 years
Consumers to have alternatives to choose the Distribution Company for enhancing competitiveness
Rs. 3,05,984 crore over 5 years for a revamped, reforms-based and result-linked new power distribution sector scheme
A comprehensive National Hydrogen Energy Mission 2021-22 to be launched

Ports, Shipping, Waterways

Rs. 2,000 crore worth 7 projects to be offered in PPP-mode in FY21-22 for operation of major ports
Indian shipping companies to get Rs. 1624 crore worth subsidy support over 5 years in global tenders of Ministries and CPSEs
To double the recycling capacity of around 4.5 Million Light Displacement Tonne (LDT) by 2024; to generate an additional 1.5 lakh jobs

Petroleum & Natural Gas

Extention of Ujjwala Scheme to cover 1 crore more beneficiaries
To add 100 more districts to the City Gas Distribution network in next 3 years
A new gas pipeline project in J&K
An independent Gas Transport System Operator to be set up for facilitation and coordination of booking of common carrier capacity in all-natural gas pipelines on a non-discriminatory open access basis

Financial Capital

A single Securities Markets Code to be evolved
Support for development of a world class Fin-Tech hub at the GIFT-IFSC
A new permanent institutional framework to help in development of Bond market by purchasing investment grade debt securities both in stressed and normal times
Setting up a system of Regulated Gold Exchanges: SEBI to be notified as a regulator and Warehousing Development and Regulatory Authority to be strengthened
To develop an investor charter as a right of all financial investors
Capital infusion of Rs. 1,000 crore to Solar Energy Corporation of India and Rs. 1,500 crore to Indian Renewable Energy Development Agency

Increasing FDI in Insurance Sector

To increase the permissible FDI limit from 49% to 74% and allow foreign ownership and control with safeguards

Stressed Asset Resolution

Asset Reconstruction Company Limited and Asset Management Company to be set up

Recapitalization of PSBs

Rs. 20,000 crore in 2021-22 to further consolidate the financial capacity of PSBs

Deposit Insurance

Amendments to the DICGC Act, 1961, to help depositors get an easy and time-bound access to their deposits to the extent of the deposit insurance cover
Minimum loan size eligible for debt recovery under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 proposed to be reduced from Rs. 50 lakh to Rs. 20 lakh for NBFCs with minimum asset size of Rs. 100 crore

Company Matters

To decriminalize the Limited Liability Partnership (LLP) Act, 2008
Easing Compliance requirement of Small companies by revising their definition under Companies Act, 2013 by increasing their thresholds for Paid up capital from “not exceeding Rs. 50 Lakh” to “not exceeding Rs. 2 Crore” and turnover from “not exceeding Rs. 2 Crore” to “not exceeding Rs. 20 Cr”.
Promoting start-ups and innovators by incentivizing the incorporation of One Person Companies (OPCs):

Allowing their growth without any restrictions on paid up capital and turnover
Allowing their conversion into any other type of company at any time,
Reducing the residency limit for an Indian citizen to set up an OPC from 182 days to 120 days and
Allowing Non Resident Indians (NRIs) to incorporate OPCs in India.

To ensure faster resolution of cases by:

Strengthening NCLT framework
Implementation of e-Courts system
Introduction of alternate methods of debt resolution and special framework for MSMEs

Launch of data analytics, artificial intelligence, machine learning driven MCA21 Version 3.0 in 2021-22

Disinvestment and Strategic Sale

Rs. 1,75,000 crore estimated receipts from disinvestment in BE 2020-21
Strategic disinvestment of BPCL, Air India, Shipping Corporation of India, Container Corporation of India, IDBI Bank, BEML, Pawan Hans, Neelachal Ispat Nigam limited etc. to be completed in 2021-22.
Other than IDBI Bank, two Public Sector Banks and one General Insurance company to be privatized
IPO of LIC in 2021-22
New policy for Strategic Disinvestment approved; CPSEs except in four strategic areas to be privatized
NITI Aayog to work out on the next list of CPSEs to be taken up for strategic disinvestment
Incentivizing States for disinvestment of their Public Sector Companies, using central funds
Special Purpose Vehicle in the form of a company to monetize idle land
Introducing a revised mechanism for ensuring timely closure of sick or loss making CPSEsGovernment Financial Reforms
Treasury Single Account (TSA) System for Autonomous Bodies to be extended for universal application
Separate Administrative Structure to streamline the ‘Ease of Doing Business’ for Cooperatives

Inclusive Development for Aspirational India

Agriculture

Ensured MSP at minimum 1.5 times the cost of production across all commodities.
With steady increase in the procurement, payment to farmers increased as under:

(in Rs. crore)

	2013-14	2019-20	2020-21
Wheat	Rs. 33,874	Rs. 62,802	Rs. 75,060
Rice	Rs. 63,928	Rs. 1,41,930	Rs. 172,752
Pulses	Rs. 236	Rs. 8,285	Rs. 10,530

SWAMITVA Scheme to be extended to all States/UTs, 1.80 lakh property-owners in 1,241 villages have already been provided cards
Agricultural credit target enhanced to Rs. 16.5 lakh crore in FY22 - animal husbandry, dairy, and fisheries to be the focus areas
Rural Infrastructure Development Fund to be enhanced to Rs. 40,000 crore from Rs. 30,000 crore
To double the Micro Irrigation Fund to Rs. 10,000 crore
‘Operation Green Scheme’ to be extended to 22 perishable products, to boost value addition in agriculture and allied products
Around 1.68 crore farmers registered and Rs. 1.14 lakh crore of trade value carried out through e-NAMs; 1,000 more mandis to be integrated with e-NAM to bring transparency and competitiveness.
APMCs to get access to the Agriculture Infrastructure Funds for augmenting infrastructure facilities

Fisheries

Investments to develop modern fishing harbours and fish landing centres – both marine and inland
5 major fishing harbours – Kochi, Chennai, Visakhapatnam, Paradip, and Petuaghat to be developed as hubs of economic activity
Multipurpose Seaweed Park in Tamil Nadu to promote seaweed cultivation

Migrant Workers and Labourers

One Nation One Ration Card scheme for beneficiaries to claim rations anywhere in the country - migrant workers to benefit the most

Scheme implementation so far covered 86% of beneficiaries across 32 States and UTs
Remaining 4 states to be integrated in next few months

Portal to collect information on unorganized labour force, migrant workers especially, to help formulate schemes for them
Implementation of 4 labour codes underway

Social security benefits for gig and platform workers too
minimum wages and coverage under the Employees State Insurance Corporation applicable for all categories of workers
Women workers allowed in all categories, including night-shifts with adequate protection
Compliance burden on employers reduced with single registration and licensing, and online returns

Financial Inclusion

Under Stand Up India Scheme for SCs, STs and women,

Margin money requirement reduced to 15%
To also include loans for allied agricultural activities

Rs. 15,700 crore budget allocation to MSME Sector, more than double of this year’s BE

4. Reinvigorating Human Capital

School Education

15,000 schools to be strengthened by implementing all NEP components. Shall act as exemplar schools in their regions for mentoring others
100 new Sainik Schools to be set up in partnership with NGOs/private schools/states

Higher Education

Legislation to be introduced to setup Higher Education Commission of India as an umbrella body with 4 separate vehicles for standard-setting, accreditation, regulation, and funding
Creation of formal umbrella structure to cover all Govt. colleges, universities, research institutions in a city for greater synergy.

Glue grant to implement the same across 9 cities

Central University to come up in Leh for accessibility of higher education in Ladakh

Scheduled Castes and Scheduled Tribes Welfare

750 Eklavya model residential schools in tribal areas:

Unit cost of each school to be increased to Rs. 38 crore
For hilly and difficult areas, to Rs. 48 crore
Focus on creation of robust infrastructure facilities for tribal students

Revamped Post Matric Scholarship Scheme for welfare of SCs

Rs. 35,219 crore enhanced Central Assistance for 6 years till 2025-2026
4 crore SC students to benefit

Skilling

Proposed amendment to Apprenticeship Act to enhance opportunities for youth
Rs. 3000 crore for realignment of existing National Apprenticeship Training Scheme (NATS) towards post-education apprenticeship, training of graduates and diploma holders in Engineering
Initiatives for partnership with other countries in skilling to be taken forward, similar to partnership:

With UAE to benchmark skill qualifications, assessment, certification, and deployment of certified workforce
With Japan for a collaborative Training Inter Training Programme (TITP) to transfer of skills, technique and knowledge

Innovation and R&D

· Modalities of National Research Foundation announced in July 2019 –

Rs. 50,000 crore outlay over 5 years
To strengthen overall research ecosystem with focus on national-priority thrust areas

Rs. 1,500 crore for proposed scheme to promote digital modes of payment
National Language Translation Mission (NTLM) to make governance-and-policy related knowledge available in major Indian languages

· PSLV-CS51 to be launched by New Space India Limited (NSIL) carrying Brazil’s Amazonia Satellite and some Indian satellites

As part of the Gaganyaan mission activities:
- 4 Indian astronauts being trained on Generic Space Flight aspects, in Russia
- First unmanned launch is slated for December 2021
Rs. 4,000 crore over five years for Deep Ocean Mission survey exploration and conservation of deep sea biodiversity

Minimum Government, Maximum Governance

Measures being undertaken to bring reforms in Tribunals to ensure speedy justice
National Commission for Allied Healthcare Professionals already introduced to ensure transparent and efficient regulation of the 56 allied healthcare professions
The National Nursing and Midwifery Commission Bill introduced for the same in nursing profession

· Proposed Conciliation Mechanism with mandate for quick resolution of contractual disputes with CPSEs

Rs. 3,768 crore allocated for first digital census in the history of India

· Rs. 300 crore grant to the Government of Goa for the diamond jubilee celebrations of the state’s liberation from Portuguese

· Rs. 1,000 crore for the welfare of Tea workers especially women and their children in Assam and West Bengal through a special scheme

Fiscal Position

*Item*	*Original BE 2020-21*	*RE 2020-21*	*BE 2021-22*
*Expenditure*	`30.42 lakh crore	`34.50 lakh crore	`34.83 lakh crore
Capital Expenditure	`4.12 lakh crore	`4.39 lakh crore	` 5.5 lakh crore
Fiscal Deficit (as % of GDP)	-	*9.5%*	*6.8%*

RE for Expenditure is Rs. 34.50 lakh crore as against original BE expenditure of Rs. 30.42 lakh crore
- Quality of expenditure has been maintained as Capital Expenditure estimated as per RE is Rs. 4.39 lakh crore in 2020-2021 as against Rs. 4.12 lakh crore in BE 2020-21

· Estimates of Rs. 34.83 lakh crore BE for expenditure in 2021-2022 including Rs. 5.5 lakh crore as capital expenditure, an increase of 34.5% to give required push to economy

· The fiscal deficit in BE 2021-2022 is estimated to be 6.8% of GDP. The fiscal deficit in RE 2020-21 is pegged at 9.5% of GDP - funded through Government borrowings, multilateral borrowings, Small Saving Funds and short term borrowings

- Gross borrowing from the market for the next year to be around 12 lakh crore.
- Plan to continue on the path of fiscal consolidation, achieving a fiscal deficit level below 4.5% of GDP by 2025-2026 with a fairly steady decline over the period
- It will be achieved by increasing the buoyancy of tax revenue through improved compliance, and secondly, by increased receipts from monetisation of assets, including Public Sector Enterprises and land
- Deviation Statement under Sections 4(5) and 7(3) (b) of the FRBM Act tabled necessitated by this year’s unforeseen and unprecedented circumstances
- Amendment to FRBM Act proposed to achieve targeted Fiscal Deficit levels

· The Contingency Fund of India is to be augmented from Rs. 500 crore to Rs. 30,000 crore through Finance Bill

Net borrowing of the States:

Net borrowing for the states allowed at 4% of GSDP for the year 2021-2022 as per recommendation of 15^th FC
- Part of this earmarked for incremental capital expenditure
- Additional borrowing ceiling of 0.5% of GSDP will be provided subject to conditions
States expected to reach a fiscal deficit of 3% of GSDP by 2023-24, as recommended by the 15^th Finance Commission

Fifteenth Finance Commission:

The final report covering 2021-26 was submitted to the President, retaining vertical shares of states at 41%
Funds to UTs of Jammu and Kashmir and Ladakh would be provided by Centre
On the Commission’s recommendation, Rs. 1,18,452 crore have been provided as Revenue Deficit Grant to 17 states in 2021-22, as against Rs. 74,340 crore to 14 states in 2020-21

Tax Proposals

Vision of a transparent, efficient tax system to promote investments and employment in the country with minimum burden on tax payers

1. Direct Taxes

Achievements:

Corporate tax rate slashed to make it among the lowest in the world
Burden of taxation on small taxpayers eased by increasing rebates
Return filers almost doubled to 6.48 crore in 2020 from 3.31 crore in 2014
Faceless Assessment and Faceless Appeal introduced

Relief to Senior Citizens:

Exemption from filing tax returns for senior citizens over 75 years of age and having only pension and interest income; tax to be deducted by paying bank

Reducing Disputes, Simplifying Settlement:

Time limit for re-opening cases reduced to 3 years from 6 years
Serious tax evasion cases, with evidence of concealment of income of Rs. 50 lakh or more in a year, to be re-opened only up to 10 years, with approval of the Principal Chief Commissioner
Dispute Resolution Committee to be set up for taxpayers with taxable income up to Rs. 50 lakh and disputed income up to Rs. 10 lakh

National Faceless Income Tax Appellate Tribunal Centre to be established
Over 1 lakh taxpayers opted to settle tax disputes of over Rs. 85,000 crore through Vivad Se Vishwas Scheme until 30^th January 2021

Relaxation to NRIs:

Rules to be notified for removing hardships faced by NRIs regarding their foreign retirement accounts

Incentivising Digital Economy:

Limit of turnover for tax audit increased to Rs. 10 crore from Rs. 5 crore for entities carrying out 95% transactions digitally

Relief for Dividend:

Dividend payment to REIT/ InvIT exempt from TDS
Advance tax liability on dividend income only after declaration/ payment of dividend
Deduction of tax on dividend income at lower treaty rate for Foreign Portfolio Investors

Attracting Foreign Investment for Infrastructure:

Infrastructure Debt Funds made eligible to raise funds by issuing Zero Coupon Bonds
Relaxation of some conditions relating to prohibition on private funding, restriction on commercial activities, and direct investment

Supporting ‘Housing for All’:

Additional deduction of interest, up to Rs. 1.5 lakh, for loan taken to buy an affordable house extended for loans taken till March 2022
Tax holiday for Affordable Housing projects extended till March 2022
Tax exemption allowed for notified Affordable Rental Housing Projects

Tax incentives to IFSC in GIFT City:

Tax holiday for capital gains from incomes of aircraft leasing companies
Tax exemptions for aircraft lease rentals paid to foreign lessors
Tax incentive for relocating foreign funds in the IFSC
Tax exemption to investment division of foreign banks located in IFSC

Ease of Filing Taxes:

Details of capital gains from listed securities, dividend income, interest from banks, etc. to be pre-filled in returns

Relief to Small Trusts:

Exemption limit of annual receipt revised from ₹1 crore to ₹5 crore for small charitable trusts running schools and hospitals

Labour Welfare:

Late deposit of employee’s contribution by the employer not to be allowed as deduction to the employer
Eligibility for tax holiday claim for start-ups extended by one more year
Capital gains exemption for investment in start-ups extended till 31^st March, 2022

Indirect Taxes

GST:

Measures taken till date:

Nil return through SMS
Quarterly return and monthly payment for small taxpayers
Electronic invoice system
Validated input tax statement
Pre-filled editable GST return
Staggering of returns filing
Enhancement of capacity of GSTN system
Use of deep analytics and AI to identify tax evaders

Custom Duty Rationalization:

Twin objectives: Promoting domestic manufacturing and helping India get onto global value chain and export better
80 outdated exemptions already eliminated
Revised, distortion-free customs duty structure to be put in place from 1^st October 2021 by reviewing more than 400 old exemptions
New customs duty exemptions to have validity up to the 31^st March following two years from its issue date

Electronic and Mobile Phone Industry:

Some exemptions on parts of chargers and sub-parts of mobiles withdrawn
Duty on some parts of mobiles revised to 2.5% from ‘nil’ rate

Iron and Steel:

Customs duty reduced uniformly to 7.5% on semis, flat, and long products of non-alloy, alloy, and stainless steels
Duty on steel scrap exempted up to 31^st March, 2022
Anti-Dumping Duty (ADD) and Counter-Veiling Duty (CVD) revoked on certain steel products
Duty on copper scrap reduced from 5% to 2.5%

Textiles:

Basic Customs Duty (BCD) on caprolactam, nylon chips and nylon fiber & yarn reduced to 5%

Chemicals:

Calibrated customs duty rates on chemicals to encourage domestic value addition and to remove inversions
Duty on Naptha reduced to 2.5%

Gold and Silver:

Custom duty on gold and silver to be rationalized

Renewable Energy:

Phased manufacturing plan for solar cells and solar panels to be notified
Duty on solar invertors raised from 5% to 20%, and on solar lanterns from 5% to 15% to encourage domestic production

Capital Equipment:

Tunnel boring machine to now attract a customs duty of 7.5%; and its parts a duty of 2.5%
Duty on certain auto parts increased to general rate of 15%

MSME Products:

Duty on steel screws and plastic builder wares increased to 15%
Prawn feed to attract customs duty of 15% from earlier rate of 5%
Exemption on import of duty-free items rationalized to incentivize exporters of garments, leather, and handicraft items
Exemption on imports of certain kind of leathers withdrawn
Customs duty on finished synthetic gem stones raised to encourage domestic processing

Agriculture Products:

Customs duty on cotton increased from nil to 10% and on raw silk and silk yarn from 10% to 15%.
Withdrawal of end-use based concession on denatured ethyl alcohol
Agriculture Infrastructure and Development Cess (AIDC) on a small number of items

Rationalization of Procedures and Easing of Compliance:

Turant Customs initiative, a Faceless, Paperless, and Contactless Customs measures
New procedure for administration of Rules of Origin

Achievements and Milestones during the COVID-19 pandemic

Pradhan Mantri Garib Kalyan Yojana (PMGKY):
- Valued at Rs. 2.76 lakh crore
- Free food grain to 80 crore people
- Free cooking gas for 8 crore families
- Direct cash to over 40 crore farmers, women, elderly, the poor and the needy
AatmaNirbhar Bharat package (ANB 1.0):
- Estimated at Rs. 23 lakh crore – more than 10% of GDP
PMGKY, three ANB packages (ANB 1.0, 2.0, and 3.0), and announcements made later were like 5 mini-budgets in themselves
Rs. 27.1 lakh crore worth of financial impact of all three ANB packages including RBI’s measures – amounting to more than 13% of GDP
Structural reforms:
- One Nation One Ration Card
- Agriculture and Labour Reforms
- Redefinition of MSMEs
- Commercialisation of the Mineral Sector
- Privatisation of Public Sector Undertakings
- Production Linked Incentive Schemes
Status of India’s fight against COVID-19:
- 2 Made-in-India vaccines – medically safeguarding citizens of India and those of 100-plus countries against COVID-19
- 2 or more new vaccines expected soon
- Lowest death rate per million and the lowest active cases

2021 - Year of milestones for Indian history

75th year of India’s independence
60 years of Goa’s accession to India
50 years of the 1971 India-Pakistan War
Year of the 8th Census of Independent India
India’s turn at the BRICS Presidency
Year for Chandrayaan-3 Mission
Haridwar MahaKumbh

Vision for AatmaNirbhar Bharat

AatmaNirbharta – not a new idea – ancient India was self-reliant and a business epicentre of the world
AtmaNirbhar Bharat – an expression of 130 crore Indians who have full confidence in their capabilities and skills
Strengthening the Sankalp of:
- Nation First
- Doubling Farmer’s Income
- Strong Infrastructure
- Healthy India
- Good Governance
- Opportunities for Youth
- Education for All
- Women Empowerment
- Inclusive Development
13 promises made in the Union Budget 2015-16, and resonating with the vision of AatmaNirbharta, to materialise during the AmrutMahotsav of 2022 – on the 75th year of our independence

“Faith is the bird that feels the light and sings when the dawn is still dark.”

– Rabindranath Tagore

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RM/AS/AUK/KA/PJ

(Release ID: 1693907)

Summary of the Budget 2021-22

Ministry of Finance

Summary of the Budget 2021-22

Dated: 01 FEB 2021

PART-A

The Union Minister for Finance & Corporate Affairs, Smt Nirmala Sitharaman presented the Union Budget 2021-22 in Parliament today, which is the first budget of this new decade and also a digital one in the backdrop of unprecedented COVID-19 crisis. Laying a vision for AatmaNirbhar Bharat, she said this is an expression of 130 crore Indians who have full confidence in their capabilities and skills. She said that Budget proposals will further strengthen the Sankalp of Nation First, Doubling Farmer’s Income, Strong Infrastructure, Healthy India, Good Governance, Opportunities for youth, Education for All, Women Empowerment, and Inclusive Development among others. Additionally, also on the path to fast-implementation are the 13 promises of Budget 2015-16-which were to materialize during the AmrutMahotsav of 2022, on the 75^th year of our Independence. They too resonate with this vision of AatmaNirbharta, she added.

The Budget proposals for 2021-22 rest on 6 pillars.

Health and Wellbeing
Physical & Financial Capital, and Infrastructure
Inclusive Development for Aspirational India
Reinvigorating Human Capital
Innovation and R&D
Minimum Government and Maximum Governance
Health and Wellbeing

There is substantial increase in investment in Health Infrastructure and the Budget outlay for Health and Wellbeing is Rs 2,23,846 crore in BE 2021-22 as against this year’s BE of Rs 94,452 crore, an increase of 137 percentage.

The Finance Minister announced that a new centrally sponsored scheme, PM AatmaNirbhar Swasth Bharat Yojana, will be launched with an outlay of about Rs 64, 180 crore over 6 years. This will develop capacities of primary, secondary, and tertiary care Health Systems, strengthen existing national institutions, and create new institutions, to cater to detection and cure of new and emerging diseases. This will be in addition to the National Health Mission. The main interventions under the scheme are:

1. Support for 17,788 rural and 11,024 urban Health and Wellness Centers
2. Setting up integrated public health labs in all districts and 3382 block public health units in 11 states;
3. Establishing critical care hospital blocks in 602 districts and 12 central institutions;
4. Strengthening of the National Centre for Disease Control (NCDC), its 5 regional branches and 20 metropolitan health surveillance units;
5. Expansion of the Integrated Health Information Portal to all States/UTs to connect all public health labs;
6. Operationalisation of 17 new Public Health Units and strengthening of 33 existing Public Health Units at Points of Entry, that is at 32 Airports, 11 Seaports and 7 land crossings;
7. Setting up of 15 Health Emergency Operation Centers and 2 mobile hospitals; and
8. Setting up of a national institution for One Health, a Regional Research Platform for WHO South East Asia Region, 9 Bio-Safety Level III laboratories and 4 regional National Institutes for Virology.

Vaccines

Provision of Rs 35,000 crore made for Covid-19 vaccine in BE 2021-22.

The Pneumococcal Vaccine, a Made in India product, presently limited to only 5 states, will be rolled out across the country aimed at averting 50,000 child deaths annually.

Nutrition

To strengthen nutritional content, delivery, outreach, and outcome, Government will merge the Supplementary Nutrition Programme and the PoshanAbhiyan and launch the Mission Poshan 2.0. Government will adopt an intensified strategy to improve nutritional outcomes across 112 Aspirational Districts.

Universal Coverage of Water Supply and Swachch Bharat Mission

The Finance Minister announced that the JalJeevan Mission (Urban), will be launched for universal water supply in all 4,378 Urban Local Bodies with 2.86 crore household tap connections, as well as liquid waste management in 500 AMRUT cities. It will be implemented over 5 years, with an outlay of Rs. 2,87,000 crore. Moreover, the Urban Swachh Bharat Mission will be implemented with a total financial allocation of Rs 1,41,678 crore over a period of 5 years from 2021-2026. Also to tackle the burgeoning problem of air pollution, government proposed to provide an amount of Rs. 2,217 crore for 42 urban centres with a million-plus population in this budget. A voluntary vehicle scrapping policy to phase out old and unfit vehicles was also announced. Fitness tests have been proposed in automated fitness centres after 20 years in case of personal vehicles, and after 15 years in case of commercial vehicles

Physical and Financial Capital and Infrastructure

AatmaNirbhar Bharat-Production Linked Incentive Scheme

Finance Minister said that for a USD 5 trillion economy, our manufacturing sector has to grow in double digits on a sustained basis. Our manufacturing companies need to become an integral part of global supply chains, possess core competence and cutting-edge technology. To achieve all of the above, PLI schemes to create manufacturing global champions for an AatmaNirbhar Bharat have been announced for 13 sectors. For this, the government has committed nearly Rs.1.97 lakh crore in the next 5 years starting FY 2021-22. This initiative will help bring scale and size in key sectors, create and nurture global champions and provide jobs to our youth.

Textiles

Similarly, to enable the textile industry to become globally competitive, attract large investments and boost employment generation, a scheme of Mega Investment Textiles Parks (MITRA) will be launched in addition to the PLI scheme. This will create world class infrastructure with plug and play facilities to enable create global champions in exports. 7 Textile Parks will be established over 3 years.

Infrastructure

The National Infrastructure Pipeline (NIP) which the Finance Minister announced in December 2019 is the first-of-its-kind, whole-of-government exercise ever undertaken. The NIP was launched with 6835 projects; the project pipeline has now expanded to 7,400 projects. Around 217 projects worth Rs 1.10 lakh crore under some key infrastructure Ministries have been completed.

Infrastructure financing - Development Financial Institution (DFI)

Dwelling on the infrastructure sector, Smt Sitharaman said that infrastructure needs long term debt financing. A professionally managed Development Financial Institution is necessary to act as a provider, enabler and catalyst for infrastructure financing. Accordingly, a Bill to set up a DFI will be introduced. Government has provided a sum of Rs 20,000 crore to capitalise this institution and the ambition is to have a lending portfolio of at least Rs 5 lakh crore for this DFI in three years time.

Asset Monetisation

Monetizing operating public infrastructure assets is a very important financing option for new infrastructure construction. A “National Monetization Pipeline” of potential Brownfield infrastructure assets will be launched. An Asset Monetization dashboard will also be created for tracking the progress and to provide visibility to investors. Some important measures in the direction of monetisation are:

National Highways Authority of India and PGCIL each have sponsored one InvIT that will attract international and domestic institutional investors. Five operational roads with an estimated enterprise value of Rs 5,000 crore are being transferred to the NHAIInvIT. Similarily, transmission assets of a value of Rs 7,000 crore will be transferred to the PGCIL InvIT.
Railways will monetize Dedicated Freight Corridor assets for operations and maintenance, after commissioning.
The next lot of Airports will be monetised for operations and management concession.
Other core infrastructure assets that will be rolled out under the Asset Monetization Programme are: (i) NHAI Operational Toll Roads (ii) Transmission Assets of PGCIL (iii) Oil and Gas Pipelines of GAIL, IOCL and HPCL (iv) AAI Airports in Tier II and III cities, (v) Other Railway Infrastructure Assets (vi) Warehousing Assets of CPSEs such as Central Warehousing Corporation and NAFED among others and (vii) Sports Stadiums.

Roads and Highways Infrastructure

Finance Minister announced that more than 13,000 km length of roads, at a cost of Rs 3.3 lakh crore, has already been awarded under the Rs. 5.35 lakh crore Bharatmala Pariyojana project of which 3,800 kms have been constructed. By March 2022, Government would be awarding another 8,500 kms and complete an additional 11,000 kms of national highway corridors. To further augment road infrastructure, more economic corridors are also being planned. She also provided an enhanced outlay of Rs. 1,18,101 lakh crore for Ministry of Road Transport and Highways, of which Rs.1,08,230 crore is for capital, the highest ever.

Railway Infrastructure

Indian Railways have prepared a National Rail Plan for India – 2030. The Plan is to create a ‘future ready’ Railway system by 2030. Bringing down the logistic costs for our industry is at the core of our strategy to enable ‘Make in India’. It is expected that Western Dedicated Freight Corridor (DFC) and Eastern DFC will be commissioned by June 2022.

For Passenger convenience and safety the following measures are proposed:

Introduction of aesthetically designed Vista Dome LHB coach on tourist routes to give a better travel experience to passengers.
The safety measures undertaken in the past few years have borne results. To further strengthen this effort, high density network and highly utilized network routes of Indian railways will be provided with an indigenously developed automatic train protection system that eliminates train collision due to human error.
Budget also provided a record sum of Rs. 1,10,055 crore, for Railways of which Rs. 1,07,100 crore is for capital expenditure.

Urban Infrastructure

Government will work towards raising the share of public transport in urban areas through expansion of metro rail network and augmentation of city bus service. A new scheme will be launched at a cost of Rs. 18,000 crore to support augmentation of public bus transport services.

A total of 702 km of conventional metro is operational and another 1,016 km of metro and RRTS is under construction in 27 cities. Two new technologies i.e., ‘MetroLite’ and ‘MetroNeo’ will be deployed to provide metro rail systems at much lesser cost with same experience, convenience and safety in Tier-2 cities and peripheral areas of Tier-1 cities.

Power Infrastructure

The past 6 years have seen a number of reforms and achievements in the power sector with the addition of 139 Giga Watts of installed capacity, connecting an additional 2.8 crore households and addition of 1.41 lakh circuit km of transmission lines.

Expressing a serious concern over the viability of Distribution Companies, the Finance Minister proposed to launch a revamped reforms-based result-linked power distribution sector scheme with an outlay of Rs. 3,05,984 crore over 5 years. The scheme will provide assistance to DISCOMS for Infrastructure creation including pre-paid smart metering and feeder separation, upgradation of systems, etc., tied to financial improvements.

Ports, Shipping, Waterways

Major Ports will be moving from managing their operational services on their own to a model where a private partner will manage it for them. For the purpose the budget proposes to offer more than Rs. 2,000 crore by Major Ports on Public Private Partnership mode in FY21-22.

A scheme to promote flagging of merchant ships in India will be launched by providing subsidy support to Indian shipping companies in global tenders floated by Ministries and CPSEs. An amount of Rs. 1624 crore will be provided over 5 years. This initiative will enable greater training and employment opportunities for Indian seafarers besides enhancing Indian companies share in global shipping.

Petroleum & Natural Gas

Smt Sitharaman said that the government has kept fuel supplies running across the country without interruption during the COVID-19 lockdown period. Taking note of the crucial nature of this sector in people’s lives, the following key initiatives are being announced:

Ujjwala Scheme which has benefited 8 crore households will be extended to cover 1 crore more beneficiaries.
Government will add 100 more districts in next 3 years to the City Gas Distribution network.
A gas pipeline project will be taken up in Union Territory of Jammu & Kashmir.
An independent Gas Transport System Operator will be set up for facilitation and coordination of booking of common carrier capacity in all-natural gas pipelines on a non-discriminatory open access basis.

Financial Capital

The Finance Minister proposed to consolidate the provisions of SEBI Act, 1992, Depositories Act, 1996, Securities Contracts (Regulation) Act, 1956 and Government Securities Act, 2007 into a rationalized single Securities Markets Code. The Government would support the development of a world class Fin-Tech hub at the GIFT-IFSC.

Increasing FDI in Insurance Sector

She also proposed to amend the Insurance Act, 1938 to increase the permissible FDI limit from 49% to 74% and allow foreign ownership and control with safeguards. Under the new structure, the majority of Directors on the Board and key management persons would be resident Indians, with at least 50% of Directors being Independent Directors, and specified percentage of profits being retained as general reserve.

Disinvestment and Strategic Sale

In spite of COVID-19, Government has kept working towards strategic disinvestment. The Finance Minister said a number of transactions namely BPCL, Air India, Shipping Corporation of India, Container Corporation of India, IDBI Bank, BEML, Pawan Hans, NeelachalIspat Nigam limited among others would be completed in 2021-22. Other than IDBI Bank, Government propose to take up the privatization of two Public Sector Banks and one General Insurance company in the year 2021-22.

In 2021-22, Government would also bring the IPO of LIC for which the requisite amendments will be made in this Session itself.

In a very important announcement, the Finance Minister said that in the AtmaNirbhar Package, she had announced to come out with a policy of strategic disinvestment of public sector enterprises and said that the Government has approved the said policy. The policy provides a clear roadmap for disinvestment in all non-strategic and strategic sectors. Government has kept four areas that are strategic where bare minimum CPSEs will be maintained and rest privatized. In the non-strategic sectors, CPSEs will be privatised, otherwise shall be closed. She said that to fast forward the disinvestment policy, NITI Aayog will work out on the next list of Central Public Sector companies that would be taken up for strategic disinvestment. Government has estimated Rs. 1,75,000 crore as receipts from disinvestment in BE 2020-21 .

3. Inclusive Development for Aspirational India

Under the pillar of Inclusive Development for Aspirational India, the Finance Minister announced to cover Agriculture and Allied sectors, farmers’ welfare and rural India, migrant workers and labour, and financial inclusion.

Agriculture

Dwelling on agriculture, she said that the Government is committed to the welfare of farmers. The MSP regime has undergone a sea change to assure price that is at least 1.5 times the cost of production across all commodities. The procurement has also continued to increase at a steady pace. This has resulted in increase in payment to farmers substantially.

In case of wheat, the total amount paid to farmers in 2013-2014 was Rs. 33,874 crore. In 2019-2020 it was Rs. 62,802 crore, and even better, in 2020-2021, this amount, paid to farmers, was Rs. 75,060 crore. The number of wheat growing farmers that were benefitted increased in 2020-21 to 43.36 lakhs as compared to 35.57 lakhs in 2019-20.

For paddy, the amount paid in 2013-14 was Rs. 63,928 crore. In 2019-2020, this increased to Rs.1,41,930 crore. Even better, in 2020-2021, this is further estimated to increase to Rs. 172,752 crore. The farmers benefitted increased from 1.24 crore in 2019-20 to 1.54 crore in 2020-21.

In the same vein, in case of pulses, the amount paid in 2013-2014 was ` 236 crore. In 2019-20 it increased to Rs. 8,285 crore. Now, in 2020-2021, it is at Rs.10,530 crore, a more than 40 times increase from 2013-14.

The receipts to cotton farmers have seen a stupendous increase from Rs. 90 crore in 2013-14 to Rs. 25,974 crore (as on 27^th January 2021).

Early this year, Honourable Prime Minister had launched SWAMITVA Scheme. Under this, a record of rights is being given to property owners in villages. Up till now, about 1.80 lakh property-owners in 1,241 villages have been provided cards and the Finance Minister proposed during FY21-22 to extend this to cover all states/UTs.

To provide adequate credit to our farmers, Government has enhanced the agricultural credit target to Rs. 16.5 lakh crore in FY22. Similarly, the allocation to the Rural Infrastructure Development Fund increased from Rs. 30,000 crore to Rs. 40,000 crore. The Micro Irrigation Fund, with a corpus of Rs.5,000 crore has been created under NABARD will be doubled.

In an important announcement to boost value addition in agriculture and allied products and their exports, the scope of ‘Operation Green Scheme’ that is presently applicable to tomatoes, onions, and potatoes, will be enlarged to include 22 perishable products.

Around 1.68 crore farmers are registered and Rs. 1.14 lakh crore of trade value has been carried out through e-NAMs. Keeping in view the transparency and competitiveness that e-NAM has brought into the agricultural market, 1,000 more mandis will be integrated with e-NAM. The Agriculture Infrastructure Funds would be made available to APMCs for augmenting their infrastructure facilities.

Fisheries

Finance Minister proposed substantial investments in the development of modern fishing harbours and fish landing centres. To start with, 5 major fishing harbours – Kochi, Chennai, Visakhapatnam, Paradip, and Petuaghat – will be developed as hubs of economic activity.

Migrant Workers and Labourers

Government has launched the One Nation One Ration Card scheme through which beneficiaries can claim their rations anywhere in the country. One Nation One Ration Card plan is under implementation by 32 states and UTs, reaching about 69 crore beneficiaries – that’s a total of 86% beneficiaries covered. The remaining 4 states and UTs will be integrated in the next few months.

Government proposes to conclude a process that began 20 years ago, with the implementation of the 4 labour codes. For the first time globally, social security benefits will extend to gig and platform workers. Minimum wages will apply to all categories of workers, and they will all be covered by the Employees State Insurance Corporation. Women will be allowed to work in all categories and also in the night-shifts with adequate protection. At the same time, compliance burden on employers will be reduced with single registration and licensing, and online returns.

Financial Inclusion

To further facilitate credit flow under the scheme of Stand Up India for SCs, STs, and women, the Finance Minister proposed to reduce the margin money requirement from 25% to 15%, and to also include loans for activities allied to agriculture. Moreover, a number of steps were taken to support the MSME sector and in this Budget, Government has provided Rs. 15,700 crore to this sector – more than double of this year’s BE.

4. Reinvigorating Human Capital

The Finance Minister said that the National Education Policy (NEP) announced recently has had good reception, while adding that more than 15,000 schools will be qualitatively strengthened to include all components of the National Education Policy. She also announced that 100 new Sainik Schools will be set up in partnership with NGOs/private schools/states. She also proposed to set up a Higher Education Commission of India, as an umbrella body having 4 separate vehicles for standard-setting, accreditation, regulation, and funding. For accessible higher education in Ladakh, Government proposed to set up a Central University in Leh.

Scheduled Castes and Scheduled Tribes Welfare

Government has set a target of establishing 750 Eklavya model residential schools in tribal areas with increase in unit cost of each such school from Rs. 20 crore to Rs. 38 crore, and for hilly and difficult areas, to Rs. 48 crore. Similarly, under the revamped Post Matric Scholarship Scheme for the welfare of Scheduled Castes, the Central Assistance was enhanced and allocated Rs. 35,219 crore for 6 years till 2025-2026, to benefit 4 crore SC students.

Skilling

An initiative is underway, in partnership with the United Arab Emirates (UAE), to benchmark skill qualifications, assessment, and certification, accompanied by the deployment of certified workforce. The Government also has a collaborative Training Inter Training Programme (TITP) between India and Japan to facilitate transfer of Japanese industrial and vocational skills, technique, and knowledge and the same would be taken forward with many more countries.

5. Innovation and R&D

The Finance Minister said that in her Budget Speech of July 2019, She had announced the National Research Foundation and added that the NRF outlay will be of Rs. 50,000 crore, over 5 years. It will ensure that the overall research ecosystem of the country is strengthened with focus on identified national-priority thrust areas.

Government will undertake a new initiative – National Language Translation Mission (NTLM). This will enable the wealth of governance-and-policy related knowledge on the Internet being made available in major Indian languages.

The New Space India Limited (NSIL), a PSU under the Department of Space will execute the PSLV-CS51 launch, carrying the Amazonia Satellite from Brazil, along with a few smaller Indian satellites.

As part of the Gaganyaan mission activities, four Indian astronauts are being trained on Generic Space Flight aspects, in Russia. The first unmanned launch is slated for December 2021.

6. Minimum Government, Maximum Governance

Dwelling on the last of the six pillars of the Budget, the Finance Minister proposed to take a number of steps to bring reforms in Tribunals in the last few years for speedy delivery of justice and proposes to take further measures to rationalised the functioning of Tribunals. Government has introduced the National Commission for Allied Healthcare Professionals Bill in Parliament, with a view to ensure transparent and efficient regulation of the 56 allied healthcare professions. She also announced that the forthcoming Census could be the first digital census in the history of India and for this monumental and milestone-marking task, Rs. 3,768 crore allocated in the year 2021-2022.

On Fiscal position, she underlined that the pandemic’s impact on the economy resulted in a weak revenue inflow. Once the health situation stabilised, and the lockdown was being slowly lifted, Government spending was ramped up so as to revive domestic demand. As a result, against an original BE expenditure of Rs. 30.42 lakh crore for 2020-2021, RE estimates are Rs. 34.50 lakh crore and quality of expenditure was maintained. The capital expenditure, estimated in RE is Rs. 4.39 lakh crore in 2020-2021 as against Rs. 4.12 lakh crore in BE 2020-21.

The Finance Minister said fiscal deficit in RE 2020-21 is pegged at 9.5% of GDP and it has been funded through Government borrowings, multilateral borrowings, Small Saving Funds and short term borrowings. She added that the Government would need another Rs 80,000 crore for which it would be approaching the markets in these 2 months. The fiscal deficit in BE 2021-2022 is estimated to be 6.8% of GDP. The gross borrowing from the market for the next year would be around 12 lakh crore.

Smt Sitharaman announced that the Government plan to continue the path of fiscal consolidation, and intend to reach a fiscal deficit level below 4.5% of GDP by 2025-2026 with a fairly steady decline over the period. “We hope to achieve the consolidation by first, increasing the buoyancy of tax revenue through improved compliance, and secondly, by increased receipts from monetisation of assets, including Public Sector Enterprises and land”, she said.

In accordance with the views of the 15^th Finance Commission, Government is allowing a normal ceiling of net borrowing for the states at 4% of GSDP for the year 2021-2022.

The FRBM Act mandates fiscal deficit of 3% of GDP to be achieved by 31^st March 2020-2021. The effect of this year’s unforeseen and unprecedented circumstances has necessitated the submission of a deviation statement under Sections 4 (5) and 7 (3) (b) of the FRBM Act which the Finance Minister laid on the Table of the House as part of the FRBM Documents.

On 9^th December 2020, the 15^th Finance Commission submitted its final report, covering the period 2021-2026 to the Rashtrapatiji. The Government has laid the Commission’s report, along with the explanatory memorandum retaining the vertical shares of the states at 41%. On the Commission’s recommendation, the Budget provided Rs. 1,18,452 crore as revenue deficit grant to 17 states in 2021-22.

PART-B

In Part B of the Budget Speech, the Union Minister Smt. Nirmala Sitharaman seeks to further simplify the Tax Administration, Litigation Management and ease the compliance of Direct Tax Administration. The indirect proposal focuses on custom duty rationalization as well as rationalization of procedures and easing of compliance.

DIRECT TAX PROPOSALS

The Finance Minister provided relief to senior citizens in filing of income tax returns, reduced time limit for income tax proceedings announced setting up of the Dispute Resolution Committee, faceless ITAT, relaxation to NRIs, increase in exemption limit from audit and relief for dividend income. She also announced steps to attract foreign investment into infrastructure, relief to affordable housing and rental housing, tax incentives to IFSC, relief to small charitable trusts, and steps for incentivizing Start-ups in the country.

Smt.Nirmala Sitharaman, in her Budget speech, said that post-pandemic, a new world order seems to be emerging and India will have a leading role therein. She said in this scenario, our tax system has to be transparent, efficient and should promote investment and employment in the country. The Minister said that at the same time, it should put minimum burden on our tax payers. She said that a series of reforms had been introduced by the Government for the benefit of tax payers and economy, including slashing of corporate tax rate, abolition of dividend distribution tax, and increasing of rebate for small tax payers. In the year 2020, the income tax return filers saw a dramatic increase to 6.48 crore from 3.31 crore in 2014.

The Budget seeks to reduce compliance burden on senior citizens who are of 75 years of age and above. Such senior citizens having only pension and interest income will be exempted from filing their income tax return. The paying Bank will deduct the necessary tax on their income. The Budget proposes to notify rules for removing the hardship of non-Resident Indians returning to India on the issue of their accrued incomes in their foreign retirement account. The Budget proposes to make dividend payment to REIT/InvIT exempt from TDS. For Foreign Portfolio Investors, the Budget proposes deduction of tax on dividend income at lower treaty rate. The Budget provides that advanced tax liability on dividend income shall arise only after the declaration or payment of dividend. The Minister said that this was being done as the amount of dividend income cannot be estimated correctly by the shareholders for paying advance tax.

The Finance Minister proposed to extend the eligibility period for claim of additional deduction for interest of Rs. 1.5 lakh paid for loan taken for purchase of an affordable house to 31^st March, 2022. In order to increase the supply of affordable houses, she also announced extension of eligibility period for claiming tax holiday for affordable housing projects by one more year to 31^st March, 2022. For promoting supply of affordable rental housing for the migrant workers, the Minister announced a new tax exemption for the notified affordable rental housing projects.

In order to incentivize start ups in the country, Smt. Sitharaman announced extension in the eligibility for claiming tax holiday for start ups by one more year till 31^st March, 2022. In order to incentivize funding of start ups, she proposed extending the Capital Gains exemption for investment in start ups by one more year till 31^st March, 2022.

The Finance Minister said that delay in deposit of the contribution of employees towards various welfare funds results in permanent loss of interest/income for the employees. In order to ensure timely deposit of employee’s contribution to these funds by the employers, she announced that late deposit of employee’s contribution shall never be allowed as deduction to the employer.

In order to reduce compliance burden, the Budget provides reduction in the time-limit for reopening of income tax proceeding for three years from the present six years. In serious tax evasion cases, where there is evidence of concealment of income of Rs. 50 lakh or more in a year, the assessment can be reopened upto 10 years but only after the approval of the Principal Chief Commissioner.

Stating the resolve of the Government to reduce litigation in the taxation system, the Finance Minister said that the Direct Tax Vivad se Vishwas Scheme announced by the Government has been received well. Until 30^th January, 2021, over one lakh ten thousand tax payers have opted to settle tax dispute of over Rs. 85 thousand crores under the Scheme. To further reduce litigation of small tax payers, she proposed to constitute a Dispute Resolution Committee. Anyone with a taxable income upto Rs. 50 lakh and disputed income upto Rs. 10 lakh shall be eligible to approach the Committee. She also announced setting up of National Faceless Income Tax Appellate Tibunal Centre.

To incentivize digital transaction and to reduce the compliance burden of the person who is carrying almost all of the transactions digitally, the Budget proposes to increase the limit for tax audit for persons who are undertaking 95 per cent of their transaction digitally from Rs. 5 Crore to Rs. 10 Crore.

To attract foreign investment into infrastructure sector, the Budget proposes to relax certain conditions relating to prohibition on private funding, restriction on commercial activities and direct investment in infrastructure. In order to allow funding of infrastructure by issue of zero coupon bonds, the Budget proposes to make notified infrastructure debt funds eligible to raise funds by issuing tax efficient zero coupon bonds.

In order to promote International Financial Services Centre (IFSC) in GIFT City, the Budget proposes more tax incentives.

The Budget proposes that details of capital gains from listed securities, dividend income and interest from banks, post office etc. will also be pre-filled to ease filing of returns. Details of salary income, tax payment, TDS etc already come pre-filled in returns.

In order to reduce compliance burden on the small charitable trust running educational institutions and hospitals, the Budget proposes to increase the limit on annual receipts for these trusts from present Rs.1 Crore to Rs. 5 Crore for non-applicability of various compliances.

INDIRECT TAX PROPOSALS

On the issue of Indirect Tax proposals, the Minister said that record GST collections have been made in the last few months. She said several measures have been taken to further simplify the GST. The capacity of GSTN system has been announced. Deep analytics and artificial intelligence have been deployed to identity tax evaders and fake billers, launching special drives against them. The Finance Minister assured the House that every possible measure shall be taken to smoothen the GST further and remove anomalies such as the inverted duty structure.

With respect to the custom duty policy, the Finance Minister said that it has the twin objectives of promoting domestic manufacturing and helping India get on to global value change and export better. She said that the thrust now has to be on easy access to raw materials and exports of value added products. In this regard, she proposed to review 400 old exemptions in the custom duty structure this year. She announced that extensive consultation will be conducted and from 1^stOctober, 2021, a revised custom duty structure free of distortions will be put in place. She also proposed that any new custom duty exemptions henceforth will have validity upto to the 31^st March following 2 years of the date of its issue.

The Finance Minister announced withdrawal of a few exemptions on parts of chargers and sub-parts of mobile phones further some parts of mobiles will move from “NIL” rate to a moderate 2.5 per cent. She also announced reducing custom duty uniformly to 7.5 per cent on semis, flat, and long products of non-alloy and stainless steel. She also announced exempting duty on steel scrap for a period upto 31^st March 2022.

Stressing on the need to rationalize duty on raw material inputs to man-made textile, the Finance Minister announced bringing nylon chain on par with polyester and other man-made fibers. Announcing uniform deduction of the BCD rates on Caprolactam, nylon chips and nylon fiber and yarn to 5 per cent, the Minister said this will help the textile industry, MSMEs and exports too. She also announced calibration of customs duty rate on chemical to encourage domestic value addition and to remove inversions. The Minister also announced rationalization of custom duty on gold and silver.

The Finance Minister said that a phased manufacturing plan for solar cells and solar panels will be notified to build up domestic capacity. She announced raising duty on solar inverter from 5 per cent to 20 percent and on solar lanterns from 5 per cent to 15 per cent.

The Finance Minister in her Budget speech said that there is immense potential in manufacturing heavy capital equipment domestically and the rate structure will be comprehensively reviewed in due course. However, she announced revision in duty rates on certain items immediately including tunnel boring machine and certain auto parts.

The Budget proposes certain changes to benefit MSMEs which include increasing duty on steel screws, plastic builder wares and prawn feed. It also provide for rationalizing exemption on import of duty free items as an incentives to exporters of garments leather and handicraft items. It also provides withdrawing exemption on imports of certain kind of leather and raising custom duty on finished synthetic gem stones.

To benefit farmers, the Finance Minister announced raising custom duty on cotton, raw silk and silk yarn. She also announced withdrawing end-use based concessions on denatured ethyl alcohol. The Minister also proposed an Agriculture Infrastructure and Development Cess on a small number of items. She said “while applying the cess, we have taken care not to put additional burden on consumers on most items.

Regarding rationalization of procedures and easing of compliance, the Finance Minister proposed certain changes in the provisions relating to ADD and CVD levies. She also said that to complete customs investigation, definite time-lines are being prescribed. The Minister said that the Turant Custom Initiative rolled out in 2020 has helped in putting a check of misuse of FTAs.

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RM/BB/YB/SNC

(Release ID: 1693908)

Key Highlights of Economic Survey 2020-21

Ministry of Finance

Key Highlights of Economic Survey 2020-21

Dated: 29 JAN 2021

Union Minister for Finance and Corporate Affairs, Smt. Nirmala Sitharaman presented the Economic Survey 2020-21 in the Parliament today. The key highlights of Economic Survey 2020-21, which is dedicated to the COVID Warriors, are as follows:

Saving Lives and Livelihoods amidst a Once-in-a-Century Crisis

• India focused on saving lives and livelihoods by its willingness to take short-term pain for long-term gain, at the onset of the COVID-19 pandemic

• Response stemmed from the humane principle that:

Human lives lost cannot be brought back

o GDP growth will recover from the temporary shock caused by the pandemic

• An early, intense lockdown provided a win-win strategy to save lives, and preserve livelihoods via economic recovery in the medium to long-term

• Strategy also motivated by the Nobel-Prize winning research by Hansen & Sargent (2001): a policy focused on minimizing losses in a worst-case scenario when uncertainty is very high

• India’s strategy flattened the curve, pushed the peak to September, 2020

• After the September peak, India has been unique in experiencing declining daily cases despite increasing mobility

• V-shaped recovery, as seen in 7.5% decline in GDP in Q2 and recovery across all key economic indicators vis-à-vis the 23.9% GDP contraction in Q1

• COVID pandemic affected both demand and supply:

India was the only country to announce structural reforms to expand supply in the medium-long term and avoid long-term damage to productive capacities
Calibrated demand side policies to ensure that the accelerator is slowly pushed down only when the brakes on economic activities are being removed

o A public investment programme centered around the National Infrastructure Pipeline to accelerate the demand push and further the recovery

• Upturn in the economy, avoiding a second wave of infections - a sui generis case in strategic policymaking amidst a once-in-a-century pandemic

State of the Economy in 2020-21: A Macro View

• COVID-19 pandemic ensued global economic downturn, the most severe one since the Global Financial Crisis

• The lockdowns and social distancing norms brought the already slowing global economy to a standstill

• Global economic output estimated to fall by 3.5% in 2020 (IMF January 2021 estimates)

• Governments and central banks across the globe deployed various policy tools to support their economies such as lowering policy rates, quantitative easing measures, etc.

• India adopted a four-pillar strategy of containment, fiscal, financial, and long-term structural reforms:

o Calibrated fiscal and monetary support was provided, cushioning the vulnerable during the lockdown and boosting consumption and investment while unlocking

o A favourable monetary policy ensured abundant liquidity and immediate relief to debtors while unclogging monetary policy transmission

• As per the advance estimates by NSO, India’s GDP is estimated to grow by (-) 7.7% in FY21 - a robust sequential growth of 23.9% in H2: FY21 over H1: FY21

• India’s real GDP to record a 11.0% growth in FY2021-22 and nominal GDP to grow by 15.4% – the highest since independence:

Rebound to be led by low base and continued normalization in economic activities as the rollout of COVID-19 vaccines gathers traction

• Government consumption and net exports cushioned the growth from diving further down, whereas investment and private consumption pulled it down

• The recovery in second half of FY2020-21 is expected to be powered by government consumption, estimated to grow at 17% YoY

• Exports expected to decline by 5.8% and imports by 11.3% in the second half of FY21

• India expected to have a Current Account Surplus of 2% of GDP in FY21, a historic high after 17 years

• On supply side, Gross Value Added (GVA) growth pegged at -7.2% in FY21 as against 3.9% in FY20:

o Agriculture set to cushion the shock of the COVID-19 pandemic on the Indian economy in FY21 with a growth of 3.4%

o Industry and services estimated to contract by 9.6% and 8.8% respectively during FY21

• Agriculture remained the silver lining while contact-based services, manufacturing, construction were hit hardest, and recovering steadily

• India remained a preferred investment destination in FY 2020-21 with FDI pouring in amidst global asset shifts towards equities and prospects of quicker recovery in emerging economies:

o Net FPI inflows recorded an all-time monthly high of US$ 9.8 billion in November 2020, as investors’ risk appetite returned

o India was the only country among emerging markets to receive equity FII inflows in 2020

• Buoyant SENSEX and NIFTY resulted in India’s market-cap to GDP ratio crossing 100% for the first time since October 2010

• Softening of CPI inflation recently reflects easing of supply side constraints that affected food inflation

• Mild contraction of 0.8% in investment (as measured by Gross Fixed Capital Formation) in 2^nd half of FY21, as against 29% drop in 1^st half of FY21

• Reignited inter and intra state movement and record-high monthly GST collections have marked the unlocking of industrial and commercial activity

• The external sector provided an effective cushion to growth with India recording a Current Account Surplus of 3.1% of GDP in the first half of FY21:

o Strong services exports and weak demand leading to a sharper contraction in imports (merchandise imports contracted by 39.7%) than exports (merchandise exports contracted by 21.2%)

o Forex reserves increased to a level so as to cover 18 months worth of imports in December 2020

o External debt as a ratio to GDP increased to 21.6% at end-September 2020 from 20.6% at end-March 2020

o Ratio of forex reserves to total and short-term debt improved because of the sizable accretion in reserves

• V-shaped recovery is underway, as demonstrated by a sustained resurgence in high frequency indicators such as power demand, e-way bills, GST collection, steel consumption, etc.

• India became the fastest country to roll-out 10 lakh vaccines in 6 days and also emerged as a leading supplier of the vaccine to neighbouring countries and Brazil

• Economy’s homecoming to normalcy brought closer by the initiation of a mega vaccination drive:

o Hopes of a robust recovery in services sector, consumption, and investment have been rekindled

o Reforms must go on to enable India realize its potential growth and erase the adverse impact of the pandemic

• India’s mature policy response to the ‘once-in-a-century’ crisis provides important lessons for democracies to avoid myopic policy-making and demonstrates benefits of focusing on long-term gains

Does Growth lead to Debt Sustainability? Yes, But Not Vice- Versa!

• Growth leads to debt sustainability in the Indian context but not necessarily vice-versa:

Debt sustainability depends on the ‘Interest Rate Growth Rate Differential’ (IRGD), i.e., the difference between the interest rate and the growth rate

o In India, interest rate on debt is less than growth rate - by norm, not by exception

• Negative IRGD in India – not due to lower interest rates but much higher growth rates – prompts a debate on fiscal policy, especially during growth slowdowns and economic crises

• Growth causes debt to become sustainable in countries with higher growth rates; such clarity about the causal direction is not witnessed in countries with lower growth rates

• Fiscal multipliers are disproportionately higher during economic crises than during economic booms

• Active fiscal policy can ensure that the full benefit of reforms is reaped by limiting potential damage to productive capacity

• Fiscal policy that provides an impetus to growth will lead to lower debt-to-GDP ratio

• Given India’s growth potential, debt sustainability is unlikely to be a problem even in the worst scenarios

• Desirable to use counter-cyclical fiscal policy to enable growth during economic downturns

• Active, counter-cyclical fiscal policy - not a call for fiscal irresponsibility, but to break the intellectual anchoring that has created an asymmetric bias against fiscal policy

Does India’s Sovereign Credit Rating Reflect Its Fundamentals? No!

• The fifth largest economy in the world has never been rated as the lowest rung of the investment grade (BBB-/Baa3) in sovereign credit ratings:

Reflecting the economic size and thereby the ability to repay debt, the fifth largest economy has been predominantly rated AAA

o China and India are the only exceptions to this rule – China was rated A-/A2 in 2005 and now India is rated BBB-/Baa3

• India’s sovereign credit ratings do not reflect its fundamentals:

A clear outlier amongst countries rated between A+/A1 and BBB-/Baa3 for S&P/ Moody’s, on several parameters

o Rated significantly lower than mandated by the effect on the sovereign rating of the parameter

• Credit ratings map the probability of default and therefore reflect the willingness and ability of borrower to meet its obligations:

India’s willingness to pay is unquestionably demonstrated through its zero sovereign default history

o India’s ability to pay can be gauged by low foreign currency denominated debt and forex reserves

• Sovereign credit rating changes for India have no or weak correlation with macroeconomic indicators

• India’s fiscal policy should reflect Gurudev Rabindranath Tagore’s sentiment of ‘a mind without fear’

• Sovereign credit ratings methodology should be made more transparent, less subjective and better attuned to reflect economies’ fundamentals

Inequality and Growth: Conflict or Convergence?

• The relationship between inequality and socio-economic outcomes vis-à-vis economic growth and socio-economic outcomes, is different in India from that in advanced economies.

• Both inequality and per-capita income (growth) have similar relationships with socio-economic indicators in India, unlike in advanced economies

• Economic growth has a greater impact on poverty alleviation than inequality

• India must continue to focus on economic growth to lift the poor out of poverty

• Expanding the overall pie - redistribution in a developing economy is feasible only if the size of the economic pie grows

Healthcare takes centre stage, finally!

• COVID-19 pandemic emphasized the importance of healthcare sector and its inter-linkages with other sectors - showcased how a health crisis transformed into an economic and social crisis

• India’s health infrastructure must be agile so as to respond to pandemics - healthcare policy must not become beholden to ‘saliency bias’

• National Health Mission (NHM) played a critical role in mitigating inequity as the access of the poorest to pre-natal/post-natal care and institutional deliveries increased significantly

• Emphasis on NHM in conjunction with Ayushman Bharat should continue

• An increase in public healthcare spending from 1% to 2.5-3% of GDP can decrease the out-of-pocket expenditure from 65% to 35% of overall healthcare spending

• A regulator for the healthcare sector must be considered given the market failures stemming from information asymmetry

Mitigation of information asymmetry will help lower insurance premiums, enable the offering of better products and increase insurance penetration

o Information utilities that help mitigate the information asymmetry in healthcare sector will be useful in enhancing overall welfare

• Telemedicine needs to be harnessed to the fullest by investing in internet connectivity and health infrastructure

Process Reforms

• India over-regulates the economy resulting in regulations being ineffective even with relatively good compliance with process

• The root cause of the problem of overregulation is an approach that attempts to account for every possible outcome

• Increase in complexity of regulations, intended to reduce discretion, results in even more non-transparent discretion

• The solution is to simplify regulations and invest in greater supervision which, by definition, implies greater discretion

• Discretion, however, needs to be balanced with transparency, systems of ex-ante accountability and ex-post resolution mechanisms

• The above intellectual framework has already informed reforms ranging from labour codes to removal of onerous regulations on the BPO sector

Regulatory Forbearance an emergency medicine, not staple diet!

• During the Global Financial Crisis, regulatory forbearance helped borrowers tide over temporary hardship

• Forbearance continued long after the economic recovery, resulting in unintended consequences for the economy

• Banks exploited the forbearance window for window-dressing their books and misallocated credit, thereby damaging the quality of investment in the economy

• Forbearance represents emergency medicine that should be discontinued at the first opportunity when the economy exhibits recovery, not a staple diet that gets continued for years

• To promote judgement amidst uncertainty, ex-post inquests must recognize the role of hindsight bias and not equate unfavourable outcomes to bad judgement or malafide intent

• An Asset Quality Review exercise must be conducted immediately after the forbearance is withdrawn

• The legal infrastructure for the recovery of loans needs to be strengthened de facto

Innovation: Trending Up but Needs Thrust, Especially from the Private Sector

• India entered the top-50 innovating countries for the first time in 2020 since the inception of the Global Innovation Index in 2007, ranking first in Central and South Asia, and third amongst lower middle-income group economies

• India’s gross domestic expenditure on R&D (GERD) is lowest amongst top ten economies

• India’s aspiration must be to compete on innovation with the top ten economies

• The government sector contributes a disproportionately large share in total GERD at three times the average of top ten economies

• The business sector’s contribution to GERD, total R&D personnel and researchers is amongst the lowest when compared to top ten economies

• This situation has prevailed despite higher tax incentives for innovation and access to equity capital

• India’s business sector needs to significantly ramp up investments in R&D

• Indian resident’s share in total patents filed in the country must rise from the current 36% which is much below the average of 62% in top ten economies

• For achieving higher improvement in innovation output, India must focus on improving its performance on institutions and business sophistication innovation inputs

JAY Ho! PM‘JAY’ Adoption and Health outcomes

• Pradhan Mantri Jan Arogya Yojana (PM-JAY) – the ambitious program launched by Government of India in 2018 to provide healthcare access to the most vulnerable sections demonstrates strong positive effects on healthcare outcomes in a short time

• PM-JAY is being used significantly for high frequency, low cost care such as dialysis and continued during the Covid pandemic and the lockdown.

• Causal impact of PM-JAY on health outcomes by undertaking a Difference-in-Difference analysis based on National Family Health Survey (NFHS)-4 (2015-16) and NFHS-5 (2019-20) is following:

Enhanced health insurance coverage: The proportion of households that had health insurance increased in Bihar, Assam and Sikkim from 2015-16 to 2019-20 by 89% while it decreased by 12% over the same period in West Bengal
Decline in Infant Mortality rate: from 2015-16 to 2019-20, infant mortality rates declined by 20% for West Bengal and by 28% for the three neighbouring states
Decline in under-5 mortality rate: Bengal saw a fall of 20% while, the neighbours witnessed a 27% reduction
Modern methods of contraception, female sterilization and pill usage went up by 36%, 22% and 28% respectively in the three neighbouring states while the respective changes for West Bengal were negligible
While West Bengal did not witness any significant decline in unmet need for spacing between consecutive kids, the neighbouring three states recorded a 37% fall
Various metrics for mother and child care improved more in the three neighbouring states than in West Bengal.

• Each of these health effects manifested similarly when we compare all states that implemented PM-JAY versus the states that did not

• Overall, the comparison reflects significant improvements in several health outcomes in states that implemented PM-JAY versus those that did not

Bare Necessities

• Access to the ‘bare necessities’ has improved across all States in the country in 2018 as compared to 2012

o It is highest in States such as Kerala, Punjab, Haryana and Gujarat while lowest in Odisha, Jharkhand, West Bengal and Tripura

o Improvement in each of the five dimensions viz., access to water, housing, sanitation, micro-environment and other facilities

o Inter-State disparities declined across rural and urban areas as the laggard states have gained relatively more between 2012 and 2018

o Improved disproportionately more for the poorest households when compared to the richest households across rural and urban areas

• Improved access to the ‘bare necessities’ has led to improvements in health indicators such as infant mortality and under-5 mortality rate and also correlates with future improvements in education indicators

• Thrust should be given to reduce variation in the access to bare necessities across states, between rural and urban and between income groups

• The schemes such as Jal Jeevan Mission, SBM-G, PMAY-G, etc. may design appropriate strategy to reduce these gaps

• A Bare Necessities Index (BNI) based on the large annual household survey data can be constructed using suitable indicators and methodology at district level for all/targeted districts to assess the progress on access to bare necessities.

Fiscal Developments

• India adopted a calibrated approach best suited for a resilient recovery of its economy from COVID-19 pandemic impact, in contrast with a front-loaded large stimulus package adopted by many countries

• Expenditure policy in 2020-21 initially aimed at supporting the vulnerable sections but was re-oriented to boost overall demand and capital spending, once the lockdown was unwound

• Monthly GST collections have crossed the Rs. 1 lakh crore mark consecutively for the last 3 months, reaching its highest levels in December 2020 ever since the introduction of GST

• Reforms in tax administration have begun a process of transparency and accountability and have incentivized tax compliance by enhancing honest tax-payers’ experience

• Central Government has also taken consistent steps to impart support to the States in the challenging times of the pandemic

External Sector

• COVID-19 pandemic led to a sharp decline in global trade, lower commodity prices and tighter external financing conditions with implications for current account balances and currencies of different countries

• India’s forex reserves at an all-time high of US$ 586.1 billion as on January 08, 2021, covering about 18 months worth of imports

• India experiencing a Current Account Surplus along with robust capital inflows leading to a BoP surplus since Q4 of FY2019-20

• Balance on the capital account is buttressed by robust FDI and FPI inflows:

o Net FDI inflows of US$ 27.5 billion during April-October, 2020: 14.8% higher as compared to first seven months of FY2019-20

o Net FPI inflows of US$ 28.5 billion during April-December, 2020 as against US$ 12.3 billion in corresponding period of last year

• In H1: FY21, steep contraction in merchandise imports and lower outgo for travel services led to:

o Sharper fall in current payments (by 30.8%) than current receipts (15.1%)

o Current Account Surplus of US$ 34.7 billion (3.1% of GDP)

• India to end with an Annual Current Account Surplus after a period of 17 years

• India’s merchandise trade deficit was lower at US$ 57.5 billion in April-December, 2020 as compared to US$ 125.9 billion in the corresponding period last year

• In April-December, 2020, merchandise exports contracted by 15.7% to US$ 200.8 billion from US$ 238.3 billion in April-December, 2019:

o Petroleum, Oil and Lubricants (POL) exports have contributed negatively to export performance during the period under review

o Non-POL exports turned positive and helped in improving export performance in Q3 of 2020-21

o Within Non-POL exports, agriculture & allied products, drugs & pharmaceutical and ores & minerals recorded expansion

• Total merchandise imports declined by (-) 29.1% to US$ 258.3 billion during April-December, 2020 from US$ 364.2 billion during the same period last year:

o Sharp decline in POL imports pulled down the overall import growth

o Imports contracted sharply in Q1 of 2020-21; the pace of contraction eased in subsequent quarters, due to the accelerated positive growth in Gold and Silver imports and narrowing contraction in non-POL, non-Gold & non-Silver imports

o Fertilizers, vegetable oil, drugs & pharmaceuticals and computer hardware & peripherals have contributed positively to the growth of non-POL, non-Gold & non-Silver imports

• Trade balance with China and the US improved as imports slowed

• Net services receipts amounting to US$ 41.7 billion remained stable in April-September 2020 as compared with US$ 40.5 billion in corresponding period a year ago.

• Resilience of the services sector was primarily driven by software services, which accounted for 49% of total services exports

• Net private transfer receipts, mainly representing remittances by Indians employed overseas, totaling US$ 35.8 billion in H1: FY21 declined by 6.7% over the corresponding period of previous year

• At end-September 2020, India’s external debt placed at US$ 556.2 billion - a decrease of US$ 2.0 billion (0.4%) as compared to end-March 2020.

• Improvement in debt vulnerability indicators:

o Ratio of forex reserves to total and short-term debt (original and residual)

o Ratio of short-term debt (original maturity) to the total stock of external debt.

o Debt service ratio (principal repayment plus interest payment) increased to 9.7% as at end-September 2020, compared to 6.5% as at end-March 2020

• Rupee appreciation/depreciation:

o In terms of 6-currency nominal effective exchange rate (NEER) (trade-based weights), Rupee depreciated by 4.1% in December 2020 over March 2020; appreciated by 2.9% in terms of real effective exchange rate (REER)

o In terms of 36-currency NEER (trade-based weights), Rupee depreciated by 2.9% in December 2020 over March 2020; appreciated by 2.2% in terms of REER

• RBI’s interventions in forex markets ensured financial stability and orderly conditions, controlling the volatility and one-sided appreciation of the Rupee

• Initiatives undertaken to promote exports:

o Production Linked Incentive (PLI) Scheme

o Remission of Duties and Taxes on Exported Products (RoDTEP)

o Improvement in logistics infrastructure and digital initiatives

Money Management and Financial Intermediation

• Accommodative monetary policy during 2020: repo rate cut by 115 bps since March 2020

• Systemic liquidity in FY2020-21 has remained in surplus so far. RBI undertook various conventional and unconventional measures like:

o Open Market Operations

o Long Term Repo Operations

o Targeted Long Term Repo Operations

• Gross Non-Performing Assets ratio of Scheduled Commercial Banks decreased from 8.21% at end-March, 2020 to 7.49% at end-September, 2020

• The monetary transmission of lower policy rates to deposit and lending rates improved during FY2020-21

• NIFTY-50 and BSE SENSEX reached record high closing of 14,644.7 and 49,792.12 respectively on January 20, 2021

• The recovery rate for the Scheduled Commercial Banks through IBC (since its inception) has been over 45%

Prices and Inflation

• Headline CPI inflation:

o Averaged 6.6% during April-December, 2020 and stood at 4.6% in December, 2020, mainly driven by rise in food inflation (from 6.7% in 2019-20 to 9.1% during April-December, 2020, owing to build up in vegetable prices)

o CPI headline and its sub groups witnessed inflation during April-October 2020, driven by substantial increase in price momentum - due to the initial disruptions caused by COVID-19 lockdown

o Moderated price momentum by November 2020 for most sub groups, coupled with positive base effect helped ease inflation

• Rural-urban difference in CPI inflation saw a decline in 2020:

Since November 2019, CPI-Urban inflation has closed the gap with CPI-Rural inflation
Food inflation has almost converged now
Divergence in rural-urban inflation observed in other components of CPI like fuel and light, clothing and footwear, miscellaneous etc.

• During April-December, 2019 as well as April-December, 2020-21, the major driver of CPI-C inflation was the food and beverages group:

Contribution increased to 59% during April-December, 2020, compared to 53.7% during April-December, 2019

• Thali cost increased between June 2020 and November 2020, however a sharp fall in the month of December reflecting the fall in the prices of many essential food commodities

• State-wise trend:

CPI-C inflation increased in most of the states in the current year
Regional variation persists
Inflation ranged from 3.2% to 11% across States/UTs during June-December 2020 compared to (-) 0.3% to 7.6% during the same period last year.

• Food inflation driving overall CPI-C inflation due to the relatively more weight of food items in the index.

• Steps taken to stabilize prices of food items:

Banning of export of onions
Imposition of stock limit on onions
Easing of restriction on imports of pulses

• Gold prices:

Sharp spike as investors turned to gold as a safe haven investment amid COVID-19 induced economic uncertainties
Compared to other assets, gold had considerably higher returns during FY2020-21

• Consistency in import policy warrants attention:

Increased dependence on imports of edible oils poses risk of fluctuations in import prices
Imports impacting production and prices of domestic edible oil market, coupled with frequent changes in import policy of pulses and edible oils, add to confusion among farmers/producers and delay imports

Sustainable Development and Climate Change

• India has taken several proactive steps to mainstream the SDGs into the policies, schemes and programmes

• Voluntary National Review (VNR) presented to the United Nations High-Level Political Forum (HLPF) on Sustainable Development

• Localisation of SDGs is crucial to any strategy aimed at achieving the goals under the 2030 Agenda

Several States/UTs have created institutional structures for implementation of SDGs and also nodal mechanisms within every department and at the district levels for better coordination and convergence

• Sustainable development remains core to the development strategy despite the unprecedented COVID-19 pandemic crisis

• Eight National Missions under National Action Plan on Climate Change (NAPCC) focussed on the objectives of adaptation, mitigation and preparedness on climate risks

• India’s Nationally Determined Contributions (NDC) states that finance is a critical enabler of climate change action

• The financing considerations will therefore remain critical especially as the country steps up the targets substantially

• The goal of jointly mobilizing US$ 100 billion a year by 2020 for climate financing by the developed countries has remained elusive

• The postponement of COP26 to 2021 also gives less time for negotiations and other evidence-based work to inform the post-2025 goal

• Despite overall growth in the global bond markets, green bond issuance in the first half of 2020 slowed down from 2019, possibly as a result of the on-going COVID-19 pandemic

• International Solar Alliance (ISA) launched two new initiatives – ‘World Solar Bank’ and ‘One Sun One World One Grid Initiative’ - poised to bring about solar energy revolution globally

Agriculture and Food Management

• India’s Agricultural (and Allied Activities) sector has shown its resilience amid the adversities of COVID-19 induced lockdowns with a growth of 3.4% at constant prices during 2020-21 (first advance estimate)

• The share of Agriculture and Allied Sectors in Gross Value Added (GVA) of the country at current prices is 17.8% for the year 2019-20 (CSO-Provisional Estimates of National Income, 29^th May, 2020)

• Gross Capital Formation (GCF) relative to GVA showing a fluctuating trend from 17.7 % in 2013-14 to 16.4 % in 2018-19, with a dip to 14.7 % in 2015-16

• Total food grain production in the country in the agriculture year 2019-20 (as per Fourth Advance Estimates), is 11.44 million tonnes more than than during 2018-19

• The actual agricultural credit flow was ₹13,92,469.81 crores against the target of ₹13,50,000 crores in 2019-20. The target for 2020-21 was ₹15,00,000 crores and a sum of ₹ 9,73,517.80 crores was disbursed till 30th November, 2020:

- 1.5 crore dairy farmers of milk cooperatives and milk producer companies’ were targeted to provide Kisan Credit Cards (KCC) as part of Prime Minister’s AatmaNirbhar Bharat Package after the budget announcement of February 2020
- As of mid January 2021, a total of 44,673 Kisan Credit Cards (KCCs) have been issued to fishers and fish farmers and an additional 4.04 lakh applications from fishers and fish farmers are with the banks at various stages of issuance

• The Pradhan Mantri Fasal Bima Yojana covers over 5.5 crore farmer applications year on year

- Claims worth Rs. 90,000 crore paid, as on 12^th January, 2021
- Speedy claim settlement directly into the farmer accounts through Aadhar linkage
- 70 lakh farmers benefitted and claims worth Rs. 8741.30 crores were transferred during COVID-19 lock down period

• An amount of Rs. 18000 crore have been deposited directly in the bank accounts of 9 crore farmer families of the country in December, 2020 in the 7^th installment of financial benefit under the PM-KISAN scheme

• Fish production reached an all-time high of 14.16 million metric tons during 2019-20:

- GVA by the Fisheries sector to the national economy stood at ₹2,12,915 crores constituting 1.24% of the total national GVA and 7.28 % of the agricultural GVA

• Food Processing Industries (FPI) sector growing at an Average Annual Growth Rate (AAGR) of around 9.99 % as compared to around 3.12 % in Agriculture and 8.25 % in Manufacturing at 2011-12 prices during the last 5 years ending 2018-19

• Pradhan Mantri Garib Kalyan Anna Yojana:

- 80.96 crore beneficiaries were provided foodgrains above NFSA mandated requirement free of cost till November, 2020.
- Over 200 LMT of foodgrains were provided amounting to a fiscal outgo of over Rs. 75000 Crores

• AatmaNirbhar Bharat Package: 5 kg per person per month for four months (May to August) to approximately 8 crores migrants (excluded under NFSA or state ration card) entailing subsidy of Rs. 3109 crores approximately

Industry and Infrastructure

• A strong V-shaped recovery of economic activity further confirmed by IIP data

• The IIP & eight-core index further inched up to pre-COVID levels

• The broad-based recovery in the IIP resulted in a growth of (-) 1.9 % in Nov-2020 as compared to a growth of 2.1 % in Nov-2019 and a nadir of (-) 57.3 % in Apr-2020

• Further improvement and firming up in industrial activities are foreseen with the Government enhancing capital expenditure, the vaccination drive and the resolute push forward on long pending reform measures

• AatmaNirbhar Bharat Abhiyan with a stimulus package worth 15 % of India’s GDP announced

• India’s rank in the Ease of Doing Business (EoDB) Index for 2019 has moved upwards to the 63^rd position in 2020 from 77^th in 2018 as per the Doing Business Report (DBR):

- India has improved its position in 7 out of 10 indicators
- Acknowledges India as one of the top 10 improvers, the third time in a row, with an improvement of 67 ranks in three years
- It is also the highest jump by any large country since 2011

• FDI equity inflows were US$49.98 billion in FY20 as compared to US$44.37 billion during FY19:

- It is US$30.0 billion for FY21 (up to September-2020)
- The bulk of FDI equity flow is in the non-manufacturing sector
- Within the manufacturing sector, industries like automobile, telecommunication, metallurgical, non-conventional energy, chemical (other than fertilizers), food processing, petroleum & natural gas got the bulk of FDI

• Government has announced a Production-Linked Incentive (PLI) Scheme in the 10 key sectors under the aegis of AatmaNirbhar Bharat for enhancing India’s manufacturing capabilities and exports:

- To be implemented by the concerned ministries with an overall expenditure estimated at Rs.1.46 lakh crores and with sector specific financial limits

Services Sector

• India’s services sector contracted by nearly 16 % during H1: FY2020-21, during the COVID-19 pandemic mandated lockdown, owing to its contact-intensive nature

• Key indicators such as Services Purchasing Managers’ Index, rail freight traffic, and port traffic, are all displaying a V-shaped recovery after a sharp decline during the lockdown

• Despite the disruptions being witnessed globally, FDI inflows into India’s services sector grew robustly by 34% Y-o-Y during April-September 2020 to reach US$ 23.6 billion

• The services sector accounts for over 54 % of India’s GVA and nearly four-fifths of total FDI inflow into India

• The sector’s share in GVA exceeds 50% in 15 out of 33 States and UTs, and is particularly more pronounced (greater than 85%) in Delhi and Chandigarh

• Services sector accounts for 48% of total exports, outperforming goods exports in the recent years

• The shipping turnaround time at ports has almost halved from 4.67 days in 2010-11 to 2.62 days in 2019-20

• The Indian start-up ecosystem has been progressing well amidst the COVID-19 pandemic, being home to 38 unicorns - adding a record number of 12 start-ups to the unicorn list last year

• India’s space sector has grown exponentially in the past six decades:

- Spent about US$ 1.8 billion on space programmes in 2019-20
- Space ecosystem is undergoing several policy reforms to engage private players and attract innovation and investment

Social Infrastructure, Employment and Human Development

• The combined (Centre and States) social sector expenditure as % of GDP has increased in 2020-21 compared to last year.

• India’s rank in HDI 2019 was recorded at 131, out of a total 189 countries:

- India's GNI per capita (2017 PPP $) has increased from US$ 6,427 in 2018 to US$ 6,681 in 2019
- Life expectancy at birth improved from 69.4 years in 2018 to 69.7 years in 2019

• The access to data network, electronic devices such as computer, laptop, smart phone etc. gained importance due to online learning and remote working during the pandemic

• Major proportion of workforce engaged as regular wage/salaried in the urban sector during the period of January 2019-March 2020 (quarterly survey of PLFS)

• Government’s incentive to boost employment through AatmaNirbhar Bharat Rozgar Yojana and rationalization and simplification of existing labour codes into 4 codes

• Low level of female LFPR in India:

- Females spending disproportionately more time on unpaid domestic and care giving services to household members as compared to their male counterparts (Time Use Survey, 2019)
- Need to promote non-discriminatory practices at the workplace like pay and career progression, improve work incentives, including other medical and social security benefits for female workers

• Under PMGKP announced in March, 2020, cash transfers of upto Rs.1000 to existing old aged, widowed and disabled beneficiaries under the National Social Assistance Programme (NSAP)

• An amount of Rs. 500 each was transferred for three months digitally into bank accounts of the women beneficiaries under PM Jan Dhan Yojana, totalling about Rs. 20.64 crores

• Free distribution of gas cylinders to about 8 crore families for three months

• Limit of collateral free lending increased from Rs. 10 lakhs to Rs. 20 lakhs for 63 lakh women SHGs which would support 6.85 crore households

• Wages under Mahatma Gandhi NREGA increased by Rs.20 from Rs.182 to Rs.202 w.e.f. 1^st April, 2020

India’s fight against COVID-19:

- Initial measures of lockdown, social distancing, travel advisories, practicing hand wash, wearing masks reduced the spread of the disease
- Country also acquired self-reliance in essential medicines, hand sanitizers, protective equipment including masks, PPE Kits, ventilators, COVID-19 testing and treatment facilities
- World’s largest COVID-19 vaccination drive commenced on 16^th January, 2021 using two indigenously manufactured vaccines

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RM/AS/PJ
(Release ID: 1693231)

Summary of Economic Survey-2020-21

Ministry of Finance

Summary of Economic Survey-2020-21

V-Shaped Economic Recovery Due to Mega Vaccination Drive, Robust Recovery in the Services Sector and Robust Growth in Consumption and Investment

V-Shaped Recovery is Due to Resurgence in High Frequency Indicators Such as Power Demand, Rail Freight, E-Way Bills, GST Collection, Steel Consumption, Etc

India to Become the Fastest Growing Economy in Next Two Years as Per IMF

India’s GDP is Estimated to Contract by 7.7 Per Cent in FY2020-21

Agriculture to Clock 3.4 Per Cent Growth, While Industry and Services to Contract by 9.6 Per Cent and 8.8 Per Cent Respectively this Year This Year

India to Have a Current Account Surplus of 2 Per Cent of GDP in FY21, A Historic High After 17 Years

Net FPI Inflows Recorded an All-Time Monthly High of 9.8 Billion Dollars in November 2020

Scores of lives saved and V-Shaped Economic Recovery bear Testimony to India’s Boldness in taking Short-Term Pain for Long-Term Gain.

Dated: 29 JAN 2021

India’s real GDP to record a growth of 11 per cent in 2021-22 and nominal GDP by 15.4 per cent-the highest since independence. The V-shaped economic recovery is supported by the initiation of a mega vaccination drive with hopes of a robust recovery in the services sector and prospects for robust growth in consumption and investment. The Union Minister for Finance & Corporate Affairs, Smt Nirmala Sitharaman presented the Economic Survey 2020-21 in Parliament today, which states that the rebound will be led by the low base and continued normalization in economic activities as the rollout of COVID-19 vaccines gathers traction. The fundamentals of the economy remain strong as gradual scaling back of lockdowns along with the astute support of Atmanirbhar Bharat Mission have placed the economy firmly on the path of revival. This path would entail a growth in real GDP by 2.4 percent over the absolute level of 2019-20-implying that the economy would take two years to reach and go past the pre-pandemic level. These projections are in line with IMF estimate of real GDP growth of 11.5 per cent in 2021-22 for India and 6.8 per cent in 2022-23. India is expected to emerge as the fastest growing economy in the next two years as per IMF.

The Survey says, India’s mature policy response to this “once-in-a-century” crisis provides important lessons for democracies to avoid myopic policymaking and demonstrates the significant benefits of focusing on long-term gains. India adopted a unique four-pillar strategy of containment, fiscal, financial, and long-term structural reforms. Calibrated fiscal and monetary support was provided given the evolving economic situation, cushioning the vulnerable in the lockdown and boosting consumption and investment while unlocking, mindful of fiscal repercussions and entailing debt sustainability. A favorable monetary policy ensured abundant liquidity and immediate relief to debtors via temporary moratoria, while unclogging monetary policy transmission.

The Survey says, India’s GDP is estimated to contract by 7.7 per cent in FY2020-21, composed of a sharp 15.7 per cent decline in first half and a modest 0.1 per cent fall in the second half. Sector-wise, agriculture has remained the silver lining while contact-based services, manufacturing, construction were hit hardest, and have been recovering steadily. Government consumption and net exports have cushioned the growth from diving further down.

As anticipated, while the lockdown resulted in a 23.9 per cent contraction in GDP in Q1, the recovery has been a V-shaped one as seen in the 7.5 per cent decline in Q2 and the recovery across all key economic indicators. Starting July, a resilient V-shaped recovery is underway, as demonstrated by the recovery in GDP growth in Q2 after the sharp decline in Q1. As India’s mobility and pandemic trends aligned and improved concomitantly, indicators like E-way bills, rail freight, GST collections and power consumption not only reached pre-pandemic levels but also surpassed previous year levels. The reignited inter and intra state movement and record-high monthly GST collections have marked the unlocking of industrial and commercial activity. A sharp rise in commercial paper issuances, easing yields, and sturdy credit growth to MSMEs portend revamped credit flows for enterprises to survive and grow.

Dwelling on the sectoral trends, the Survey says that the year also saw manufacturing sector’s resilience, rural demand cushioning overall economic activity and structural consumption shifts in booming digital transactions. It adds that Agriculture is set to cushion the shock of the COVID-19 pandemic on the Indian economy in 2020-21 with a growth of 3.4 per cent in both Q1 and Q2. A series of progressive reforms undertaken by the government have contributed to nourishing a vibrant agricultural sector, which remains a silver lining to India’s growth story of FY 2020-21.

A palpable V-shaped recovery in industrial production was observed over the year. Manufacturing rebounded and industrial value started to normalize. Indian services sector sustained its recovery from the pandemic driven declines with PMI Services output and new business rising for the third straight month in December.

Bank credit remained subdued in FY 2020-21 amid risk aversion and muted credit appetite. However, credit growth to agriculture and allied activities accelerated to 7.4 per cent in October 2020 from 7.1 per cent in October 2019. October 2020 saw resilient credit flows to sectors such as construction, trade and hospitality, while bank credit remained muted to the manufacturing sector. Credit growth to the services sector accelerated to 9.5 per cent in October 2020 from 6.5 per cent in October 2019.

High food prices remained a major driver of inflation in 2020. However, inflation in December, 2020 fell back into the RBI’s target range of 4+/-2 per cent to reach 4.6 per cent to reach 4.6 per cent year-on-year as compared to 6.9 per cent in November. This was driven by a step fall in food prices, particularly of vegetables, cereals, and protein products and favorable base effects.

The external sector provided an effective cushion to growth with India recording a current account surplus of 3.1 per cent of GDP in the first half of the year, largely supported by strong services exports, and weak demand leading to a sharper contraction in imports (with merchandise imports contracting by 39.7%) than exports (with merchandise exports contracting by 21.2%). Consequently, the Foreign exchange reserves rose to cover 18 months of imports in December 2020.

External debt as a ratio to GDP rose marginally to 21.6 per cent at end-September 2020 from 20.6 per cent at end-March 2020. However, the ratio of foreign exchange reserves to total and short-term debt (original and residual) improved because of the sizable accretion in reserves.

India remained a preferred investment destination in FY 2020-21 with FDI pouring in amidst global asset shifts towards equities and prospects of quicker recovery in emerging economies. Net FPI inflows recorded an all-time monthly high of US$ 9.8 billion in November 2020, as investors’ risk appetite returned, with a renewed search for yield, and US dollar weakened amid global monetary easing and fiscal stimulus packages. India was the only country among emerging markets to receive equity FII inflows in 2020.

Buoyant Sensex and NIFTY resulted in India’s market-capitalisation to Gross Domestic Product (GDP) ratio crossing 100 per cent for the first time since October 2010. This, however, raises concerns on the disconnect between the financial markets and real sector.

Exports are expected to decline by 5.8 per cent and imports by 11.3 per cent in the second half of the year. India is expected to have a Current Account Surplus of 2 per cent of GDP in FY21, a historic high after 17 years.

On the supply side, Gross Value Added (GVA) growth is pegged at -7.2 per cent in 2020-21 as against 3.9 per cent in FY:2019-20. Agriculture is set to cushion the shock of the Covid-19 pandemic on the Indian economy in 2020-21 with a growth of 3.4 per cent, while industry and services are estimated to contract by 9.6 per cent and 8.8 per cent during the year.

The Survey underlines that the year 2020 was dominated by the COVID-19 pandemic and the ensuing global economic downturn, the most severe one since the Global Financial Crisis. The lockdowns and social distancing norms brought the already slowing global economy to a standstill. Global economic output is estimated to fall by 3.5 percent in 2020 (IMF January 2021 estimates). In view of this, Governments and central banks across the world deployed a range of policy tools to support their economies such as lowering key policy rates, quantitative easing measures, loan guarantees, cash transfers and fiscal stimulus measures. India recognized the disruptive impact of the pandemic and charted its own unique path amidst dismal projections by several international institutions of the spread in the country given its huge population, high population density and an overburdened health infrastructure.

The Survey observes that the intense lockdown implemented at the start of the pandemic – when India had only a 100 confirmed cases – characterized India’s unique response in several ways. First, the policy response was driven by the findings from both epidemiological and economic research. Specifically, faced with enormous uncertainty about the potential spread of the pandemic, the policy implemented the Nobel-prize winning research in Hansen and Sargent (2001) that recommends a policy focussed on minimising losses in a worst case scenario. Faced with an unprecedented pandemic, loss of scores of human lives captured this worst case scenario. Moreover, epidemiological research highlighted the importance of an initial, stringent lockdown especially in a country where high population density posed difficulties with respect to social distancing. Therefore, India’s policy humane response that focused on saving human lives, recognised that the short-term pain of an initial, stringent lockdown would lead to long-term gains both in the lives saved and in the pace of the economic recovery. The scores of lives that have been saved and the V-shaped economic recovery that is being witnessed bear testimony to India’s boldness in taking short-term pain for long-term gain.

Second, India recognised that the pandemic impacts both supply and demand in the economy. The slew of reforms – again unique amidst all major economies – were implemented to ensure that the supply-side disruptions, which were inevitable during the lockdown, are minimized in the medium to long-run. The demand side policy reflected the understanding that aggregate demand, especially that for non-essential items, reflects precautionary motives to save, which inevitably remains high when overall uncertainty is high. Therefore, during the initial months of the pandemic when uncertainty was high and lockdowns imposed economic restrictions, India did not waste precious fiscal resources in trying to pump up discretionary consumption. Instead, the policy focused on ensuring that all essentials were taken care of, which included direct benefit transfers to the vulnerable sections and the world’s largest food subsidy programme targeting 80.96 crore beneficiaries. Government of India also launched Emergency Credit Line Guarantee Scheme to provide much needed relief to stressed sectors by helping entities sustain employment and meet liabilities.

During the unlock phase, when uncertainty declined and the precautionary motive to save subsided, on the one hand, and economic mobility increased, on the other hand, India has ramped up its fiscal spending. A favorable monetary policy ensured abundant liquidity and immediate relief to debtors via temporary moratoria, while unclogging monetary policy transmission. India’s demand-side policy, thus, underscores the idea that pressing on the accelerator while the brakes are clamped only wastes scarce fuel.

The year 2020 threw at the world a bedlam of novel COVID-19 virus, threatening all that was taken for granted –mobility, safety, and a normal life itself. This, in turn, posed the most formidable economic challenge to India and to the world in a century. Bereft of a cure or a vaccine, public health policy became central to tackling this all-pervasive crisis. The imperative of flattening the disease curve was entwined with the livelihood cost of an imminent recession, which emanated from the restrictions in economic activities from the lockdown required to contain the pandemic. This inherent trade-off led to the policy dilemma of “lives versus livelihoods”.

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RM/SC/SNC
(Release ID: 1693232)

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