The Union Budget 2021-2022

The Union Minister for Finance & Corporate Affairs, Nirmala Sitharaman presented the Union Budget 2021-2022 in Parliament last week which is the first budget of this new decade and also a digital one in the backdrop of unprecedented COVID-19 crisis. The Union Budget proposals for 2021-2022 rest on 6 pillars:

1. Health and well-being,
2. Physical and financial capital and infrastructure,
3. Inclusive Development for Aspirational India,
4. Reinvigorating Human Capital,
5. Innovation and R&D
6. Minimum Government, Maximum Governance


1. Health and well-being

The current presentation of the budget of the Indian Union shows that there is a significant increase of 137% in health infrastructure. In numbers, this means that the budget for health and well-being is ₹ 2,23,846 in BE 2021-22 compared to this year’s BE of ₹ 94,452, which gives an increase of 137 percent. The Minister of Finance announced that a new centrally sponsored scheme, Prime Minister AatmaNirbhar Swath Bharat Yojana, will be launched with an outlay of around ₹ 64, 180 crore over 6 years. This will improve primary, secondary, and tertiary care health systems, strengthen existing national institutions, create new institutions, to cater to detection and cure of new and emerging diseases. This will be in addition to the National Health Mission.

Universal Coverage of Water Supply and Swachch Bharat Mission

The Finance Minister said that “The Jal Jeevan Mission (urban) will be launched. It aims at 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 2,87,000 crores,”. In addition, the Urban Swachh Bharat mission will be implemented over a period of 5 years from 2021-2026 with a total financial allocation of ₹ 1,411,678 crore. This to increase the response to the growing number of air pollution problems in cities with a population of more than 1 million in their urban centers, the government proposed an amount of ₹ 2,217 crore for 42 city centers. The Minister of Finance also presented a voluntary scrapping policy to phase out old and unsuitable vehicles. Passenger cars undergo a fitness test after 20 years, while commercial vehicles require it after completion at 15 years.


2. Physical and financial capital and infrastructure

AatmaNirbhar Bharat – Production Linked Incentive Scheme (PLI)

In presenting the budget, the finance minister said that for an economy of $ 5 million, the Indian manufacturing sector needs to grow continuously by double digits. The Indian manufacturing companies must be an integral part of the global supply chain and continue to have core competencies in cutting-edge technology. In order to meet these expectations, PLI schemes must be instrumental in creating global world champions for Atma Nirbhar Bharat in 13 articulated sectors. To this end, the government has allocated almost ₹ 1.97lakh crore over the next five years, starting in 2020-22. This effort will help create jobs for India’s young people by helping bring scale and size into key sectors, cabinets and care global masters.


At the presentation of the budget by the Minister of Finance, a scheme was proposed with Mega Investment Textiles Parks (MITRA) that enables the textile industry to become globally competitive, attract large investments, increase employment generation and exports. At the presentation of the Union budget 2021-22, the Minister of Finance said that this will create world-class infrastructure with plug and play facilities that will make it possible to create global champions in exports. MITRA will be launched in addition to the PLI (Production Linked Incentive Scheme). A scheme with Mega Investments Textile Park will be launched in addition to the PLI Scheme, which will create world – class infrastructure with plug and play facilities that enable world champions in exports. 7 Textile Parks will be established over 3 years.


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 ₹ 1.10 lakh crore under some key infrastructure Ministries have been completed.

Infrastructure financing – Development Financial Institution (DFI)

Infrastructure is an area that needs long-term debt financing. It is considered necessary to establish a professionally managed Development Finance Institution (DFI) in order to act as a provider, enabler and catalyst for infrastructure financing. Therefore, a bill on the establishment of a DFI is submitted. An amount of 20,000 crore has been provided to capitalize this institution. The ambition is to have a loan portfolio of at least 5 lakh crores for this DFI in three years.

Debt financing of inVITs and REITs from foreign portfolio investors will be made possible by making appropriate changes to the relevant legislation. This will further facilitate access to finance for InVITS and REIT, thereby increasing funding for infrastructure and real estate sectors.


Roads and Highways Infrastructure

By March 2022, the Government would be awarding another 8,500 kms and completing an additional 11,000 kms of national highway corridors. To further augment road infrastructure, more economic corridors are also being planned.  The finance minister also provided an enhanced outlay of ₹ 1,18,101 lakh crore for the Ministry of Road Transport and Highways, of which ₹ 1,08,230 crore is for capital, the highest ever.

To further augment road infrastructure, more economic corridors are also being planned. Some are:

  • 3,500 km of National Highway works in the state of Tamil Nadu at an investment of ₹03 lakh crores. These include Madurai-Kollam corridor, Chittoor-Thatchur corridor. Construction will start next year.
  • 1,100 km of National Highway works in the State of Kerala at an investment of ₹ 65,000 crores including 600 km section of Mumbai-Kanyakumari corridor in Kerala.
  • 675 km of highway works in the state of West Bengal at a cost of ₹ 25,000 crores including upgradation of existing road-Kolkata – Siliguri.
  • National Highway works of around ₹ 19,000 crores are currently in progress in the State of Assam. Further works of more than ₹ 34,000 crores covering more than 1300 kms of National Highways will be undertaken in the State in the coming three years.


Railway Infrastructure: The National Rail Plan for India 2030 will create a future-ready railway system and bring down the logistic cost for industry to enable Make in India.”The plan is to create a future-ready railway system by 2030, bringing down the logistics cost,” the finance minister said.


Urban Infrastructure

The government will work to increase the share of public transport in urban areas through the expansion of the metro railway network and the expansion of city bus services. A new scheme will be launched at a cost of ₹ 18,000 crore to support the expansion of public bus transport. The scheme will facilitate the implementation of innovative PPP models so that actors in the private sector can finance, acquire, operate and maintain over 20,000 buses. This scheme will improve the mobility of urban dwellers and create increased employment opportunities for young people.

At present, a total of 702 km of conventional metro are in operation, and a further 1,016 km of metro and RRTS are under construction in 27 cities. Two new technologies, ie. ‘MetroLite’ and ‘MetroNeo’, will be implemented to provide much lower cost metro systems with the same experience, convenience and safety in Tier-2 cities and peripheral areas in Tier-1 cities.


Power Infrastructure

The viability of Distribution Companies is a serious concern and therefore the government proposed to launch a revamped reforms-based result-linked power distribution sector scheme with an outlay of ₹ 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, 7 projects worth more than ₹ 2,000 crores will be offered by the 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 ₹ 1624 crores 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.


Increasing Foreign Direct Investment (FDI) in Insurance Sector

The finance minister 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, the Government has kept working towards strategic disinvestment.  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 proposes 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.

The Minister of Finance said that in the AtmaNirbhar package she had announced that the government will come out with a policy for strategic disinvestment of companies in the public sector. The policy provides a clear roadmap for disinvestment in all non-strategic and strategic sectors. The government has retained four strategic areas where absolute minimum CPSEs are maintained and the rest are privatized. In the non-strategic sectors, CPSEs will be privatized, otherwise they will be closed. The Minister of Finance said that in order to speed up the investment policy, NITI Aayog will work on the next list of key public companies that will be taken up for strategic disinvestment. The government has estimated ₹ 1.75,000 crore as income 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.


At the budget item on agriculture, the Minister of Finance expressed that the government feels obliged to keep the welfare of farmers in mind. The MSP regime has undergone a sea change to ensure a price that is at least 1.5 times the cost of production across all goods. Purchasing is also continuing to increase at a steady pace. This has resulted in a significant increase in payment to farmers. The attention to the farmers’ well-being has also led the government to decide, among other things, to improve the agricultural credit targets to ₹ 16.5 lakh crore in FY 22 in order to provide the farmers with sufficient credit. Similarly, the allocation to the Rural Development Fund increased from ₹ 30,000 crore to ₹ 40,000 crore. The Micro Irrigation Fund created with a corpus of ₹ 5,000 crore will be doubled under NABARD.
Early this year, the Prime Minister Modi 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.

In order to increase the value added in agriculture and production with similar products and their exports, the scope of the ‘Operation Green Scheme’, which currently applies to tomatoes, onions and potatoes, will be expanded to include 22 perishable products.



The 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.


4. Reinvigorating Human Capital

Scheduled Castes and Scheduled Tribes Welfare

The budget includes an increase in investment expenditure for the improvement of school roads and the establishment of schools in the tribal areas.

The government wants to upskill the apprenticeship training and has therefore partnered with the United Arab Emirates to benchmark qualifications, assessment and certification of skills. Likewise, the government has partnered with Japan to facilitate the transfer of industrial and business skills, engineering and knowledge. India is expected to expand similar partnership agreements with other countries to raise the skills level of the workforce.


5. Innovation and R&D

There has been a manifold increase in digital payments in the recent past. To give a further boost to digital transactions, the finance minister earmarks ₹ 1,500 crores for a proposed scheme that will provide financial incentive to promote digital modes of payment. The 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. Our oceans are a storehouse of living and non-living resources. To better understand this realm, the government will launch a Deep Ocean Mission with a budget outlay of more than ₹ 4,000 crores, over five years. This Mission will cover deep ocean survey exploration and projects for the conservation of deep sea bio-diversity.


6. Minimum Government, Maximum Governance

Direct Tax Proposals

In the budget presented, there are proposals to relax some of the conditions associated with the ban on private financing, the restriction of commercial activities and indirect investments in infrastructure. These reductions are proposed in order to attract foreign investment in Indian infrastructure. Budget proposes to make notified infrastructure debt funds eligible to raise funds by issuing tax efficient zero coupon bonds.


Indirect Tax Proposals

The Minister of Finance also informed that many initiatives have been taken in recent months to implement further simplifications of GST. In this connection, the Minister assured that attention is focused on removing irregularities such as the reverse customs structure. As for the tariff policy, the finance minister said it has the two objectives of promoting domestic production and helping India move forward to global value change and exports better. The Minister informed that the effort must now be easy access to raw materials and export of value-added products.

The Minister of Finance also announced that there will be an exemption from customs duties on scrap steel for a period until 31 March 2022. At the same time, the need to rationalize customs duties on raw material supplies for man-made textiles was emphasized and that nylon chains are brought to the same level as polyester and other man-made fibers The announcement of a uniform reduction in the BCD prices of Caprolactam, nylon chips, nylon fibers and yarn to 5 percent will help the Indian textile industry, MSMEs and exports.

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 inverters 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 machines and certain auto parts.


The Union Budget, and as such above recap, are is subject to change until ratification April 1st.


You can read the whole Union Budget 2021-22 here:


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