Union Budget 2021: Announcement and impact on sectors

The Union Budget 2021 was read by Finance Minister Nirmala Sitharaman at 11 AM this morning, Friday 1st February 2021. The details below contain important and relevant announcements made and their impact on the economy –

  • Announcement – Voluntary vehicle scrappage policy

To phase out old and unfit vehicles. This will encourage fuel-efficient and environment-friendly vehicles which will reduce vehicular population and oil import bills. Vehicle will undergo fitness test and if a vehicle fails it thrice, it will be subjected to mandatory scrapping. Passenger vehicle older than 20 years and commercial vehicles older than 15 years are allowed to be scrapped.

Impact – Positive for Auto sector and for Rupee. May generate more employment and cleaner cars.

  • Announcement – PM Atmanirbhar Swasth Bharat

To strengthen primary, secondary and tertiary health care infrastructure, the government is handing out Rs 64,180 crore over 6 years. This also aims to motivate the healthcare industry.

Impact – Favorable for the entire healthcare industry

  • Announcement – The Urban Swachh Bharat scheme  

This scheme will be implemented with an outlay of over Rs 1.4 lakh crore.

Impact – Positive for sanitary ware companies

  • Announcement: Introduce a bill to setup a developmental financial institution

This development financing institution will play a major role as an enabler for financing infrastructure in the country. The institution will be provided with Rs 20,000 crore. There is also indications for switching to more affordable housing which will up real estate companies in the market.

Impact – Positive for infrastructure and Real Estate Companies

  • Announcement – FY22 capital expenditure target raised to Rs. 5.54 as against Rs. 4.39 lakh crore

Impact – Advantageous for Capital Goods (L&T, ABB, Siemens) and Infrastructure companies.

  • Announcement – 100 more districts to be added in city gas expansion and Independent gas transportation system to be set up

Impact – Positive for Gas companies like GAIL, IGL, MGL and Gujarat Gas

  • Announcement – FY22 PSU Bank Recap of Rs. 22,000 crore

Impact – Positive for select PSU Banks

  • Announcement – Asset reconstruction and Management Company to manage stressed asset.

Impact – Positive for Banking sector

Agriculture – 

  • Announcement – Paid Rs 75,100 crore for wheat MSP and 43.46 lakh farmers benefited

In 2020-21 estimate of Rs 1,72,752 crore is to be paid in comparison to Rs 2019-20 Rs 41,931 crore and presently 1.54 crore farmers have benefitted.

Agriculture credit to farmers – Rs 16.5 lakh crore for FY22

Impact – Beneficial for agriculture and accompanying sectors. Companies such as Coromandal, Godrej Agrovet, UPL, M&M, Escorts

  • Announcement – FM announces Rs 1,000 crore to solar energy corporation and Rs 1,500 to renewable energy development agency.

Impact – Positive for silver demand outlook

  • Announcement – Schemes to assist Discoms will be launched. 

The scheme will commence with an outlay of Rs 3 lakh crore. The framework will allow consumers to choose their supplier.

Impact – Immense competition

  • Announcement – The Fiscal deficit for FY21 is expected to be at 9.5% and FY22 is expected to be at 6.8% of GDP. Target to return to fiscal consolidation path and return to 4.5% by FY26.

Impact – Higher than what the markets were expecting. Typically, negative for banks but considering the economic scenario it would be taken in stride.

  • Announcement – Deduction on payment of interest for affordable housing extended by 1 year

Impact – It will stimulate demand and is positive for Real estate companies

  • Announcement – Gold and silver import duty to be rationalized

Impact – Negative for gold prices in the immediate short term, but very positive in long term for gold demand outlook and will also control illegal trade in gold. It will boost the Gems and Jewellary industry.

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