In these unprecedented times, when the common citizens are adapting to the new normal and life is returning to normalcy, the eyes of the entire nation will be stuck at the national television and channels on February 1, 2021, when the union finance minister Nirmala Sitharaman will be presenting the Union Budget for the upcoming financial year 2021-22. This will be the first time ever since the release of independent India’s first budget on November 26, 1947 that the government has decided not to print the Budget documents following the protocols of COVID-19. Hence all the MPs will be receiving soft copies of the Budget and Economic Survey of FY 2021-22. 

Speaking about Union Budget 2021-22 set to be presented in the Parliament on February 1, 2020, FM Sitharaman said-

“100 years of India wouldn’t have seen a Budget being made post-pandemic like this”

The Union Budget 2021-22 will make it quite imperative for the government to come up with a comprehensive strategy for the revival of the Indian economy against the backdrop of an economic contraction of 7.7% (Mint, 2021). Therefore all the stakeholders hold great expectations from the release of the budget hoping that it provides a boost to the economic growth. While the investments in social sectors like health, education, medical infrastructure, Research and Development (R&D), inculcating better skills to manage the use of technology in medicine is going to be important, challenges in the livelihood pattern ought to be seen in a broader canvas with the changed perspective on skill development. 

Tax and FDI reforms: Impetus to the insurance industry

During the past several years, there has been a tendency of low insurance penetration in health insurance that has acted as a cause of worry for the common citizens. Following the shortage of healthcare insurance funds in the light of  COVID-19, it becomes imperative for the industry experts to believe that the Union Budget 2021 should be leveraged in such a way to mitigate the distress of individuals and industry to some extent. 

It is being speculated that the reforms in two key spheres- tax and foreign direct investment (FDI) can be undertaken and discussed at length under the Union Budget 2021. The provisions should be made for enhancing the limits of insurance under section 80C and 80D that will encourage consumers to opt for health life insurance (Mint, 2021).  

Further, the GST payable currently on the insurance premiums must be reduced by the government thus making life insurance affordable to the vulnerable sections of the society. Such tax reductions and incentives will prove to be successful in the long run by ensuring insurance penetration in India. 

Liberalisation in the FDI regime is extremely important in order to attract additional capital to expand the business in the economy and ensure substantial insurance penetration into India. Therefore, there is a growing need that the government should liberalise the current FDI regime by raising the FDI limits to 74% from the current limit of 49% of paid-up equity capital (Mint, 2021). This would in turn support the disinvestment programme of the government. The reduction in the FDI limits will prove to be an impetus to the expanding insurance industry of India thereby providing opportunities to the investors to fetch higher returns on the assets and capital. 

Another important recommendation has to be made in the form of treating annuity income as tax-free income which will encourage higher uptake of annuity policies and better financial security during the old age years.  This recommendation is significant for a country like India, which has a history of limited social security measures. 

Work from home: A time to rethink the income tax allowances 

The global outbreak of the novel COVID-19 in the month of March has drastically changed the working landscape for the organisations globally. This shift in the working landscape has put in several companies to provide enabling infrastructure such as furniture (like tables, chairs etc), printers, high-speed internet connectivity, stationery etc for providing ease to the employees working at their residences. 

For the smooth conduct of the work at their respective places, the organisations are providing a fixed allowance to the employees in order to meet the expenditure incurred on furniture and digital infrastructure. The governments have to work in tandem with these organizations and ensure the efficient provision of exemption and deductions for the allowances which are reimbursed by the employer to employees who are working from their respective homes. The Union Budget 2021 should also incorporate a similar approach as well thus reaping the benefits of evolving a new digital working landscape. 

The Education sector: Seeking an array of Expectations

With just a fortnight left for the release of Union Budget 2021-22 by the Ministry of Finance, the experts are in lieu of several expectations in the education sector from the Union finance minister Nirmala Sitharaman. Here is the discussion on the top five expectations for the education sector in Budget 2021 (Economic Times, 2021). 

Use of Technology in Education

Following the outbreak of COVID-19, there was an increasing use of technology in education as the schools and academic institutions were shut down. The Finance minister should provide some relief to the education sector in terms of reduction in GST and subsidy on the education loans which are granted for both formal as well as skill-based learning. The focus should also be on the provision of the appropriate flow of ed tech-focused funds into the education sector that will enable the mid-size tech start-ups inside the campuses in raising the money for better and faster experiences using technology in education. 

Online teaching

In order to make online education accessible to each and every student, the GST on online education should be cut down to 5% from 18% in the upcoming Budget 2021 (Economic Times, 2021). The experts are looking at the more announcements especially in reference to New Education Policy 2020 with a primary focus on the K12 segment. The collaborative approach should be adopted wherein the government and private institutions can come forward in order to scale up the coding education. Thus increasing the contribution of education in the lives of students across the nation. 

National Education Policy 2020

The NEP 2020 marked the historic turn of events in the education sector. The vision laid by the government in the form of mandates in NEP 2020 will play a significant role in achieving the inclusive education system. There has to be a concrete implementation plan for the NEP 2020 in the Union Budget 2021 to further ensure focussed investment in Edu-tech companies. 

Tax Exemption

In the Union Budget 2021, the central government must ensure to reduce the expenditure limit of 85% to obtain tax exemption of 75% (Economic Times, 2021). Further, the academic institutions having good NAAC score should be allowed to retain the additional 10% of the funds received by them for providing education loans to the students. Such a provision will prove to be successful in providing funds to students that cannot provide collaterals to obtain loans in the long run. 

Restoring the trust of India’s upset farmers

With the farmers’ agitation still in place, the Union Budget 2021-22 will have to address the problems in agriculture with a more comprehensive and practical approach. The promise of doubling farmers income by 2022 made by the then finance minister Nirmala Sitharaman in her last year budget would require annual growth of 15% in the real income of the farmers till 2022. The Union Budget 2021-22 will therefore have an action to increase the allocation of Central government to schemes like on irrigation, rural roads, warehousing and storage facilities. Moreover, the new Acts are likely to supplement the working of mandis and will not replace them. The Minimum Support Price (MSP) will continue with no substantial changes. This will reorient the expenditure of the government in the right direction to restore the lost trust of farmers. 

Weaving a way for healthcare innovations

While the country is still struggling to deal with the pandemic, the state of health infrastructure in some of the developed economies has raised an alarm across the globe. This pandemic has reflected on the structure of the healthcare sector in India. Keeping  in view the last year allocation of Rs 69,000 crore to the healthcare budget, some of the key considerations for the Union Budget 2021-22 are listed below:

1. The centrally funded hospital and medical college have to be established in each Indian district. This will change the landscape of healthcare in India by ensuring effective and quality healthcare facilities to citizens.
2. The National Healthcare Audit Authority (NHAA) should be set up and funded which will provide the facility of audit functioning of all the healthcare institutions in the country.
3. The Ayushman Bharat Yojana, also known as the Pradhan Mantri Jan Arogya Yojana (PMJAY) should be expanded to include all the taxpayers. 

The gap in the accessibility and affordability in healthcare facilities is enabling local technology-driven innovations that will facilitate the delivery of medical devices within the country. This gap and provision need to be addressed in Budget 2021 with a special focus on the equitable allocation of the funds for healthcare delivery, healthcare equipment, healthcare infrastructure and healthcare innovations by means of start-ups. 

Hospitality sector: Looking for a fair deal in Budget 2021

The travel and tourism sector is the worst-hit sector due to COVID-19 pandemic. The structural financial reforms are needed to ensure the pathbreaking recovery of the sector in the upcoming Union Budget 2021. The experts of the sector are in the view of revitalising the famous Incredible India campaign in accordance with the year 2023 when India will be hosting the G20 summit. The current GST structure of wellness and medical tourism should be restructured so that there is an infusion of funds into the tourism businesses. 

The Federation of Association in Indian Tourism and Hospitality (FAITH) has proposed the setting up of a National Council of Chief Ministers to be headed by the Prime Minister as well as the Tourism Minister. This Council should be placed in the concurrent list and be a subject matter of both Central and State government. Further, the incidence of taxes on tourism earnings should be cut down to zero per cent. The current Service Exports from India Scheme (SEIS) of 10% to all the foreign exchange earnings in tourism be made in place for the next 5 years in order to ensure the post-covid recovery (Sinha, 2021). 

The country holds immense potential for promoting domestic tourism. The Indian organisations and business houses should be encouraged to promote domestic MICE (meetings, incentives, conferences and events) by offering them 200% income tax expense benefits to those Indian organisations who are a part of domestic MICE in India. For conserving the rich cultural heritage of our country, there is a need to establish a Natural and Cultural Heritage Restoration Fund with a backup of at least Rs 2000 crore that will encourage sustainable tourism around each horizon of tourism. 

A secured comprehensive mechanism is required to secure the future travel plans for the travel agents and tour operators who are affected by the pandemic thus restoring the higher growth in the travel and tourism sector. 

Privatisation of Public Sector Banks and PSUs

While the previous year’s budget(2020-2021) made way for the bank-led growth, banks are facing the challenge of confounding the impact of COVID-19 pandemic on their balance sheets and focussing on the economic recovery of India. It is expected that the upcoming Union Budget will include the proposal for Bank Investment Company (BIC) which will increase the shareholding of the government in its banks. As a result of which Public sector banks (PSBs) will dominate the banking sector as the major responsibility will fall on them. 

The government which is running a high fiscal deficit is in search of alternatives in order to reduce its burden on the Non-Performing Assets (NPAs). it is projected that the gross NPAs will be rising to 16.2% in the first quarter of FY21. the mounting NPAs has to be reduced. The BIC is therefore seen as a first welcoming step signalling the intention of the government to undertake reforms in order to ensure that the performance of PSBs are improved. The upcoming budget could therefore act as a signal by announcing the first step- the re-emergence of the Bank Nationalisation Acts and the State Bank of India Act.

Fiscal deficit targeted at 4% of GDP by FY26

It is expected that the Central government will provide an outline and lay down a road map in the Union Budget 2021 to bring the fiscal deficit down to 4% of GDP by FY 2025-26. This plays an important role in considering the fact that there will be growing demands for expansionary policies for the next 4-5 years. This further means that the government had to deviate from the set medium-term target of around 2-3% of GDP as the recommendations made by the Fiscal Responsibility and Budget Management Act (FRBM).

An opportunity to fund data infrastructure and Artificial Intelligence skills 

India has a golden opportunity to lead the next Industrial Revolution which is dominated by Big Data and Artificial Intelligence. The upcoming Union Budget 2021-22 will act as a platform for the Union Finance Minister Nirmala Sitharaman to unfold the benefits of big data through employment multiplier by means of funding through data science which is subjected to research (Umapathy & Singh, 2021). The integrated pool of the entire national data will be the way forward. The data generators ought to share the unfiltered data with the pool. This step will boost employment, nurture the start-up ecosystem and generate employment in the economy.  

Inclusion of Climate-responsive budgeting: A way forward

There is a growing need to recognise the potential of India is working towards a national budget responsive to climate change. Several initiatives have been taken by the leaders worldwide after recognising the significance of efficient fiscal handling of the climate changes in the spheres of planning of domestic public finances. For example, the Paris government has launched the Paris Collaborative on Green Budgeting. In south-east Asia, Indonesia has successfully implemented its climate budget tagging framework in 2016 and leveraged it in 2018. 

The state of Odisha in India which is the most disaster-prone state with the highest disaster score in the country has launched its own climate-budgeting based on the experiences of budget lines across the key economic sectors. Gujarat is another Indian state which has worked at length to adopt its own annual climate budgeting framework. However, India lacks such uniformity in the process of integrating all the subnational climate actions with the national climate goals. The state governments need the leadership of the Centre in establishing guidelines for climate-budgeting at the national level and work on climate-related risk planning. 

Climate-responsive budgeting will make sure that the future governments in power are financially stable in order to ensure the smooth transition of the economy. Moreover, India has to be ready to act as a responsible host during its maiden G20 presidency on climate change and economy. 

Personally, I believe the upcoming Union Budget 2021 will play a crucial role in lifting the Indian economy out of the recession and take significant steps that will focus on post-Covid recovery. Additionally, it is extremely important to concentrate on the forthcoming vision of the upcoming budgets on the threats imposed by climate change. For this, a proper national framework will be required focussing on the contribution of stakeholders from a diverse background including civil society and think tanks. 

Bibliography

Economic Times. (2021, January 17). Budget 2021: Expectations of Education Sector. Economic Times. https://indianexpress.com/article/opinion/columns/union-budget-2021-psb-privatisation-7148097/

Maji, P. (2021, January 15). Budget 2021 expectations. Financial Express. https://www.financialexpress.com/money/budget-2021-expectations-tax-fdi-reforms-to-provide-much-needed-impetus-to-insurance-industry/2171583/

Mint. (2021, January 16). FM holds pre budget meetings with the key stakeholders. mint. https://www.livemint.com/budget/expectations/page-2

Pandey, R., & Priyadarshini, D. (2021, January 16). Budget must take steps towards privatising ownership of public sector banks. The Indian Express. https://indianexpress.com/article/opinion/columns/union-budget-2021-psb-privatisation-7148097/

Sinha, D. (2021, January 18). Budget 2021 Expectations: Travel, Tourism sector expects pathbreaking Union Budget for post-Covid recovery. Financial Express. https://www.financialexpress.com/budget/budget-2021-expectations-travel-tourism-sector-expects-pathbreaking-union-budget-for-post-covid-recovery/2173235/

Umapathy, S., & Singh, R. (2021, January 19). View: Budget 2021 should fund data infrastructure and Artificial Intelligence skills. Economic Times. https://economictimes.indiatimes.com/tech/technology/view-budget-2021-should-fund-data-infrastructure-and-artificial-intelligence-skills/articleshow/80317424.cms

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It can be clearly seen that the preceding economic condition was nothing to boast about and already a national concern, but with the current pandemic scenario, not only did we lose all hopes of recovery, the country is now expected to go into an even deeper state of recession.

The financial stoppage in India, quickened by the COVID-19 pandemic, is compromising the occupations of millions, and will as per moderate evaluations drive a million others into miserable neediness. However, there is an improbable partner in India’s fight against neediness and loss of riches – religious freedom and social harmony

“The social side cannot be viewed as different from the economy side. Not only is social harmony desirable in itself, but it is also necessary for investment to flourish and generate growth. In an autocratic system, dissent is more easily suppressed, but in a democratic environment it cannot be suppressed and this means it is important for the political leadership to work hard to create harmony.”- Montek Singh Ahluwalia

However, the scenario is not the same with India since religion has been a matter of conflict since ages. The government needs to ensure that social harmony is being kept and this topic is just too important to be ignored.

Freedom of Religion and Resulting Consequences

Freedom of religion in India is a fundamental right that is guaranteed to every citizen by Article 25-28 of the Constitution of India. It includes the freedom of conscience, the right to practice, propagate and profess any religion of their own will. As many as 172 countries have signed the International Covenant on Civil and Political Rights that protects the right to freedom.

However, since the faulty implementation is one of the basic root causes of any failed scheme, act or campaign in India, so is the application of the above law. Several incidents have been reported where this basic right has been violated in the past and even in the present.

There have been uncountable conflicts happening in India just because of religious disparities whether it entails the destruction or disrespect of someone’s place of worship or their religion itself.  This has resulted in violent attacks and led to a huge toll on the country’s economy with shops being put on fire and resting curfews that slow down economic activity. Social and religious instabilities and conflicts hamper the economic growth, be it the conflict over Ram Mandir or Attack on Indira Gandhi in the late 70s. Communal violence has been one of the weaknesses that result in the loss of millions of lives.

Deviation from the Crucial Problems

There are a variety of issues such as inadequate healthcare, unemployment rates that are soaring high, illiteracy, protection and empowerment of marginalized communities, systematic corruption, eccentric climatic patterns, poverty and sanitation problems for the urban slum dwellers which require resources and hold vital significance in any country’s agendas. However, with the rising violent conflicts in the country, resources get spent to bring the situation under control and are further utilized in the redevelopment of affected areas. This results in increased government spending and hence the focus shifts from the critical areas of concern to such social disputes.

Violence cost the Indian economy $1.19 trillion (over Rs 80 lakh crore) in the year 2018, in constant purchasing power parity terms, which amounts to roughly $595.4 per person, according to a report prepared by the Institute for Economics and Peace based on an analysis of 163 countries and territories. Also, in 2017, violence impacted $1,190.51 billion to the Indian economy, 9 percent of the country’s gross domestic product or $595.4 (over Rs 40,000) per person. On the other hand, government allocation on the education sector has been only a small portion, nearly 3 percent or even less some years, which is an essential need for the county to progress and develop.

The given data pretty much concludes the fact of how resources reduce for rather crucial issues when social harmony isn’t maintained. It is rumoured that many times such conflicts are the fruits of political disputes and conspiracies. Even the focus of the policymakers and thanks tanks gets diverted to such issues and the crucial issues go rather ignored. It has been suggested in many research works that social and religious conflicts hamper the economy as well as the overall development of the country gravely.

Impact on Investment and Foreign Relation

Even trade negotiations, political relations, and allies also get affected because of these disturbances in the social harmony as the various conflicts sometimes lead to a portrayal of poor image for the country.

It has been observed in various studies that countries that have low levels of religious malice and restrictions put up by the government are ranked higher in terms of education, technological readiness, financial markets and many more important parameters that define a country’s growth and development. China even boasts of not having democratic reforms as it believes that just hampers the nation’s economy and leads to dissent and chaos in the country. Investors tend to be happy with countries where social and religious harmony prevails.

“There is disappointment with India and increasing caution among investors since the last election,” said John Lau, Hong-Kong based head of Asian Equities at SEI, which has $352 billion under management. “The recent political moves and laws have distracted the government from economic reforms,” Lau said the disruptions had led SEI to cut exposure to the South Asian nation to below benchmark levels.

In February, as protesters blocked streets for the third straight month, WisdomTree Investments Inc., the US-based fund with $64 billion under management — said it is concerned rising political and social tensions will delay the country’s economic recovery. Western Asset Management Co., the $453-billion investor and affiliate of Legg Mason Inc., said in January — less than a month after protests intensified — that it was reducing its Indian government bond holdings after tensions around a new citizenship law and the Kashmir region.

These incidents show how investment suffers as a result of social and political issues and thus hampers development. When any protest or conflict takes place, a situation of uncertainties tends to dominate and becomes unappealing to the foreign investors especially. Foreign Direct Investment thus suffers greatly.

Environmental Issues

Moreover, social issues such as the environment have been completely ignored by many companies and industries. A possible reason for the same is that environmental degradation is not subtracted from the country’s GDP and the amount of pollution and toxic waste generated does not have any impact on the GDP. This portrays that although the industry might be severely polluting the nearby water bodies, as long as it is generating goods and services, and adding to the GDP it isn’t a matter of concern. But in the long run, environmental degradation would bring town the economy as a whole as many industries are consumers of natural products such as agricultural products, water bodies for all cleaning and production purposes in industries and other raw materials which are necessary for the manufacturing industry. If the supply of these materials is disrupted because of environmental problems then the economy would eventually slow down.

Imports in the country already supersede the exports and the country thus runs a huge trade deficit which is yet another challenge for the Indian economy. If the supply chain gets disturbed, we would have to again increase the imports followed by a decrease in exports which would further increase our dependency on other nations.

Conclusion

Thus social harmony needs to be given special consideration by the government along with environmental aspects if we wish to develop our economy and achieve the target of getting to a five trillion dollar economy by 2024-25 as envisioned by the government of India. The current GDP growth is already way lower than required to achieve the goal and hence relevant steps need to be taken by the government.

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