Union Budget 2021: A necessary boost to economic recovery

The hopes from the upcoming budget are piling up, with industries anticipating what it might have in store in them.

Jan 22, 2021 09:01 IST India Infoline News Service

Here's what industry experts have to say:

Lalit Mehta, co-founder and CEO, Decimal Technologies said, "The lockdown brought with it an economic downturn for enterprises of all sizes, which urged the government to offer Loan Moratorium to borrowers amidst liquidity crunch. While this helped kick-start the economy, the government must introduce a long-term stimulus in its upcoming budget to ensure cash-flow for the BFSI industry.

In the post-COVID19 economy, credit is going to be the enabler of businesses, we expect the government to introduce credit schemes that will provide a fillip to the sector. Schemes that would ensure continuous availability of credit as and when needed will provide a great boost, especially to the lending industry. During the lockdown, borrowing, for both commercial and personal purposes, increased, facilitated by FinTech players. We expect the government to announce necessary regulatory changes that would create an easy line of access for FinTech players to secure credit from conservative banks and further disburse loans to borrowers.

Covid-19 catapulted India into a digital economy and the FinTech start-up ecosystem witnessed some high-value investments in 2020.  While the PM has already announced a Rs1,000 cr Startup India seed fund, the FinTech start-ups can further benefit from the launch of a fund focused on equity capital requirements of start-ups in the lending space. This will help give steam to India’s $ 5-trillion GDP target by 2024 and fill the $380-billion MSME credit gap.”

Ashraf Rizvi, founder & CEO of Digital Swiss Gold and Gilded said, "India’s working-age population (15-59 years old) is a cohort estimated to comprise roughly two-thirds of India’s total population, which the United Nations estimates at 1.38 billion in 2020. As the economy opens up, we expect the government to roll out more initiatives and investment that create jobs which will will to more spending and consumption, and also more saving and investing as personal finances improve, Digital Gold being one such safe, flexible and scalable investment option suited to all investors.

We, at Digital Swiss Gold, are among the many excitedly anticipating Indian Finance Minister Sitharaman’s Union Budget 2021-22. Gold continues to be one of the biggest imports in India and is an easy source of increased revenues for the government. We will be eager to see if the gold business draws additional import duties as has been the case in prior budgets over the past decade. We are confident that this budget will spur growth across industries while keeping the needs of Indians at its core. With our cutting-edge financial technology and unparalleled service, Digital Swiss Gold hopes to play a role in helping Indians realize their financial hopes and dreams in 2021 and beyond.”

Dr Alok Roy, Chair, FICCI Health Services Committee and Chairman, Medica Group of Hospitals, "Union Budget is a much anticipated event every year and more so in FY 21-22, as expectations are running much higher this time.

The year that’s ending has been a year of pandemic disrupting lives & livelihoods & causing economic turmoil. From being one of the fastest growing economies, we are still battling with the pandemic gloom.

In 2021-22 budget, prioritization of Healthcare sector shall be of utmost importance. While India fought Covid 19 reasonably well and with vaccines just being rolled out, we must not forget the indomitable spirit of the private health sector which fought the pandemic alongside with the government despite severe financial losses in revenues.

Covid 19 has shown us all that Health is the new normal and going forward health shall be significantly measured by sanitation, hygiene and preventive healthcare. With a market size of 1.4 billion people government must look into attracting investments into these sectors via existing as well as start-ups.

Attracting investments in healthcare start-ups & “Atmanirbhar” in healthcare equipment

The key solution to address this gap in accessibility and affordability of healthcare is making homegrown technology-driven innovations that facilitate production and delivery of medical devices within the country, provided the policymakers use this opportunity to align the resources/budgets to ensure accessible, equitable, and quality healthcare for the citizens of India. The needs to be addressed in the budget this year with a specific allocation of the budget for healthcare delivery, healthcare personnel, infrastructural developments, and a special focus on innovations in healthcare by supporting start-ups in this field.

It is evident that this pandemic has fast-tracked the need and adoption of technology-driven solutions in healthcare and this trend is here to stay. Healthcare providers have embraced technology with virtual consultations, robot-assisted procedures, wearables (AI in medical equipment), and many more innovations that aid smooth delivery of healthcare. Government can consider putting healthcare start-ups under MSME category which will enable them to get the extended advantages. Banks to also consider flexibility in lending to such start-ups as these will add the much needed boost to not just the start ups but also to the healthcare industry.

Digitization of healthcare and the impetus required

2020 has been the year of pandemic and the new normal which have changed the way we look at healthcare. The healthcare sector has been quick enough to change and adapt to the digital transformation. Going forward such changes are all set to go to the next level ably supported by AI, Big Data & Analytics, Electronic Records & Telemedicine. While we strive for seamless digitization we also have to work for protection against data breaches & safeguard all such data.

Expectations on taxation vis-a-vis healthcare

It is also crucial that the government provides appropriate fiscal incentives and creates sustainable public policy to encourage investment in private healthcare infrastructure. Hospitals should be included under the definition of ‘industrial undertaking’ u/s 72A of IT Act. This has been a long standing demand, critical to expedite private investment in healthcare capacity building and to ensure that healthcare is treated at par with other sectors.

Currently, the benefits of deduction for CAPEX are extended only to hospitals having a minimum capacity of 100 beds. No benefits are provided to encourage the setup of smaller hospitals/nursing homes in rural areas posing as an impediment for organizations to start chains of smaller hospitals. Given that there is an urgent need for expansion of healthcare facilities in smaller cities and rural areas, the benefits u/s 35AD of IT Act should be extended to hospitals having:

(i) min of 50 beds in tier II, III and IV cities and
(ii) min of 25 beds in rural areas

The pandemic has also substantiated that we cannot be over-dependent on only testing and treatment of diseases. Primary and preventive care is vital for a strong healthcare system. It is recommended that tax exemption on Preventive Health check-up be raised from the current Rs 5,000 per person (Rs 7,000 for senior citizens) to Rs 20,000 u/s 80-D of IT Act. This is an opportunity incentivizing health-oriented consumer behaviour for insulating individuals from effects of unanticipated healthcare spending and for institutionalising a Healthcare Savings Fund.

Further, while grappling with COVID-19, hospitals have had to make substantial capital expenditure towards making structural changes in the building layout, air-flows etc. and significant fresh investment in medical equipment, bringing in immense strain on hospital cash flow and operational sustenance. FICCI has recommended that some relief through weighted deduction on CAPEX u/s 35AD be provided to all hospitals who have made any capital expenditure for prevention and/ or treatment of COVID patients.
On the GST front, government need to consider zero rating of GST for healthcare services.

Healthcare Infrastructure investments

The Finance Ministry has devised an inspiring INR 111 lakh crore National Infrastructure Pipeline (NIP) for 2020-25, which includes INR 1.69 lakh crores for infrastructure development projects for healthcare.
There is also a need to increase proportion of Health Research allocation in overall Health Expenditure to at least 6% of the funds allocated to MoHFW. The pandemic has ascertained that Health Research is a critical component for forging an effective healthcare response and it is also important for attaining SDG-3 goals.

Healthcare should be accorded ‘National Priority’ status, as was done for the IT sector, to bring in requisite attention and investment.m Innovative long-term financing structures, special healthcare zones, subsidized cost for land and electricity, higher FSI for hospital buildings are some of the measures needed for enhancing infrastructure creation in healthcare. Overall, Budget 2021 must focus on allocation of higher spending towards healthcare with special attention to preventive health and wellness segments. "

Rahul Singh, CIO-Equities, Tata Mutual Fund said, "Government’s focus in the upcoming Budget is likely to be on providing acceleration to the economic recovery which has been underway over past few months. Government spending target will key and aided by the (i) strong recovery in nominal GDP growth in FY22 and (ii) relatively higher tolerance for fiscal deficit (globally) even though it will be materially lower than the FY21 levels. We expect the focus of spending to be on healthcare, housing and infrastructure.

Real estate revival is already underway and driven by genuine demand this time as low interest rates and stable real estate prices have improved affordability; government has the potential to design targeted incentives as a revival in real estate capex will have benefits throughout the economy. Production linked incentive (PLI) scheme has seen early success and further momentum can be imparted if it can be backed up by dedicated export zones with associated infrastructure and easier approvals. More emphasis on devising alternate funding mechanism for infrastructure investments is expected.

There have been significant changes to the tax structure in the last 2-3 years – corporate, individual and capital gains – and hence only incremental changes are likely this time around. Any decision on Covid cess on higher income categories to fund the vaccination drive could be one-off and will depend on government’s forecasts on tax revenue growth and expenditure targets. On the reform front, Government is likely to target PSU reforms (including banks) and privatisation as one of the key areas to raise capital over the medium term.”

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