India batting on a sticky pandemic wicket was certainly in no shape to offer sops and benefits. Much like the Indian cricket team which was left reeling at 36 all out at Adelaide, there was hardly any room for Sitharaman to squeeze goodies for Indian citizens.
India Inc and many on the Dalal Street had in fact given up hopes of benefits. On the contrary, market expectations were gloomy on the probability of additional taxes.
But Sitharaman certainly had other plans.
At the end of her brisk 110 minute (speech) stay at the crease, the Finance Minister gave much for India Inc to cheer. In the process, she not only infused spark among India Inc but also got some interest back on the stock indices.
Here, we pick 5 of the craftiest moves from Sitharaman's arsenal.
1. The Drives: India Inc seemed to be in awe of the powerful drives across the wicket. From the straight drives to the cover drives and the deft leg-glances, the ball spun 360 degrees of Sitharaman's wicket. Here are some of the strokes:
Infrastructure Push: Infrastructure was one among the six essential pillars of the Union Budget 2021. The word repeats 60 times in Sitharaman's brief speech. The capital expenditure itself is up by 34.5 percent more from BE for 2020-21. Better infrastructure followed policy announcements such as asset monetization, roads, and infrastructure for highway, Railways, Power and Urban Infrastructure.
Speaking of sectors she touched across Textiles (MSME relief and reduction in BCD rates), Shipping (Semi Privatization), Startups (Extention time towards OPC structure Incentives) and policies surrounding company matters.
2. Spending: The Flamboyance of Pant but the rigidity of Pujara:
In the words of Yes Securities, Sitharaman made a Pant-sque drive with Spending. "Surprisingly, she played a “Pant” (cricket metaphor), with 28% jump in expenditure for FY21. This clearly seems to be a change in stance where she has gone for Growth, while relegating fiscal consolidation to the backburner for some time. Though FY22 expenditure growth is projected to be flat, it clearly implies that government wants to Front‐Load the Expenditure given the impetus required to capitalize on the broad‐based rebound within the economy. Basis the FY21 YTD numbers, government is likely to spend at a monthly rate of Rs4 trillion in the last quarter of FY21, much higher than the historical average of Rs2‐2.5 trillion."
The report further adds that markets "loved the budget as govt intends on Raising Resources without moving on direct taxes. Most importantly, Budget assuaged apprehensions of negative surprises, of which tremors were palpable in the market action a week ahead of the budget."
3. Divestment: Sitharaman said that the minimum CPSEs would be maintained while others would be privatized. States are also likely to be incentivized for privatizing state public sector enterprises. Disinvestment receipts are estimated at Rs 1.75 lakh crores in BE for 2021-22. The FM also stated that privatization of such enterprises will help leverage non-core assets such as land. A Special Purpose Vehicle to carry out such activities is expected to be formed soon.
"ARC formation for bad loans and monetise government’s land bank, are moves that echos a sense of minimum government and boosting efficiency. On disinvestments, Rs1.75 trillion target for FY22 looks quite realistic given the buoyant market sentiment and abundant liquidity across the globe," adds a note from Yes Securities.
The factors on privatization, ARC formation, fast resolution for MSME cases in NCLT helped build volumes on banking and metal stocks in the stock-trading session on Monday. Deepak Jasani, Head-Retail Research with HDFC Securities shared a note, "Volumes on the NSE were expectedly high on the Budget day. Except pharma, other sectoral indices ended with a gain of 1-8 percent. Broad market indices - BSE Midcap and Smallcap rose 2-3 percent. Markets felt that the Banks, Infrastructure, Materials and Metals sector could be benefitted by the privatization and spending thrust in the Union Budget."
4. Increase in FDI for Insurance
Although the premium costs may not have a direct impact, the Finance Minister did offer an opportunity for capital constrained insurers with an FDI increment.
Roopam Asthana, CEO & Wholetime Director with Liberty General Insurance explains, “Increase in the FDI limits in the insurance sector from 49% to 74 % is a welcome step by the honourable Finance Minister, and has been announced at a time when it is needed the most. This move will help make the insurance companies stronger and enable them to further expand their businesses, supplement their growing business needs, and deepen the market with new products and technology. Moreover, it would foster the growth of the insurance industry and take it to the next level by bringing in global products, practices, and sales strategies to India’s insurance market. Insurance is a very efficient form of protection for general public and it is essential that it reaches everyone in India from big cities to small villages, and this move will facilitate the inflow of capital that would be required to accomplish this.”
Insurance stocks including banks that offer Bancassurance fared well in the session on Monday.
Self-reliance can not only help create a level-playing field for MSMEs but also assist in production of fully indigenous products and services. The Union Budget was a continuation of the Atmanirbhar Bharat packages. Some of the newer measures as part of the Atmanirbhar Bharat package proposed on Monday includes an outlay of Rs 64,180 crores over 6 years for Swasth Bharat Yojana, Production Linked Incentives for 13 sectors totaling Rs 1.97 lakh crores over 5 years starting 2021-22 and also revision in customs duty for specific products with an intention to support domestic MSMEs.
The Union Budget 2021 has received a thumbs up from the following business tycoons.
In a time of unprecedented economic stress, the Govt’s responsibility was to spend enough to revive the economy or else face enormous human suffering. So I had one expectation from this budget: that we should be very liberal in terms of the targeted fiscal deficit. Box ticked.— anand mahindra (@anandmahindra) February 1, 2021
Every year I refrain from giving marks to the budget thanks to my yearly check-up with my spinal doctor. This year for the first time I will give marks - 9/10. Why not 10? I probably should but if I do, I will be criticised and given names.— Harsh Goenka (@hvgoenka) February 1, 2021
A Budget for growth with next-gen reforms. Focus on healthcare, infra, financial sector. A stable tax regime, higher borrowings for capex.— Uday Kotak (@udaykotak) February 1, 2021
Specific reforms: disinvestment & monetization, opening up of insurance, cleanup plan for stressed assets. Sign of a self confident India.
On the broader economic development front, there are many positives around an aggressive growth driven approach with sizeable investments in healthcare and infrastructure. Overall a budget that enables the economy to play on the front foot. Exciting times ahead for 🇮🇳#Budget2021— Kunal Bahl (@1kunalbahl) February 1, 2021
#budget2021 has focused on growth investment n jobs. Investment in infra healthcare n mega projects is key to bringing back jobs n financing thru divestment monetisation n privatisation expeditiously will determine success @nsitharaman— Kiran Mazumdar-Shaw (@kiranshaw) February 1, 2021
Assocham President, Vineet Agarwal:
#ASSOCHAM President @agarwalvineet shares how the budget announced today by FM @nsitharaman is growth oriented and socially inclusive, apart from being a positive step towards achieving a self-reliant India.#BudgetWithASSOCHAM pic.twitter.com/VcLuW4CKbe— ASSOCHAM #WearAMask (@ASSOCHAM4India) February 1, 2021