The budget placed continued emphasis on infrastructure in order to attract global capital in equity and debt. Infrastructure investment trusts (InvITs) will be set up for roads and transmission lines with a cumulative enterprise value of $1.6 billion. The InvIT framework has proved effective in monetising and financing operating public infrastructure assets. There is likely to be further monetisation of rail and airport infrastructure and oil and gas pipelines. The creation of an asset monetisation dashboard will help provide a transparent framework for investors.
The finance minister announced that a development financial institution would be set up with a statutory $2.7 billion capital outlay, which should catalyse infrastructure financing.
Additionally, allowing foreign portfolio investors to provide debt capital to InvITs and REITs will create an alternative source of funding for infrastructure and real estate assets.
One of the pillars of the budget was health and wellbeing. A new centrally sponsored scheme called Atmanirbhar Swasth Bharat Yojana aims to strengthen India’s healthcare infrastructure with an allocation of $8.8 billion over six years. With the Centre already sponsoring the first 30 million Covid-19 shots, the FM has further allocated $4.4 billion for these vaccines without additional incidence of taxation to the general public.
An asset reconstruction and management company will be formed to take over the bad loans of state-owned banks and, along with a $2.7 billion equity infusion for public sector banks, should take care of their bad assets and equip them to lend to productive sectors as the economy recovers.
The strategic disinvestment push will help the government raise up to $24 billion in FY22. Alongside, an increase in the FDI limit in the insurance sector to 74 per cent will help attract global investors.
Not surprisingly, India’s fiscal deficit is set to widen to 9.5 per cent of GDP in FY21 from the estimated 3.5 per cent of GDP amid a slump in government revenue during the pandemic and a sharp rise in market borrowing. The government plans to borrow an additional $11 billion to fund the deficit this fiscal, which could increase interest rates in the short term. In FY22, the fiscal deficit is estimated at 6.8 per cent of GDP.
This budget reinforces India’s growth story and makes a compelling case to attract global investors. The government is aggressively pursuing the pro-business title with the minimum-government-maximum-governance approach.
For India, the decade has started on a high note, and we as a nation have proved our resilience to combat unprecedented times and rise on a steady path of recovery.