Our finance minister has introduced the budget for FY21 on 1st Feb 2021 and after the budget Sensex jumped 2,314 points i.e. 5% in a single day! This is one of the biggest jumps in a long time. And while I am recording this video on the next day, Sensex has jumped another 1250 points and is very close to hitting the level of 50,000! Clearly, the market has reacted positively towards the budget.
So in this article, we will review the budget and identify the top 11 key takeaway from the budget.
We will look at each news highlight and identify the sectors that would benefit from the budget and explore the key companies in each sector.
- The biggest takeaway from the budget is that FM has announced a capital expenditure of Rs 5.54 lakh Crore for FY22 against the FY21 capital expenditure of Rs 4.12 lakh crore.
- That’s an increase of 34%. I think this is the most important aspect of the budget. After the Covid crippled the economy, we needed the government to revive the economic activity by spending more money. This would eventually benefit every sector of the economy.
- Government has planned to raise the capital via strategic divestment in 2 PSUs and one from LIC. With this, the government is planning to raise 1.75 lakh cr by FY22.
- 2nd key takeaway is that Health & well-being sector would get Rs 2,23,846 Cr from this budget which is an increase of 137% as compared to Rs 94,452 Cr last year.
- Government has launched a new scheme called PM aatmnibhar swasth bharath scheme with a total budget of Rs 64,180 crore over the next 6 years. This would positively impact the healthcare sector in India.
- The scheme is to develop capacities of primary, secondary, and tertiary care health systems, strengthen existing national institutions, and create new institutions, to cater to detection and cure of new and emerging diseases.
I think this is again a great move by the government. COVID had exposed the issue in our healthcare system and it needed strong attention.
Takeaway #3 Another sector that has been the focus in the budget was Infrastructure.
- Infrastructure is a heavy investment sector and it requires a long term debt financing. Government has set up a “Development Financing Institution” with an initial amount of Rs 20,000 Cr.
- Our FM said that “the ambition is to have a lending portfolio of at least Rs 5 lakh crore for this DFI in three years time.” This would play a key role as an enabler in infrastructure financing in the country.
- She also announced the launch of a "National Monetization Pipeline" of potential brownfield infrastructure assets, stating that monetising operating public infrastructure assets is a very important financing option for new infrastructure construction. An asset monetisation dashboard will also be created for tracking the progress and to provide visibility to investors. This is again a great move!
- Now when we have an asset monetization program to monetize the public infrastructure, it would attract more investment from foreign investors. And that is the key for growth.
- For road and highway infrastructure - more than 13,000 kilometre length of roads at a cost of Rs3.3 lakh cr already awarded under the Rs5.35 lakh cr Bharatmala Pariyojana project. FM says, by March 2022, the government will be awarding another 8,500 kilometres and complete an additional 11,000 national highway corridors.
Please understand why infrastructure is important. The economy needs reliable infrastructure to connect supply chains and efficiently move goods and services from one place to another.. Infrastructure connects households across metropolitan areas to higher quality opportunities for employment, healthcare and education. The adequate infrastructure in the form of road and railway transport system, ports, power, airports and their efficient working is also needed for integration of the Indian economy with other economies of the world.
- 4th takeaway is in the Insurance sector. Government has increased the FDI investment in the insurance sector from 49% to 74%. This would boost the insurance sector in India. There are some top notch companies in the insurance sector including HDFC life, SBI life and ICICI prudential life insurance.
- FM has announced “Bad bank” to address the problem of stressed assets of Bank via asset reconstruction company model and set up 20,000 Cr budget. This would positively impact the banking sector in India. Market has reacted positively with this news and SBI shares jumped 10% after the announcement.
- Budget has provided a boost of nearly 200 per cent for developing the pharmaceutical sector to help strengthen India’s image of the ‘pharmacy of the world’.
- In the allocation for the Union Department of Pharmaceuticals, which comes under the Ministry of Chemicals and Fertilizers, Budget 2021-22 has allocated Rs 124.42 crore for initiatives aimed at “Development of Pharmaceutical Industry”.
- This is 200% more as compared to previous budget of 42 Crore. India has dependency on China especially for the API which is a key intermediary for drug manufacturing.
- After COVID disrupted the supply chain, we have realized the problem of over dependence on China. Hence, government is focused on encouraging the API manufacturing in India.
- So all pharma companies specially the API manufacturers like Divis lab, Aarti drugs, Lauras Lab, Alembic Pharma, Sun Pharma, Cipla, etc. should benefit from this.
- AgricultureTo provide adequate credit to our farmers, FM enhanced the agricultural credit target to Rs16.5 lakh cr in FY22. The focus will be on ensuring increased credit flows to animal husbandry, dairy, and fisheries.
- FM announced to enhance the allocation to the Rural Infrastructure Development Fund from Rs30,000cr to Rs40,000cr. FM also doubled the Micro Irrigation Fund by another Rs5,000cr.
- To further enhance the Blue Economy, the finance minister announced that she was proposing substantial investments in the development of modern fishing harbours and fish landing centres with development of 5 major fishing harbors.
- Government has launched a voluntary vehicle scrapping policy where it aims to phase out old and unfit vehicles. In case of private vehicles, they would need to go a fitness test in 20 years.This would benefit the automobile sector in India.
- The scrapping of old vehicles would create a demand for new safer and environment friendly vehicles which would generate employment in the entire auto sector and I have already covered a video on key companies that would benefit from the electric revolution in India.
- Next sector government has focused on is manufacturing.
- FM said that “for a 5 trillion dollar economy, our manufacturing sector has to grow on double digits on a sustained basis.”
- She focused on Production linked incentives i.e. PLI schemes to create manufacturing global champions announced in 13 sectors.
- Government committed Rs1.97 lakh cr over five years starting this 2021-22. I am also planning to create a separate video on this PLI scheme to help you understand the major sectors that would benefit from this scheme and key companies in each sector.
- Government has also announced the set up of 7 Mega textile parks that would attract investment in the textile industry.
- To support the MSME sector i.e. Micro Small and Medium Enterprise, government has allocated Rs 15,700 Cr which is double of what was allocated last year. This would boost the growth in MSME sector.
- Final takeaway is that there is no bad news. There is no COVID cess, no wealth tax and no hike in indirect taxes. And no bad news is great news.
So overall, our FM has done a great job in this budget by keeping it simple and focusing on expenditure which is the key to revival of our economy. If we conclude, the 2 key sectors that would benefit the most from the budget would be infrastructure and healthcare.
But overall, this budget would boost the entire economy with high capital expenditure and every sector would benefit with the growth of Indian economy.
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