Thread by @HemanthBharatha

Budget 2021 thread

Overall impression: predictable (but clean), business as usual (sigh) budget with not many harmful actions and marginal stimulus. A good budget vis a vis the last however many, but not really a big "Budget of Hope."

1/

Tl;dr: hawkish, deficit mostly from revenue loss, decent increase in CapEx, good increase in health, good privatization, but increased tariffs/"Atmanirbhar" protectionism.

Multi-year programs and consequent implementation questions. "Atmanirbhar", "digital" said 20 times?

2/

1) on deficits/stimulus

FM says deficit was 9.8% GDP last year, again claims the RBI + liquidity support magic number of 13% GDP stimulus. But, ex post expenditure was 4.1 LC higher than budgeted at 34.5 LC. So, actual additional expenditure from pocket was almost 2.8% GDP?

3/

This must mean that most of the deficit came from loss or delay in revenues. So, with revenue gain and announced divestment, deficit should drop by itself.

For 21-22, budget is 34.83 LC. Up 33K Cr from ex post of 20-21, and a la above, the deficit target is 6.8% GDP.

4/

So, in terms of deficit from borrowings, budget remains hawkish. Borrowings target is 12 LC, i.e., w/o adjusting for revenue, 8.3% GDP. After the constant reiteration of we wanted lockdown to ease before spending more, I definitely hoped for a larger increase in expenditure.

5/

As predictable, most of the stimulus will go into capital expenditure and health. CapEx is good, but would have liked to see money thrown at MNREGA, JDY, and the works.

State deficit targets marginally increased to 4% GSDP with a possible +0.5% (based on discipline?).

6/

Targets of 3% GSDP state deficit by 2023-24 and 4.5% GDP national deficit by 2025-26.

This obviously follows from above decisions...

7/

2) CapEx

Big focus. FM says budget up by 34.5% to 5.4LC. Good for infrastructure cos (partnerships). Airports, roads, railways, metros, blah blah. Good news re: 20K capitalization for new DFI w/ target of 5LC portfolio in 2025. But let's see how it gets run. +2LC for states.

8/

If anything will make a dent on stimulating consumption, it's probably these monies. Still wish there was some revenue expenditure to put cash in hands!

9/

3) Privatization

First re: our PSB problem. 2 PSBs to be divested this year. Recapitalization to the tune of 20K Cr. Good stuff.

Other good, big stuff: LIC IPO, 1.75 LC (up 70K Cr) privatization target. Completion of existing divestment work.

10/

This the area where the budget did best for me, met hopes. Also good that they decided to raise a big chunk of revenues here and thereby evaded the allure of the various taxes called for.

11/

4) Atmanirbhar + Customs + Protectionism

This government is happily neoliberal in small government but not so in market competition. Our usual pro-business, anti-market ways.

Bunch of tariff announcements (agri, leather, gems, etc.).

12/

The worst part of this budget for me. Re: Urjit Patel's recent warning in FT: ft.com/content/51c01d…

So, as always, Atmanirbhar facilitates foreign investment, hinders participation.

13/

Trade deficit falling is good but IFF it is from export increase. 2 important considerations re: hating on imports:

a. Many of our exports rely on imports. E.g., rough diamonds are imported in W. India and exported as finished jewels.

14/

b. Exchange rates. Reducing imports means, to oversimplify, increased net demand for INR ie we are buying less things of theirs => INR appreciation. Eventually, that makes exports less competitive. Remember current opportunity from recent manufacturing shifts.

15/

5) Health

"New" (not) scheme—Atmanirbhar Swasth Yojana. Good

137% increase in budget for health and wellbeing (WASH, nutrition, etc.).

35K Cr for vaccines, more if needed: should keep us on track (we're doing very well and might hit 10mn a day soon). 2 more vaccines.

16/

Have to study distribution details closer but seems like most of this ₹₹₹ is towards more HWCs, block PHCs, etc. Good, desirable plans here as well.

I.e., health and CapEx are the biggest parts and also the tl;dr of this budget.

17/

6) Taxes

Custom duties + new agriculture and infra development cess. Custom duties particularly bother, as above.

Basically no changes to direct taxes.

18/

7) Misc. interesting things

Capital gains exemption for startup investments extended, incentives to promote digital transactions, more 1 nation 1 ration card (esp for migrants), increase in crop procurement & FDI in insurance, and asset reconstruction.

19/20

In conclusion: disappointed but could have been much worse.

#Budget #BudgetSession2021 #NirmalaSitharaman

@threadreaderapp unroll

20/20. Fin.