Nov 18, 2020 (LBO) – The Budget for 2021 is focused on supporting the economy amidst massive disruptions to business activity due to lockdowns resulting from the spread of the COVID-19 pandemic, while taking measures to promote domestic investments to revive the economy, the First Capital Research said in a research note.
Heavy focus has been laid on continuing its infrastructure drive with concentration also placed on consolidating the NBFI segment and providing tax holidays for targeted selective sectors. As the Government takes forward its fiscal and monetary stimulus package, budget deficit expands to 8.9% of GDP for 2021 while the Debt to GDP ratio is expected to rise to 96%.
• Government’s tax simplification policy is taken forward as it plans to combine multiple taxes to GST while also investing further on the RAMIS system. Protecting local industries in this time of survival is priority for the Government, as it plans to expand CESS to protect local industries. Selective sectors such as agriculture, fisheries, renewable energy and ship building has been provided tax holidays to promote the sectors. In order to support the tourism sector the debt moratorium granted has been further expanded.
• The budget has a special focus on investing in infrastructure with funds being allocated to expand the expressway network, road network and continuing housing projects supported by low cost housing loans. Strengthening the NBFI sector has been identified as a critical point with proposals placed for consolidation within the sector while also recommending a National Development Banking Corporation, merging multiple small state banks.
• As Capital Market Development measures, tax holidays were proposed for newly listed firms with multiple benefits granted to promote REITs within the capital market sphere.
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