Union Budget 2021-22

Yojana Summary March

Theme – Union Budget 2021-22

“Never let the future disturb you. You will meet it, if you have to, with the same weapons of reason which today arm you against the present”- Marcus Aurelius

“Earth provides enough to satisfy every man’s needs, but not every man’s greed.” – Mahatma Gandhi

IMPORTANT FACTS

Finance Commission Recommendations			Budget 2021-22 Allocations
Total grants		Rs. 10,33,062 crore	Proposed capital expenditure	Rs. 5.54 lakh crore
Revenue Deficit Grants as a per cent of the gross revenue receipts of the Union		1.92 %	Health sector	Rs. 2,23,846 crore
Grant to local governments		Rs. 4,36,361 crore	Vaccines	Rs. 35,000 crore
Health sector grants		Rs.1,06,606 crore	Education sector	Rs. 93,224 crore
Modernisation Fund for Defence and Internal Security	Rs. 2,38,354 crore over the period 2021-26		Agriculture sector	Rs. 1,31,531.19 crore
Other Budget 2021-22 proposals			Agricultural credit target	16.5 lakh crore
Eklavya Model Residential Schools to be set up		750	Deficit Trends (2021-22, BE)
No of Sainik Schools to be set up		100	Fiscal Deficit	6.8 % of GDP
Mega Investment Textiles Parks to be set up		7	Revenue Deficit	5.1%
			Effective Revenue Deficit	4.1%
			Primary Deficit	3.1 %

Finance Commission

Syllabus: GS Paper III (Economic Development): Mobilization of Resources, Government Budgeting

The constitution of the Finance Commission (FC) is governed by Article 280 of the Constitution.
It spells out the manner and modality for the management of the finances of the Union and the States as well as the principles for governing the divisible resources.

The fifteenth Finance Commission (FC-XV)

The fifteenth Finance Commission submitted its report, titled ‘Finance Commission in Covid Times’, to the President for the period 2021-26.
The Finance Commission transfers are made under Articles 270, 275 and 280 of the Constitution, which provides a mechanism for sharing of taxes and revenues vertically between the Centre and states; and horizontally among all states.
FC-XV was additionally tasked with reviewing the design of fiscal principles for various grants that are typically provided alongside revenue shares. It was also asked to consider performance-based incentives to support and motivate the efforts of State and/or local governments.
Another unique mandate given to it included recommending funding mechanism for defence and internal security.

Recommendation of FC-XV

Vertical Transfer

The constitution has assigned higher and more buoyant taxation and resource raising powers to the Union Government whereas higher responsibilities for incurring expenditure have been assigned to the States.
This imbalance between revenues and expenditure responsibilities forms the basis of a fair vertical devolution.
FC-XV recommended this devolution to beat 41 per cent.
As compared to FC-XIV, this Commission has only made the required adjustment of about 1 % due to the changed status of the J&K into the new UT of Ladakh and J&K, as the resources for these Union territories will now be provided by the Union government.

Horizontal distribution

Horizontal devolution of taxes is mainly driven by considerations of need, equity and performance.
FC-XV has given the criterion for horizontal distribution of taxes which is shown in the table.

Population, area and forest &ecology represents the need-based principle, while income distance criterion represents an equity-based principle.
Tax and fiscal efforts and demographic performance have been used as a performance criterion.

Grants-in-aid

The Commission has recommended five different categories of grants: Revenue deficit grants; Grants for local governments; Grants for disaster management; Sector-specific grants, and State- specific grants.
FC-XV recommended grants aggregating to Rs. 10,33,062 crores, which is 19.65 per cent of total recommended transfers to States.

The revenue deficit grants will allow states time to adjust to changes in the pattern of tax devolution recommended by FCs based on the evolving patterns of their assessed needs, ability and performance.
Besides, grants-in-aid are more directly targeted and equalizes the standards of basic social services to some extent.
Some of these grants have been linked with performance-based criteria that seek to promote some sectors in furtherance of national goals.

Revenue Deficit Grants

No formula-based horizontal devolution can meet the needs of each of the twenty- eight States so vastly different from each other.
Therefore, the Commission has recommended an allocation of 1.92 per cent of the gross revenue receipts of the Union as revenue deficit grants to specific States.

Local Government Grants

The total size of the grant to local governments recommended by the Commission is Rs. 4,36,361 crore for the period 2021-26.
A sum of Rs. 2,36,805 crore is earmarked for rural local bodies, Rs. 1,21,055 crore for urban local bodies and Rs. 70,051 crore for health grants through local governments.
Urban local bodies have been categorized into two groups based on population. Basic grants are proposed only for cities/towns having a population of less than a million.
For Million-Plus cities, 100 per cent of the grants are performance-linked through the Million-Plus Cities Challenge Fund.
For rural local bodies, the FC-XV allocations cover all the three panchayati tiers—village, block and district—as well as the Excluded Areas exempted from the purview of Part IX and Part IX-A of the Constitution.
The rural-urban distribution gradually increases in favor of the urban local bodies from 67:33 in 2021- 22 to 65:35 by 2025-26.
The grants to local bodies, both rural and urban (less than a million category), contain a mix of basic, tied as well as performance grants such as sanitation, solid waste management and ease of breathing in the metro-cities.

Disaster Management Grants

The Commission recommended Mitigation Funds to be set up at both the national and State levels, in line with the provisions of the Disaster Management Act.

Other Sector-specific and State-specific Grants

The Commission has also recommended performance-based grants and incentives for sectors like health, education, agriculture, PMGSY roads, judiciary, statistics and aspirational districts and blocks.
The Commission laid special focus on health sector.
It recommended total grants-in-aid support to the health sector over the five-year award period aggregating to Rs.1,06,606 crores which is 10.3 per cent of the total grants-in-aid recommended by the Commission.

Defence Fund

It has been recommended that the Union Government may constitute in the Public Account of India, a dedicated non-lapsable fund, Modernisation Fund for Defence and Internal Security (MFDIS).
The total indicative size of the proposed MFDIS over the period 2021-26 is Rs. 2,38,354 crores.
This would make a significant difference in addressing the issue of adequacy of capital expenditure both for defence and internal security.
Finally, Rs. 1,000 crore per annum has been recommended as Jawan Welfare Fund given the enormous sacrifices of India’s armed and paramilitary forces.

Conditional Borrowings

Syllabus: GS Paper III (Economic Development): Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment, Government Budgeting

An important component of the ‘Aatmanirbhar Bharat Abhiyaan’ packages was an increase in the net borrowing limit of States for 2020- 21 by two per cent of GSDP.
The step made available additional financial resources to the tune of Rs. 4,27,302 crore to the States.

Borrowing by States: Constitutional Provision

Borrowing by States in India is guided by provisions of Article 293 of the Constitution.
States are permitted to borrow within the territory of India against the security of the Consolidated Fund of the State, subject to the limit fixed by the Legislature of the State.
However, according to Article 293(3), if a State is yet to repay any central loan extended to the State by the Government of India, it has to obtain consent of the Government of India before raising any such loan.
Based on the recommendations of the Finance Commission, the central government had fixed the net borrowing ceiling of States for the year 2020-21 at three per cent of GSDP.

Borrowing and Future Sustainability: Creating a Balance

Although the socio-economic situation had justified the raising of additional debt of two per cent by the States, hedging for future debt sustainability was equally important.
Therefore, to alleviate the ill- effects of the current additional borrowings, half of the additional borrowing permissions were used as an instrument to nudge the States to push reforms in various citizen-centric areas.
Four areas were identified for undertaking the much-needed reforms - implementation of ‘One Nation One Ration Card’ system, reforms to promote ease of doing business, local bodies and public utilities reforms and reforms in the power sector.
Each area was assigned equal weightage and an incentive of additional borrowing ceiling of 0.25 per cent of the GSDP was linked to completion of reforms in each sector.

One Nation One Ration Card (ONORC)

ONORC is a technology-driven reform which enables beneficiaries of NFSA and other welfare schemes to get their entitled monthly quota of food grains from any e-PoS-enabled FPS of their choice, anywhere in the country.
The reform especially empowers the migratory population like temporary workers in organized and unorganized sectors, domestic workers etc.
The reform also enables the States in better targeting of beneficiaries, elimination of bogus/duplicate/ineligible card holders resulting in enhanced welfare and reduced leakage.
The yardsticks for assessing completion of this reform are:

seeding of Aadhaar number of 95 per cent of the beneficiaries in the database, and
automation of 100 per cent FPS in the State by installing e- PoS devices.

Ease of Doing Business

The reforms stipulated in this category are:

Completion of first assessment of ‘District Level Business Reform Action Plan’.
Elimination of the requirements of renewal of registration certificates, approvals, and licenses obtained by businesses.
Implementation of a computerized central random inspection system wherein allocation of inspectors for statutory inspections is done centrally, the same inspector is not assigned to the same unit in subsequent years, prior inspection notice is provided to the business owner, and inspection report is uploaded on the website within 48 hours of inspection.

Urban Local Bodies/Utilities Reforms

Reforms in the Urban Local Bodies are aimed at their financial strengthening to enable them to provide better public health and sanitation services, and create a good civic infrastructure. To get the endorsement of MoHUA for completion of this set of reforms, a State must achieve the following:

Notify - floor rates of property tax in ULBs; floor rates of user charges in respect of the provision of water supply, drainage and sewerage which reflect current costs/past inflation.
Put in place a system of periodic increase in floor rates of property tax/user charges in line with price increase.

Power Sector Reforms

Power Sector reforms are aimed at reducing losses, and creating a transparent and hassle-free provision of power subsidy to farmers. They also aim at improving the health of power distribution companies by alleviating their liquidity stress in a sustainable manner. States have been asked to undertake three reforms in the power sector:

0.05 per cent of GSDP for reduction in Aggregate Technical & Commercial losses in the State as per prescribed targets.
Another, 0.05 per cent of GSDP is allowed for reduction in the gap between Average Cost of Supply and Average Revenue Realisation (ACS-ARR gap) in the State as per prescribed targets.
Finally, 0.15 per cent of GSDP of the State on introduction of Direct Benefit Transfer (DBT) to all farmers in the State in lieu of free/subsidised electricity.

Enabling Social Sector

Syllabus: GS Paper III (Economic Development): Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment, Government Budgeting

Budget is an instrument to convey not only the monetary allocations through fiscal provisions but it also reflects the national development priorities and growth strategies.
Unique feature of this Budget is the introduction of several measures for extending inclusive development Strategies.
The budget proposed an increase in the capital expenditure to Rs. 5.54 lakh crore, which would be 34.5 per cent higher than last year.

Health

Health and well-being is the first pillar among the six pillars that the Finance Minister has stressed upon. Budgetary allocation of Rs. 2,23,846 crore for this sector as against Rs. 94,452 crore last year marks a growth of 137 per cent.
The PM AatmanirbharSwasth Bharat Yojana, focuses on emergency response and preparedness with the objective of strengthening the health system.
The budgetary allocation of Rs. 35,000 crore for vaccines is proposed to cover around 50 crore people.
There is also a proposal to establish critical care hospitals and five regional branches of the National Centre for Disease Control (NCDC).
Digitalisation of the health sector especially an Integrated Health Information Portal (IHIP) would assume importance.
Apart from allocation for vaccines, the health issues are also linked with access to clean water (Jal Jeevan Mission) and nutrition.
The idea to merge Supplementary Nutrition Programme (SNP) and Poshan Abhiyan and launch the Mission Poshan 2.0 focussing on 112 aspirational districts merits attention.
The budgetary allocations for AYUSH Ministry and health research have gone up by 40 per cent and 25 per cent respectively.
With growing focus on AYUSH and holistic health management, there is a proposal to set up integrated public health labs in all districts.
With allocation of Rs. 4000 crore for the National Medicinal Plants Board (NMPB), budget has given clear indication for backward integration projects dealing with medicinal and aromatic plants.

Education

Reinvigorating human capital is another important pillar of this budget.
The Budget has announced partnership with NGOs and private sectors for setting up of 100 Sainik Schools in different States.
Similarly, in the tribal areas 750 Eklavya Model Residential Schools are to be set up.
The National post-metric scholarship scheme for students from scheduled caste till 2025-26 is a significant step.
Human skills is adequately emphasized with the possible partnership with Japan and United Arab Emirates for new skills for the workforce in those countries.
Schemes like the National Digital Educational Architecture (NDEAR) and the National Initiative for School Heads and Teachers for Holistic Advancement (NISHTHA) are actually gearing up the system towards what is enshrined in the Sustainable Development Goal (SDG)4: from quantitative to qualitative education.
The Finance Minister has also reemphasized the commitment of the government to establish a Higher Education Commission (HEC). This umbrella body with four verticals would undertake standard setting, accreditation, regulation, and the funding of higher educational institutions.

Maintaining Momentum: Education Sector

Syllabus: GS Paper III (Economic Development): Government Budgeting

GS Paper II (Social Justice): Services relating to Health, Education, Human Resources.

Budget 2020 was structured on the overall theme of ‘Ease of Living’ as its basic tenet.
Moving a step forward, the FM has presented Budget 2021 focusing on six pillars –

Health and Well-Being;
Physical and Financial Capital and Infrastructure;
Inclusive Development for Aspirational India;
Reinvigorating Human Capital;
Innovation and R&D;
Minimum Government and Maximum Governance

Education

India, which boasts to have the highest in the world a total over 250 million school going students and roughly 500 million population in the age category of 5-24 years, sees huge demand and opportunities available in education sector.
However, India could see the Budget proposing allocation of Rs. 93,224 crores. This allocation is less by Rs. 6,087 crore (-6.1 per cent) than last year.
This Budget has rightly proposed amendment in the initiative viz. the National Apprenticeship Training Scheme (NATS). The amendment aims at boosting apprenticeship opportunities for Indian youth.
The focus of the Budget on the improvement of the employment opportunities in the higher education is reflected in the higher allocation for NATS so that post-education apprenticeship training to engineering graduates and diploma holders could be provided.
The allocation to the flagship scheme of Ministry of Education ‘Rashtriya Uchchatar Shiksha Abhiyan (RUSA)’ too has seen the rise.
This Budget has proposed several new initiatives such as opening of Bharatiya Bhasha Vishwavidyalaya and Institute of Translation, Indian Knowledge System, Academic Bank of Credit, PM e-Vidya, and Multidisciplinary Education and Research Improvement in Technical Education (MERITE) in line with the recommendations in NEP.
Some of the other major proposals like-setting up of a Central University in Leh, Higher Education Commission of India with four verticals to oversee standard setting-accreditation-regulation-funding, implementation of National Professional Standard for Teachers (NPST), implementation of a unique indigenous toy-based pedagogy for all levels of school education, and increasing collaboration with foreign institutions - have the potential to steer the aspirations of the people.
It was in July 2019, the government had shared the aspirations of integrating the funds to the National Research Foundation (NRF). An outlay of Rs. 50,000 crore over next 5 years for NRF proposed in this Budget intends to give a major boost to Innovation and R&D.
This Budget also showcases international collaborations such as an initiative with the UAE for benchmarking skilled qualifications-assessment-certifications accompanied by the deployment of certified workforce; and an Indo-Japan collaborative Training Inter Training Programme for facilitating the transfer of Japanese industrial and vocational skills, techniques and knowledge.
Kendriya Vidyalayas (KVs) are set to have enhanced funds whereas Mid-Day Meal Scheme (MDMS) and Navodaya Vidyalayas (NVs) too are to have funds increased.
It is a welcome step to establish 100 new Sainik Schools. The proposal to establish 750 new Eklavya Model Residential Schools in tribal areas for the learners of Scheduled Tribes may be extremely helpful in further enhancing the outreach of education to them.
Standardisation of Indian sign language across the country and development of national and state curriculum materials for children with the hearing impairments is also
The desired reforms have also been mooted in this Budget for CBSE board exams from the year 2022 in a phased manner to move away from conventional rote learning approach for school students transforming the educational system learning framework to an evolved and engaged pedagogical approach.
The holistic progress card is another step taken in this Budget for providing learners with precious information related to their strength, interest areas, and required focus areas for helping them in making optimal career choices.
Setting up of a National Digital Educational Architecture (NDEAR) for providing support to the teaching and learning activities through the digital architecture will be immense help in educational Planning, administration and governance.

Strengthening Agriculture Sector

Syllabus: GS Paper III (Economic Development): Issues related to Direct and Indirect Farm Subsidies and Minimum Support Prices, Transport and Marketing of Agricultural Produce

Government of India rolled out its budget for fiscal 2021- 22 with welfare of farms and farmers at the core.
Agriculture and its subsidiaries demonstrated exemplary resilience amid Covid-19 pandemic by clocking a growth rate of 3.4 per cent whereas other economic sectors performed negatively.

MSP, Mandis and Markets

MSP regime has undergone a sea change to assure price that is at least 1.5 times the cost of production across all commodities.
Amid many speculations on future of Agriculture Produce Market Committee (APMC) mandis, Govt. signaled its intention by announcing that the agriculture infrastructure fund would also be made available to APMCs.
Additionally, an increase was announced in allocation to the Rural Infrastructure Development Fund. This fund will help creation of agri-infrastructure mainly to support farm-gate processing and post-harvest facilities to reduce farm-to-farm wastage.
Provision of the Agricultural Infrastructure Development Cess of Rs. 2.5 per litre on petrol and Rs. 4.0 on diesel will further add to the kitty to meet development targets.
It is proposed to integrate 1,000 more mandis with e-NAM.
Budget proposed to enlarge scope of ‘Operation Greens’ scheme. Currently, the scheme is applicable to tomatoes, onions and potatoes (TOP) only, but now 22 perishable products will also be brought under the ambit of the scheme.
Under the scheme, as a short term price stabilisation measure, there is a provision for 50 per cent subsidy on cost of transportation and storage for evacuation of surplus production from producing area to the consumption centres during the glut situations.

Credits, Corpus and Caring

The agricultural credit flow for 2020-21 was fixed at Rs. 15 lakh crore and till November 30, 2020 a sum of Rs. 79.73 lakh crore was disbursed. Govt. has enhanced the agricultural credit target to Rs. 16.5 lakh crore in the proposed budget.
Micro-irrigation is being promoted in farms with subsidies for which a corpus of Rs. 5,000 crore was created under NABARD. Government has proposed to double it by augmenting it by another Rs. 5,000 crore.
Early this year, the PM launched a unique scheme, the Survey of Villages and Mapping with Improvised Technology in Village Areas (SVAMITVA) to provide a record of right to property. The scheme lets villagers use their property as a financial asset for taking institutional loans and other financial benefits. In the current budget its extension to all States and Union Territories is proposed.

Financing Fisheries and Allied Sectors

Animal Husbandry and Dairying sector has been allocated a sum of Rs. 3,289 crore, which is 18 per cent increase.
India is the second largest fish producing country in the world with 7.58 per cent share in global production. In its continuous efforts to modernise and make fishing sector more profitable, the Government has now proposed substantial investments in the development of fishing harbours and fish landing centres.
In the initial Phase, five major fishing harbours will be developed at Kochi, Chennai, Vishakhapatnam, Paradip and Petuaghat, as hub of economic activity. Apart from marine fisheries, inland fishing harbours and fish landing centres will also be developed along the banks of major rivers and waterways.
Seaweeds farming is a sunrise sector with potential to transform lives of coastal communities. Earlier, India was not very keen to cultivate seaweeds though it is bestowed with a coastline of more than 7500 km and over 800 species of seaweeds.
But now, its economical potential is recognised as a renewable source of food, energy, chemicals and most importantly as source of medicines. The Government intends to support seaweed cultivation by proposing to establish a Multipurpose Seaweed Park in Tamil Nadu.

Budget for Infrastructure

Syllabus: GS Paper III (Economic Development): Government Budgeting, Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

The Union Budget 2021-22 has a welcome focus on infrastructure, being part of one of the six pillars - Physical and Financial Capital, and Infrastructure.
The infrastructure allocations have gone up substantially.

National Infrastructure Pipeline

The NIP envisages a capital spend of over Rs. 100 lakh crore over six-year period, 2019-20 to 2024- 25, with 39 per cent to come from the Centre, that is about Rs. 40 lakh crore.
In terms of scope, the NIP includes over 20 sectors and has recently been enhanced to 7400 projects.

Road & Railways

The maximum allocation is for the Roads sector. While the class of roads may not easily attract PPPs in the BOT mode (like expressways and road segments where traffic volumes may not be commercially viable), the Hybrid-Annuity-Model (HAM) and Toll-Operate-Transfer (TOT) models have been more successful. Further, the government is in a position to monetise significant road assets of the NHAI.
The e-tolling (FASTag) is finally falling into place, saving significant waits at toll booths. Another important outcome of the investments in the road capacity improvement is the increase in the average kilometres per day that trucks travel.
The Dedicated Freight Corridor (DFC) and the Bullet Train, two of the big-ticket projects, have been delayed on account of land acquisition.
The container train operations, one of the domains in which private parties were brought in, have not, yielded outcomes anywhere near what was envisaged. Lack of a level playing field with the Indian Railways (IRs’) subsidiary, CONCOR, has been one of the reasons.
A recent initiative of attracting private play into passenger train operations presents an uncertain picture of its attractiveness. A sorely lacking reform is the structural need of an empowered regulator in the Railways sector, to give better transparency in the currently bundled roles of IR as the policy maker, operator, monopoly supplier, sometimes monopsonic customer, and regulator.
However, there has been a slow and steady push towards openingup to the private sector in various domains, including locomotive manufacturing, wagon manufacturing, special freight train operations and freight terminals.
The recently launched draft National Rail Plan (NRP) visualise not only arresting the declining rail share of traffic, but reversing it, in the interest of climate impact and energy efficiency. In the freight segment, increasing the rail share from the current under 30 per cent to at least 45 per cent by 2050 is envisaged.
Urban transport has been given a strong focus not only with allocations for extension of metro fines in major cities, but also for Metrolite and Metroneo projects and for bus transportation.

Telecom & Electricity

The budget had a significant mention of the telecom sector where money has been allocated to complete the Bharat Net project. There is also an allocation to the Ministry of Defence for improving their network and equipment which will enable vacating their spectrum for potential commercial use.
Another major allocation has been for the Electricity sector, to enable better performance at the Discoms level. This has been stated as an amount of Rs. 3 lakh crore to be spent over 5 years.

Other Sector

A welcome ring fenced allocation is for the Agri infrastructure sector. This comes through a cess that is being levied on fuel.
Other sectors of infrastructure that found special mention were upgradation of some fishing harbours, the water supply schemes in urban local bodies, and bringing in PPPs in more existing airports.
There is also a recent visioning exercise called the Maritime India Vision for 2030 that provides a roadmap for significant growth in this sector.

Strategic Disinvestment and Asset Monetization

Public sector companies targeted for this purpose in the infrastructure sector include Air India, Shipping Corporation of India, CONCOR, Pawan Hans and BPCL.
Asset monetization in the infrastructure sector is focused on leveraging airports of the Airports Authority of India, roads of the National Highways Authority of India, transmission lines of the Power Grid Corporation of India, warehouses of the Central Warehousing Corporation, segments of the Dedicated Freight Corridor Corporation of India, pipelines and other assets of some of the companies in the petroleum sector.
The budget highlighted a long-term policy of the government in the Public Sector Enterprises Policy.
In this policy, it classified various sectors as Strategic and Non-Strategic.

Strategic sectors would have ‘bare minimum’ presence of public sector enterprises, while all central public sector enterprises in the non-strategic sectors will be privatised.
The infrastructure domains in the ‘strategic’ classification include Transport, Telecommunications, and Energy (Power, Petroleum and Coal).

Highlights of Budget 2021-22 in respect of Indirect and Direct Taxes

Syllabus: GS Paper III (Economic Development): Government Budgeting

Indirect Taxes

Goods and Services Tax (GST)

A mandatory requirement of getting annual accounts audited and reconciliation statements has been removed.
Further it has been provided that interest on delayed payments of GST shall be charged only on net cash liability with effect from the July 1, 2017.
Certain measures have been taken to improve compliance.
Now, input tax credit shall be allowed only when the details have been furnished by the supplier in the statement of outward supplies.
Unscrupulous traders are being identified through extensive application of deep analytics and artificial intelligence.

Customs

The import duty rate structure has been meticulously calibrated to ensure adequate availability of raw materials to meet the requirements of the manufacturing sector.
Initiatives of various ministries to encourage domestic manufacturing through various Phased Manufacturing Programmes and Performance Linked Incentive Schemes are laudable.
Legislative changes have been proposed so as to mandate filing of bills of entry before the end of day preceding the day of arrival of goods.
Changes have also been proposed to encourage paperless processing; it is proposed to recognise the use of a common portal to serve notice, order, etc., and the portal to act as a one-point digital interface for the trade to interact with the Customs.
Significant changes have also been announced in respect of trade remedial measures for securing national economic interest against surge in imports, dumping of goods or export of subsidised goods to India by circumventing the trade.
The budget also proposes a cess to be called Agriculture Infrastructure and Development Cess. This cess has been proposed on import of specified goods as well as a duty of central excise on petrol and diesel.
Customs duty rates have been calibrated with the twin objectives of making raw material available at lower cost and also for enhanced integration of India in the Global Value chain.
This was necessitated as iron and steel prices have risen sharply in the last six months. Further, anti-dumping duty and countervailing duty on certain steel products have been temporarily revoked till September 30, 2021.
Customs duty rates have been reviewed to benefit the domestic value addition by MSME units. Certain long-standing exemptions on items that could be manufactured locally by MSME have been withdrawn.
Import duty is being raised on raw cotton and cotton waste from nil to 10 per cent, raw silk and silk yarn from 10 per cent to 15 per cent.
End-use based concession is being withdrawn on denatured ethyl alcohol.

Direct Taxes

The time-limit for re-opening of assessmenthas been reduced from the earlier 6 years to 3 years.
The discretion in the re-opening of scrutiny has been done away with and replaced with a system- flagged approach.
A Dispute Resolution Committee has been constituted for final settlement of their cases once they are served the draft assessment order.
The Appellate Tribunal has also been made faceless and free of territorial jurisdiction while the Settlement Commission has been abolished.
The senior citizen pensioners who are 75 years of age or above having only pension and interest income have been exempt from the requirement of filing an income tax return if the full amount of tax payable has been deducted by the paying bank.
The rules for taxation of the retirement benefits payable by another country in the case of NRIs have also been aligned with the payee country to avoid undue hardship to them.
The deduction on loans taken to purchase an affordable house has been extended by a year.
Further, the deduction on profits of the developers and builders engaged in the construction of such affordable housing as well as affordable rental housing has also been extended to March 2022.
With the objective of improving ease of doing business in India, relaxation has been provided to the criteria for claiming exemption by the Sovereign Wealth Funds, Pension Funds, etc.
At the same time, relaxation has also been given to expand the business activities in the Gujarat International Finance Tec (GIFT) City, Ahmedabad.

Flattening Climate Curve

Syllabus: GS Paper III (Economic Development): Government Budgeting

GS Paper III (Environment): Conservation, Environmental Pollution and Degradation, Environmental Impact Assessment

The Union Budget 2021-22 was only the fourth that followed a contraction in the economy. The Economic Survey 2020, argued that the economy would take merely two years to reach and go past the pre-pandemic level.
Recent economic data indicates that the country has already embarked on a V- shaped path of economic recovery.

India’s NDC & Need for Money

In its Nationally Determined Contribution (NDC), India has committed to following a low carbon path to progress.
It has sought to reduce the emissions intensity of its GDP by 33 to 35 per cent below 2005 levels by the year 2030; achieve 40 per cent of cumulative electric power- installed capacity from non- fossil fuel sources by 2030; and enhance forest and tree cover to create additional carbon sink equivalent to 2.5 to 3 billion tons of carbon dioxide by 2030.
To achieve such ambitious targets, India’s climate change actions till 2030 will require as much as USD 2.5 trillion (at 2014-15 prices).
It is further estimated that the country will need around USD 206 billion (at 2014-15 prices) between 2015 and 2030 for implementing adaptation actions in agriculture, forestry, fisheries infrastructure, water resources and ecosystems.

Various Initiatives and Budget Proposals

Clean Air – Rs. 2217 crore have been allocated for 42 centres with a million plus population
Scrapping Policy – A voluntary vehicle scrapping policy to phase out old and unfit vehicles; Fitness tests in automated fitness centres after 20 yrs in case of personal vehicles, and after 15 yrs in case of commercial vehicles.
Petroleum & Natural gas – Ujjawala scheme which has benefitted 8 crore households will be extended to cover 1 crore more beneficiaries; A gas pipeline project to be taken up in UT of J&K; An independent Gas Transport System Operator to be set up
Augmentation of City Bus Service
Expansion of Metro Rail network – Govt. Is planning to deploy two new technologies – ‘MetroLite’ and ‘MetroNeo’
Non-conventional/Green Energy – Govt. Has planned to –

launch a Hydrogen Energy Mission in 2021-22 for generating hydrogen from green power sources;
add 100 more districts in next three yrs. to the City Gas Distribution Network;
Provide the additional capital infusion of Rs. 1000 crore to Solar Energy Cooperation of India and Rs. 1500 crore to Indian Renewable Energy Development Agency.

Conservation of Deep-Sea Biodiversity – The budget provides an outlay of more than Rs 4000 crore, over 5 yrs for the launch of Deep Ocean Mission. This will include:

exploration of living and non-living resources through deep ocean survey;
projects for the conservation of deep sea biodiversity

Way Forward

There is a need to develop a “Climate Budget Tagging (CBT)” tool.
This will help in identifying, classifying, climate relevant expenditures in the fiscal budget.
Recently, Vice President M. Venkaiah Naidu proposed a detailed framework-based pre and post- Legislative Impact Assessment’.

Diplomacy in Covid times

Syllabus: GS Paper II (Economic Development): India and its Neighborhood- Relations

Today, the world is facing the Covid-19 pandemic and is also passing through a phase of economic slowdown with an air of uncertainty.
By adopting India-centric foreign policy, we have been able to send a message to the world that India has a will and a capacity to define the priorities of the international system.

India’s Strengthening Position in world order

During the Cold War, the world was divided in two blocks. Considering those India had opted for non- alignment which seemed a better option then.
Fall of Soviet Union and breaking of Berlin Wall resulted in a collapse of bipolar world system.
India started to change its traditional path and lay down a solid foundation for its foreign policy in accordance with the requirements in the new scenario.
It added a part of economic diplomacy in the traditional diplomacy which had to traverse in the direction of globalization.
After “Pokharan-2” during Vajpayee government, a new element of power got added into India’s foreign policy.
Today, after about 22 years of Pokharan-2, India is being acknowledged as one of the major Asian powers and as a global player.

Neighbourhood First

Immediate neighbouring countries can play an effective role in making India weaker or stronger, then the gulf countries and East Asian countries.
Keeping this in mind, PM Modi started his first tenure with “Diplomacy with Neighbourhood First”.
Under this policy he not only, tried to move ahead by taking along Bhutan, Nepal, Bangladesh, Sri Lanka and Maldives but also presented an example before the world through his “Heart to Heart Diplomacy” with Pakistan as well.
After Pulwama, India not only gave a befitting reply to Pakistan’s misadventure by carrying out a “surgical strike” in POK and also conveyed a message to the whole world that India would not desist from adopting the strategy of “physical response” against anti-India forces.
India under its Neighbourhood Policy has been successful in moving ahead in the direction of improving connectivity, reviving of socio-religious relations, development and human assistance.

Extended Neighbourhood

The Prime Minister had once said that neighbours are not only those countries with whom our geographical borders meet but also those nations with whom our hearts meet.
With this in view, countries situated in Eastern and South East Asian regions are foremost followed by the countries of Middle East.
Looking towards East, Trans-Pacific region comes first which is presently a part of Indo-Pacific Strategy.

Indo-Pacific Region

In this region, on one side China is following the strategy of establishing monopolistic set-up on the strength of its defence power built on the basis of its economic strength and the US on the other side is trying to maintain its supremacy.
Russia is the third player which wants to move forward on “Pivot to East” strategy.
With this in mind, Russia had proposed to Japan sometime back to enter into an agreement on four controversial islands.
However, Japan turned down the suggestion from Russia and now it is eyeing upon smaller countries in East Asia.
Evaluating the whole situation, India is stressing on inclusive action.
India has, therefore, tried to make an alliance with the US and Japan and also tried to maintain its traditional relations with Russia and China as well.
For example, India played an active role in setting up the Strategic Quadrilateral (QUAD) in Indo- Pacific region on one hand and became a partner in BRICS and Shanghai Cooperation Organisation on the other hand.
Washington-Beijing-Moscow triangle has been extremely important for India’s foreign policy since the very beginning.

Europe

Having dominated as a super power for a long era, Europe is a victim of internal contradictions.
It appears to be caught in challenges posed by refugee problem, economic imbalance, idealism versus nationalism clash and Islamic terrorism.
The conditions developed in Europe after the “Merkozy Effect” (Angela Merkel and Serkozy economic theory) have weakened the bonding between France and Germany and a leakage in European Union have become visible now.
Brexit has shown that European Union is no more a reflection of optimum unity.

India in Middle East & Africa.

India has succeeded in establishing comprehensive partnership relations with the countries of this region.
India’s trade and energy security is closely connected with the security of Hormuz Water Treaty and Bab-el-Mandeb strait.
The Indo-Saudi Arabia relations touched a new height.
India has been following the policy of Afro-Asian Brotherhood for a long time and now India has cordial relations with the African Union.
PM Modi’s diplomacy with the coastal countries proved to be extremely decisive, especially with Seychelles.
It is also possible that Seychelles-Chabahar may emerge as an alternative to Gwadar- Djibouti Connect and India may succeed in Blue Water Diplomacy.

Multilateral institutions and India

Between the year 2014 to the year 2020, India might have not got entry into the Nuclear Suppliers Group but in Missile Technology Control Regin Club (MTCR), India succeeded getting entry before China.
India’s membership in MTCR was its first entry in any multilateral export control system after which India would be able to purchase higher level missile technology and its joint venture with Russia would also get a boost.
After the US back out from Paris Agreement of 2017, India has emerged as an example for other developing nations in this regard.
India is presenting standard of environmental policies along with development requirements before them.
In this direction, International Solar Alliance, headquartered in Gurugram, is very important. The objective of this alliance is to aid in implementation of Paris Climate Agreement.
This is a first agreement-based international intergovernmental organisation which is fully or partly situated between Tropics of Cancer and Capricorn.

What is MSP?

Minimum Support Price (MSP) is the guaranteed price of notified crops as declared by the Government of India for public procurement purpose.
It acts as a safety net to farmers by protecting their business interest from the uncertainties of market.
Government notifies MSP for 23 ‘Kharif’ and ‘Rabi’ crops at the start of each cropping season.
The group comprises seven cereals (paddy, wheat, maize, sorghum, pearl millet, barley and ragi), seven oilseeds (groundnut, rapeseed, mustard, soybean, sesamum, sunflower, safflower and nigar seed), and four commercial crops (copra, sugarcanes, cotton and raw jute).
MSP is fixed by the Government of India on the recommendations of the Commission for Agricultural Costs and Prices (CACP) which is a statutory body.
CACP submits its recommendations to the Government in the form of price policy reports twice a year separately for Kharif and Rabi seasons.

The National Commission on Farmers, headed by Prof. M. S. Swaminathan, had recommended in 2 006 that MSPs must be at least 50 per cent more than the cost of production.
To calculate cost of production, the Commission suggested three criteria:

A2 - It includes cost of various inputs, such as seeds fertilizers, labour, fuel, irrigation etc.
A2+FL - It includes cost of unpaid family labour in A2 parameters.
C2 - It includes the implied rent on land and interest on capital assets over and above A2+FL.

Government implemented the recommendation during the marketing season of 2018-19 by fixing MSPs over and above the at least 50 per cent of the cost of production.
Currently, the CACP reckons only A2+FL cost for calculation of MSP.
C2 costs are used as a benchmark reference costs to see if the recommended MSPs cover these costs in some of the major producing states.

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