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Resting on 6 Pillars

Speech of Nirmala Sitharaman, Union Minister of Finance, on February 1, 2021

Hiking FDI in insurance, Recapitalising PSBs

Union Finance Minister Nirmala Sithraman

Hon'ble Speaker

I present the Budget for the year 2021-2022

Honourable Speaker, the preparation of this Budget was undertaken in circumstances like never before. We knew of calamities that have affected a country or a region within a country, but what we have endured with Covid-19 through 2020 is sui generis. When I presented the Budget 2020-21, we could not have imagined that the global economy, already in throes of a slowdown, would be pushed into an unprecedented contraction. The risk of not having a lockdown was far too high. Within 48 hours of declaring a three-week-long complete lockdown, the Prime Minister announced the Pradhan Mantri Garib Kalyan Yojana, valued at Rs2.76 lakh crores, this provided, free food grain to 800 million people, free cooking gas for 80 million families for months, and cash directly to over 400 million farmers, women, elderly, the poor and the needy.

Even as a large section of citizens stayed home, milk, vegetable, and fruit-suppliers, health and sanitary workers, truck drivers, railways and public transport workers, bank employees, electricity workers, our annadatas, police, firemen, and the armed forces, all had to go about their

work as normal, but with the additional anxiety of the virus hanging over them. We recognise this, and I think I speak on behalf of everybody in this august House, when I express my heartfelt gratitude to these men and women, for how they were able to carry out their work and duty, to provide for the nation's basics, over those crucial months.

Speaker Sir, for public good, Honourable Members of Parliament and Members of Legislative Assemblies too offered their salaries.

In May 2020, the government announced the AtmaNirbhar Bharat package (ANB 1.0). To sustain the recovery, further into the year, we also rolled out two more AtmaNirbhar Bharat packages (ANB 2.0 and ANB 3.0).

Total financial impact of all AtmaNirbhar Bharat packages including measures taken by RBI was estimated to about Rs27.1 lakh crore, which amounts to more than 13 per cent of GDP.

The AtmaNirbhar Packages accelerated our pace of structural reforms. Redefinition of MSMEs, Commercialisation of the Mineral Sector, Agriculture and Labour Reforms, Privatisation of Public Sector Undertakings, One Nation One Ration Card, and Production Linked Incentive Schemes are some of the notable reforms carried out during this period. Faceless Income Tax Assessment, DBT and Financial Inclusion are the others. Today, India has two vaccines available, and has begun medically safeguarding not only her own citizens against Covid-19, but also those of 100 or more countries. It is added comfort to know that two or more vaccines are also expected soon.

i) Health and Wellbeing

Even at the outset, I would like to say that the investment on Health Infrastructure in this Budget has increased substantially. Progressively, as institutions absorb more, we shall commit more. Taking a holistic approach to Health, we focus on strengthening three areas: Preventive, Curative, and Wellbeing.

Health Systems

A new centrally sponsored scheme, PM AtmaNirbhar Swasth Bharat Yojana, will be launched with an outlay of about ` 64,180 crores over 6 years. This will 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.

This will be in addition to the National Health Mission. The main interventions under the scheme are:

a. Support for 17,788 rural and 11,024 urban Health and Wellness Centers

b. Setting up integrated public health labs in all districts and 3382 block public health units in 11 states;

c. Establishing critical care hospital blocks in 602 districts and 12 central institutions;

d. Strengthening of the National Centre for Disease Control (NCDC), its 5 regional branches and 20 metropolitan health surveillance units;

e. Expansion of the Integrated Health Information Portal to all States/UTs to connect all public health labs;

f. Operationalisation of 17 new Public Health Units and strengthening of 33 existing Public Health Units at Points of Entry, that is at 32 Airports, 11 Seaports and 7 land crossings;

g. Setting up of 15 Health Emergency Operation Centers and 2 mobilehospitals;

h. Setting up of a national institution for One Health, a Regionaa for WHO South East Asia Region, 9 Bio-Safety Level III laboratories and 4 regional National Institutes for Virology.

Swachch Bharat, Swasth Bharat

For further swachhta of urban India, we intend to focus on complete faecal sludge management and waste water treatment, source segregation of garbage, reduction in single-use plastic, reduction in air pollution by effectively managing waste from construction-and-demolition activities and bio-remediation of all legacy dump sites. The Urban Swachh Bharat Mission will be implemented with a total financial allocation of Rs1,41,678 crores over a period of 5 years from 2021-2026.


The Pneumococcal Vaccine, a Made in India product, is presently limited to only 5 states will be rolled out across the country. This will avert more than 50,000 child deaths annually. I have provided Rs35,000 crore for Covid-19 vaccine in BE 2021-22. I am committed to provide further funds if required. The Budget outlay for Health and Wellbeing is Rs2,23,846 crore in BE 2021-22 as against this year's BE of Rs94,452 crore an increase of 137 percentage.

ii) Physical and Financial

Capital and Infrastructure

AtmaNirbhar Bharat – Production Linked Incentive scheme (PLI) 40. For a $5 trillion economy, our manufacturing sector has to grow in double digits on a sustained basis. Our manufacturing companies need to become an integral part of global supply chains, possess core competence and cutting-edge technology. To achieve all of the above, PLI schemes to create manufacturing global champions for an AtmaNirbhar Bharat have been announced for 13 sectors. For this, the government has committed nearly Rs1.97 lakh crores, over 5 years starting FY 2021-22. This initiative will help bring scale and size in key sectors, create and nurture global champions and provide jobs to our youth.


To enable the textile industry to become globally competitive, attract large investments and boost employment generation, a scheme of Mega Investment Textiles Parks (MITRA) will be launched in addition to the PLI scheme. This will create world class infrastructure with plug and play facilities to enable create global champions in exports. 7 Textile Parks will be established over 3 years.


The National Infrastructure Pipeline (NIP) which I announced in December 2019 is the first-of-its-kind, whole-of-government exercise ever undertaken by Government of India. The NIP was launched with 6835 projects; the project pipeline has now expanded to 7,400 projects. Around

217 projects worth Rs1.10 lakh crores under some key infrastructure Ministries have been completed.

Infrastructure financing - Development Financial Institution (DFI)

Infrastructure needs long term debt financing. A professionally managed Development Financial Institution is necessary to act as a provider, enabler and catalyst for infrastructure financing. Accordingly, I shall introduce a Bill to set ssup a DFI. I have provided a sum of Rs20,000 crores

to capitalise this institution. The ambition is to have a lending portfolio of at least Rs5 lakh crores for this DFI in three years time. Debt Financing of InVITs and REITs by Foreign Portfolio Investors will be enabled by making suitable amendments in the relevant legislations.

Increase in Capital Budget

In the BE 2020-21, we had provided Rs4.12 lakh crore for capital expenditure. It was our effort that in spite of resource crunch we should spend more on capital and we are likely to end the year at around Rs4.39 lakh crore, which I have provided in the RE 2020-21. For 2021-22, I propose a sharp increase in capital expenditure and thus have provided Rs5.54 lakh crore, which is 34.5% more than the BE of 2020-21. Of this, I have kept a sum of more than `44,000 crores in the Budget head of the Department of Economic Affairs to be provided for projects/programmes/departments that show good progress on Capital Expenditure and are in need of further funds. Over and above this expenditure, we would also be providing more than Rs2 lakh crores to states and autonomous bodies for their capital expenditure. We will also work out specific mechanisms to nudge States to spend more of their budget on creation of infrastructure.

Power Infrastructure

The past 6 years have seen a number of reforms and achievements in the power sector. We have added 139 Giga Watts of installed capacity, connected an additional 2.8 crores households and added 1.41 lakh circuit km of transmission lines.

The distribution companies across the country are monopolies, either government or private.There is a need to provide choice to consumers by promoting competition.A framework will be put in place to give consumers alternatives to choose from among more than one.

Distribution Company

The viability of Distribution Companies is a serious concern. A revamped reforms-based result-linked power distribution sector scheme will be launched with an outlay of Rs3,05,984 crores over five years. The scheme will provide assistance to Discoms for infrastructure creation including pre-paid smart metering and feeder separation, upgradation of systems, etc., tied to financial improvements.

Ports, Shipping, Waterways

Major Ports will be moving from managing their operational services on their own to a model where a private partner will manage it for them. For the purpose, seven projects worth more than Rs2,000 crore will be offered by the Major Ports on Public Private Partnership mode in FY21-22.

Financial Capital

I propose to consolidate the provisions of SEBI Act, 1992, Depositories Act, 1996, Securities Contracts (Regulation) Act, 1956 and Government Securities Act, 2007 into a rationalized single Securities Markets Code. The Government would support the development of a world class Fin-Tech hub at the GIFT-IFSC. Towards investor protection, I propose to introduce an investor charter as a right of all financial investors across all financial products.

Increasing FDI in Insurance

I propose to amend the Insurance Act, 1938 to increase the permissible FDI limit from 49% to 74% in Insurance Companies and allow foreign ownership and control with safeguards.

Under the new structure, the majority of Directors on the Board and key management persons would be resident Indians, with at least 50% of Directors being Independent Directors, and specified percentage of profits being retained as general reserve. Stressed Asset Resolution by setting up a New Structure. The high level of provisioning by public sector banks of their stressed assets calls for measures to clean up the bank books.

An Asset Reconstruction Company Limited and Asset Management Company would be set up to consolidate and take over the existing stressed debt and then manage and dispose of the assets to Alternate Investment Funds and other potential investors for eventual value realization.

Recapitalization of PSBs

To further consolidate the financial capacity of PSBs, further recapitalization of `20,000 crores is proposed in 2021-22.

Deposit Insurance

Last year, Government had approved an increase in the Deposit Insurance cover from Rs1 lakh to Rs5 lakhs for bank customers.

Company Matters

The decriminalizing of the procedural and technical compoundable offences under the Companies Act, 2013, is now complete. I now propose to next take up decriminalization of the Limited Liability Partnership (LLP) Act, 2008.

Sir, I propose to revise the definition under the Companies Act, 2013 for Small Companies by increasing their thresholds for Paid up capital from "not exceeding Rs50 Lakh" to "not exceeding Rs2 Crore and turnover from not exceeding Rs2 crore to not exceeding Rs20 Crore. It'll benefit more than two lakh companies in easing their compliance requirements.


I have estimated Rs 1,75,000 crores as receipts from disinvestment in BE 2021-22. To fast forward the disinvestment policy, I am asking NITI to work out on the next list of Central Public Sector companies that would be taken up for strategic disinvestment.

iii) Inclusive Development

for Aspirational India

I will cover Agriculture and Allied sectors, farmers' welfare and rural India, migrant workers and labour, and financial inclusion.


Our Government is committed to the welfare of farmers. The MSP regime has undergone a sea change to assure price that is at least 1.5 times the cost of production across all commodities. The procurement has also continued to increase at a steady pace. This has resulted in increase in payment to farmers substantially. In case of wheat, the total amount paid to farmers in 2013-2014 was Rs33,874 crores. In 2019-2020 it was `62,802 crores, and even better, in 2020-2021, this amount, paid to farmers, was Rs75,060 crores. The number of wheat growing farmers that were benefitted increased in 2020-21 to 43.36 lakhs as compared to 35.57 lakhs in 2019-20.

For paddy, the amount paid in 2013-14 was Rs63,928 crores. In 2019-2020 this increased Rs1,41,930 crore. Even better, in 2020-2021, this is further estimated to increase to `172,752 crores. The number of farmers benefitted increased from 1.24 crores in 2019-20 to 1.54 crores in 2020-21.

In the same vein, in case of pulses, the amount paid in 2013-2014 was Rs236 crore. In 2019-20 it increased Rs8,285 crore. Now, in 2020-2021, it is at Rs10,530 crore, a more than 40 times increase from 2013-14.

Fiscal Deficit

The fiscal deficit in RE 2020-21 is pegged at 9.5 per cent of GDP. We have funded this through Government borrowings, multilateral borrowings, Small Saving Funds and short term borrowings. We would need another Rs80,000 crore for which we would be approaching the markets in these 2 months. To ensure that the economy is given the required push, our BE estimates for expenditure in 2021-2022, are Rs34.83 lakh crores. This includes Rs5.54 lakh crores as capital expenditure, an increase of 34.5% over the BE figure of 2020-2021. The fiscal deficit in BE 2021-2022 is estimated to be 6.8% of GDP. The gross borrowing from the market for the next year would be around Rs12 lakh crores. We plan to continue with our path of fiscal consolidation, and intend to reach a fiscal deficit level below 4.5% of GDP by 2025-2026 with a fairly steady decline over the period. We hope to achieve the consolidation by first, increasing the buoyancy of tax revenue through improved compliance, and secondly, by increased receipts from monetisation of assets, including Public Sector Enterprises and land. The Contingency Fund of India is being proposed to be augmented from Rs500 crores to Rs30,000 crores through Finance Bill.

In accordance with the views of the 15th Finance Commission, we are allowing a normal ceiling of net borrowing for the states at 4% of GSDP for the year 2021-2022. A portion of this ceiling will be earmarked to be spent on incremental capital expenditure. Additional borrowing ceiling of 0.5% of GSDP will also be provided subject to conditions. States will be expected to reach a fiscal deficit of 3% of GSDP by 2023-24, as recommended by the 15th Finance Commission.

Relief for Dividend

In the previous Budget, I had abolished the Dividend Distribution Tax (DDT) in order to incentivise investment. Dividend was made taxable in the hands of shareholders. Now, in order to provide ease of compliance, I propose to make dividend payment to REIT/ InvIT exempt from TDS. Further, as the amount of dividend income cannot be estimated correctly by the shareholders for paying advance tax, I propose to provide that advance tax liability on dividend income shall arise only after the declaration/payment of dividend. Also, for Foreign Portfolio Investors, I propose to enable deduction of tax on dividend income at lower treaty rate.


In order to allow funding of infrastructure by issue of Zero Coupon Bonds, I propose to make notified Infrastructure Debt Funds eligible to raise funds by issuing tax efficient Zero Coupon Bonds.

Iron and Steel

MSMEs and other user industries have been severely hit by a recent sharp rise in iron and steel prices. Therefore, we are reducing Customs duty uniformly to 7.5% on semis, flat, and long products of non-alloy, alloy, and stainless steels. To provide relief to metal re-cyclers, mostly MSMEs, I am exempting duty on steel scrap for a period up to 31st March, 2022. Further, I am also revoking ADD and CVD on certain steel products. Also, to provide relief to copper recyclers, I am reducing duty on copper scrap from 5% to 2.5%.

Gold and Silver

Gold and silver presently attract a basic customs duty of 12.5%. Since the duty was raised from 10% in July 2019, prices of precious metals have risen sharply. To bring it closer to previous levels, we are rationalizing custom duty on gold and silver.

MSME Products

We are proposing certain changes to benefit MSMEs. We are increasing duty from 10% to 15% on steel screws and plastic builder wares. On prawn feed we increase it from 5% to 15%. We are rationalizing exemption on import of duty-free items as an incentive to exporters of garments, leather, and handicraft items. Almost all these items are made domestically by our MSMEs. We are withdrawing exemption on imports of certain kind of leathers as they are domestically produced in good quantity and quality, mostly by MSMEs. We are also raising customs duty on finished synthetic gem stones to encourage their domestic processing.

iv) Reinvigorating Human Capital

The National Education Policy (NEP) announced recently has had good reception. School Education: More than 15,000 schools will be qualitatively strengthened to include all components of the National Education Policy.

They shall emerge as exemplar schools in their regions, handholding and mentoring other schools to achieve the ideals of the Policy. About 100 new Sainik Schools will be set up in partnership with NGOs/ private schools/states. Higher Education: In Budget 2019-20, I had mentioned about the setting-up of Higher Education Commission of India. We would be introducing Legislation this year to implement the same. It will be an umbrella body having four separate vehicles for standard-setting, accreditation, regulation, and funding.

v) Innovation and R&D

In my Budget Speech of July 2019, I had announced the National Research Foundation. We have now worked out the modalities and the NRF outlay will be of Rs50,000 crores, over 5 years. It will ensure that the overall research ecosystem of the country is strengthened with focus on identified national-priority thrust areas.

vi) Minimum Government,

Maximum Governance

Speaker Sir, I now come to the last of the six pillars. This will outline plans for reforms in one of our core principles of minimum government, maximum governance.

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