Yojana Magazine March 2021: Union Budget 2021-22

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Finance Commission


  • The constitution of the Finance Commission is governed by Article 280of the Constitution, which spells out, in conjunction with other provisions, 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.
  • After the interim Commission, the first Finance Commission was constituted on November 22, 1951, and was chaired by K.C. Niyogi.
  • Thereafter, there have been fifteen Finance Commissions.


  • The Commission from its very conception faced multiple challenges including the difference in opinion on the use of the population census of 2011 to allay the fears of certain efficient States that they would be penalised for efficient demographic management.
  • Besides, there were other issues like non-lapsable defence fund and the use of certain parameters for performance incentives which have been fairly addressed in this report.

The Fifteenth Finance Commission

  • The Fifteenth Finance Commission (FC-XV) was constituted by the President under Article 280 of the Constitution on November 27, 2017.
  • The title of the report 'Finance Commission in Covid Times', submitted to the President for the period 2021-26, itself speaks of the onerous task it had in hand when the pandemic had significantly impacted the economy and shrunk the overall pie of resources.
  • The Union government, in its action taken report on the commission's report tabled in Parliament on February lThe Finance Commission transfers are made under Articles 270, 275 and 280 of the Constitution, which provide a mechanism for sharing of taxes and revenues vertically between the Centre and states; and horizontally among all states.
  • Fifteenth Finance Commission was additionally tasked with reviewing and commenting on 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-the “appropriate level of government‖-in a variety of policy areas.
  • Another unique ToR given to it included recommending funding mechanism for defence and internal security.

Vertical Distribution

  • The Constitution empowered both the Union and the States to raise revenues from different sources of taxation and also assigned responsibilities to incur expenditure through subjects in three list- Union List, Stale List and Concurrent List- in the Seventh Schedule.
  • By Constitutional design, this distribution 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 Stales.
  • For example in 2018-19, the Union Government raised 62.7% of the aggregate resources raised by both the
  • Union and States, whereas the States spent 62.4% of the aggregate expenditure of the Union and the States.
  • There is thus a structural vertical imbalance that necessitates the orderly transfer of resources from the Union to the Stales. This imbalance between revenues and expenditure responsibilities form the basis of a fair vertical devolution.

What the Finance Commission has recommended?

  • The Fifteenth Finance Commission, in its final report, recommended this devolution to beat 41%.
  • This will maintain the predictability and stability of resources, especially during the pandemic.
  • This vertical devolution is in line with the recommended share in our first report as well as with the devolution of the FC-XIV.

Horizontal Distribution

  • Horizontal devolution of taxes is mainly driven by considerations of need, equity and performance. However, balancing equity and efficiency is never an easy exercise.
  • Additional financial resources arc certainly needed to help a stale develop, but the ability to effectively use those resources is undoubtedly more crucial and is a distinctive feature visible across States.
  • Considering these factors, Fifteenth Finance Commission has tried to harmonise the principles of expenditure needs, equity and performance in determining the criteria for horizontal sharing by broadly assigning appropriate weights, 2021 accepted most of the recommendations.
Towards Aatmanirbhar Bharat


  • Through Budget 2021-22, the government is trying to address the challenges posed by the once-in-a-century pandemic.
  • Instead of taking an incremental approach in the Budget this time, the Government was determined to take a quantum leap towards its twin objectives to achieve a US 5 trillion dollar economy by 2024 and an Aatmanirbhar Bharat to accomplish India's growth despite serious fiscal challenges.

Aatmanirbhar Bharat and PM's Garib Kalyan packages

  • The Government brought out various packages under Aatmanirbhar Bharat and PM's Garib Kalyan packages which included relief measures for households such as in-kind (food; cooking gas) and cash transfers to senior citizens, widows, disabled, women Jan Ohan Account holders, farmers: insurance coverage for workers in the healthcare sector; and wage increase for MGNREGS workers and support for building and construction workers, collateral-free loans to self-help groups, reduction in EPF contributions, employment provision for migrant workers, etc.
  • Hence, this budget may be considered as the budget-in-continuation to the mini-budgets (packages) that positively rebutted the impact of the Covid-19 pandemic.
  • The Government through its Budget 2021-22 has resolved its focus on fiscal transparency and directional change to stimulate faster economic growth.
  • It carves out the Government's strategy to trigger a virtuous cycle of economic growth and envisions the constructive role of the private sector.
  • With assets monetisation, also spells the Government's considered commitment to infrastructure spending to create new assets, jobs and demands for core industry products so that their multiplier effect would help the economy as a whole.
  • The Budget further enhances the ease of doing business and assures more simplification of compliance and other process reforms to generate additional ease of living.
  • Also, this budget which is the first-ever paperless budget has many unique features including realistic revenue projection, no tax rates tweaking and transparent fiscal accounting.
    • It acknowledges the fiscal deficit situation and draws a map to tackle the same.
    • The Budget persuades liberalisation of FDI in insurance and rationalises financial sector regulation.
    • To provide tax stability which is the mainstay to attract investment and thrust economic growth with demand, the Budget avoids tinkering of the tax rate.
    • Without increasing any tax burden on the taxpayers, it introduces a cess, just by adjusting a few duties, to fund Agricultural Infrastructure and Development besides agriculture market reforms which arc the need of the hour.
  • Following the principle of Minimum Government Maximum Governance, the government has laid the roadmap for disinvestment and privatization wherein the government's role will be confined to the minimum and in strategic sectors.

Tax Administration and Compliance Processes

Faceless System

  • The aim was to establish a platform for Transparent Taxation-Honoring the Honest and thereby provide Faceless Assessment to all taxpayers with its launch on August 13, 2020, except in cases of serious frauds and money laundering, etc.
  • Now income tax assessment is being done in a faceless manner without any physical interface is the age-old colonial-era territorial tax administration system is replaced by a faceless system consisting of randomly chosen virtual teams with dynamic jurisdiction.
    • Under this new system, a taxpayer can be assessed by an officer located anywhere in the country irrespective of his geographical location.
    • For the first time Taxpayers' Charter is issued to reflect certain principal commitments of the Income Tax department towards the taxpayers.

 Faceless Appeal

  • Faceless Appeal, launched on September 25, 2020, provides a fully faceless procedure for appeals in tax dispute matters pending before the Commissioner (Appeals) and imparts greater efficiency, transparency and accountability by eliminating the interface, optimizing utilization of the resources and introducing an appellate system with dynamic jurisdiction in which appeal shall be disposed of by one or more Commissioner (Appeals).
  • It allows taxpayers to file their documents in an electronic mode and save themselves from the hassles of physical visits to the Department.
  • Similarly in Indirect Taxes, Customs and GST, various process reform leading to ease of compliance have been introduced like validated input tax statement, e-invoice system, NIL returns with SMS, quarterly return and monthly payment for small taxpayers, pre-filled editable GST return, staggering of returns filing, enhancement of the capacity of GSTN system, etc., which is using technology to provide convenience to genuine taxpayers.

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

Goods andServices Tax(GST)

  • Towards making GST compliance easier and more effective, a mandatory requirement of getting annual accounts audited and reconciliation statements have been removed.
  • Further, it has been provided that interest on delayed payment of GST shall be charged only on net cash liability with effect from July 1, 2017. These measures would facilitate the trade considerably.
  • It is being prescribed that the input tax credit shall be allowed only when the details have been furnished by the supplier in the statement of outward supplies.
  • Other measures include the validity of provisional attachment for a period, zero-rating on payment of IGST only in specified cases and linking it to the receipt of foreign remittances, and certain other changes have been made in the provisions relating to seizure and confiscation.


  • The import duty rate structure has been meticulously calibrated to ensure adequate availability of raw materials to meet the requirements of the manufacturing sector.
  • A new provision in Customs law to prescribe that all conditional exemptions, unless otherwise specified or varied or rescinded, given under Customs Act shall come to an end on March 31, falling immediately two years after the date of such grant or variation.
  • Legislative changes have been proposed so as to mandate the filing of bills of entry before the end of the day preceding the day of arrival of goods.
  • Moreover, it is also proposed to allow the specified amendments by importer/ exporter on a self-amendment basis.
  • It is proposed 10 recognize 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 the surge in imports, dumping of goods or export of subsidized goods to India by circumventing the trade.

Agriculture Infrastructure and Development Cess (AlDC)

  • This cess has been proposed on import of specified goods as well as a duty of central excise on petrol and diesel.
  • To ensure that imposition of cess does not lead to additional burden in most of these items on the consumer, the BCD rates have been lowered.
  • It shall be used to finance the improvement of agriculture infrastructure and development projects.

Sector Specific Steps

  • In sectoral highlights, the duties on metals (steel) have been significantly rationalized.
  • This was necessitated as iron and steel prices have risen sharply in the last six months.
  • The customs duty has also been rationalised on iron and steel scrap and copper scrap.
Conditional Borrowings


  • Grant of reform-linked additional borrowing limits to States was first announced in May 2020 with the twin objective of pushing reforms and providing States with the much-needed financial resources to fight the Covid-19 pandemic.
  • During the year 2020-21, the pandemic had dealt a severe blow to the revenue collection of the governments, hampering their ability to respond to the challenges thrown up by it.
  • To successfully overcome the formidable economic challenges, the Prime Minister had announced a series of economic stimulus packages and gave the clarion call of sustaining Aatmanirbhar Bharat' (a self-reliant India).
  • An important component of the 'Aatmanirbhar Bharat Abhiyaan' packages was an increase in the net borrowing limit of States for 2020-21 by 2% of GSDP.

Borrowing by States

  • 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 or by its predecessor Government, it has to obtain the consent of the Government before raising any such loan.
  • Based on the recommendation of the Finance Commission, the Central Government had fixed the Net Borrowing ceiling for the states for FY 2021-22 at 3% of GSDP.

Reform Centric Borrowing

  • 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
    • Implernentation of 'One Nation One Ration Card' system.
    • Reforms to promote Ease of Doing Business.
    • Local bodies and public utilities reforms
    • Reforms in the power sector.
  • The Department of Food and Public Distribution (DFPD), Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Housing and Urban Affairs (MoHUA), and Ministry of Power (MoP) were respectively designated to certify completion of stipulated reforms and recommend grant of permission for additional borrowings from the bond market.
  • Availability of a huge financial incentive of additional borrowings of Rs. 53,413 crore in each sector made the reform path lucrative to the States, which were woefully short of resources with a dwindling tax collection, even as demand for expenditure was moving northwards.

Urban Local Bodies/Utilities Reforms

  • Reforms in the Urban Local Bodies (ULBs) are aimed at their financial strengthening to enable them to provide better public health and sanitation services and create a good civic infrastructure.

Power Sector Reforms

  • Power Sector reforms by the Ministry of Finance aim 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.

Present Status and Way Forward

  • Till February 8, 2021, 17 States have completed reforms in at least one of the four identified citizen-centric areas.
  • The Department of Expenditure, Ministry of Finance has issued them additional reform-linked borrowing permission of Rs.73,773 crore.
  • The move Will not only help States to maintain a sustainable debt path but has also started bringing benefits to the citizens.
A Booster Shot for Economic Growth


  • The budget proposal has laid a renewed thrust on promoting the principle of 'minimum government, maximum governance' as well as improving the ease of doing business and ease of living in the country.
  • Union Budget 2021-22 has brought in a new sense of optimism in the country, triggering hopes of better economic prospects going ahead.

Background and Initiatives Taken

  • The annual budget of the country is an indicator of economic management by the government.
  • India's Union Budget 2021-22 is meticulous, inclusive, transparent and growth-oriented, reflecting the government's commitment towards the transformation of the Indian economy.
  • The pandemic has brought to the forefront the need for strengthening our healthcare systems, right from health infrastructure to medical education to research and development.
  • The significant outlay on health and well-being sectors in this budget is a huge positive. 
  • The launch of Aatmanirbhar Swasth Bharat Yojana will strengthen primary, secondary, and tertiary healthcare infrastructure and create new institutions, addressing huge gaps in healthcare facilities in the country. This is a significant investment for the well-being of the citizens of India.
  • Initiatives announced towards a cleaner environment namely Urban Swachh Bharat 2.0 Mission, Jal Jeevan Urban Mission and Mission Poshan 2.0 will also contribute towards better health and well-being of people.
  • The commitment of Rs.35,000crore for the Covid-19 vaccine will give a fillip to the on-going immunisation program, which is extremely important for not only protecting lives but also for ensuring quick economic recovery.

The impetus given to Growth

  • There has been an equal emphasis on immediate recovery as well as medium-term growth.
  • A huge thrust has been laid on capital expenditure, with both physical and social infrastructure seeing a big push.
  • This should help in reviving the consumption and investment cycle.
  • Higher public investment in infrastructure projects is expected to crowd-in private investments and will also create several jobs, leading to improved demand.
  • The government has also announced the establishment of 7 Mega Investment Textiles Parks, which is expected to encourage greater exports and create more jobs in this labour-intensive sector.

Agricultural Growth

  • Steps have been taken to enhance productivity, bring efficiency to the agri-supple chain and also augment farmers‘ income.
  • This is in continuation of the agriculture reforms introduced by the government last year.
  • By linking 1000 more mandis with e-NAM and the availability of the Agriculture Infrastructure Fund for augmenting infrastructure facilities of APMC, continuous efforts are being made to strengthen the farm ecosystem.
  • These steps will help to integrate the national agriculture supply chains and facilitate the up-gradation of marketing infrastructure.
  • To promote the idea of 'more crop per drop‘, the micro-irrigation corpus has been doubled. This will ensure efficient water use, which is extremely critical today for the sustainable growth of this sector.
  • Operation Green Scheme: The introduction of 22 additional perishable crops under Operation Green Scheme‘ will also help in increasing productivity and quality standards and enable greater exports of perishables from the country.
  • Enhanced agriculture credit target will help in meeting the financing needs of farmers.

Financial Sector

  • The decision to privatize two public sector banks and one public sector insurance company underlines the government‘s commitment to limit its presence even in the strategic sectors and given a larger role to be played by the private sector.
  • To further release capital for growth and strengthen the banking system, FICCI for long has been advocating the need to set up a National Asset Management Company.
  • The government‘s announcement to set up an Asset Reconstruction and Asset Management Company is a timely step.
  • The aftermath of the pandemic is expected to deteriorate the balance sheet of banks and such a mechanism will help banks to unlock stuck capital and use it for more productive purposes.
  • The additional Rs.20,000crore for recapitalization of Public Sector Banks will also lend support to meet the credit requirements in the near term.
Budget And Infrastructure


  • 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 capital allocation has gone up by over a third of the previous year's allocation to Rs.5.5 lakh crore in keeping up with the plans of the National Infrastructure Pipeline (NIP).
  • The NIP envisages a capital spend of over Rs.100 lakh crore over a six-year period, 2019-20 to 2024-25, with 39% to come from the Centre.
  • NIP includes over 20 sectors and has recently been enhanced to 7400 projects.

Roads Sector of Infrastructure

  • The road sector has attracted the maximum allocation (Rs.1,18,10crore).
  • Hybrid-Annuity-Model (HAM) and Toll-Operate-Transfer (TOT) models have been given more focus.
  • Further, the government is in a position to monetize significant road assets of the National Highways Authority of India (NHAI), where there is now a clear assessment of toll revenues.
  • e-tolling (FASTag) is saving significant waits at toll booths.
  • Another important outcome of the investments in road capacity improvement is the increase in the average kilometres per day that trucks travel, resulting in not only better asset utilization, but also faster and increasingly more reliable delivery times.

Railway Infrastructure

  • The next level of allocation at Rs.1,07,100crore is for the Railways, which is expected to have a total capital outlay of over Rs.2 Lakh crore, including internal and extra-budgetary external resources.
  • Investments in Railways are driven both by capacity creation and customer-centricity.
  • Capacity creation is the easier one, though affected by land acquisition, and in some instances, environmental clearance.
  • The Dedicated Freight Corridor (DFC) and the Bullet Train, two of the big-ticket projects, have been delayed on account of land acquisition.
  • The challenge in customer-centricity is to be able to leverage PPPs with appropriate policy reforms.
  • There has been a slow and steady push towards opening up to the private sector in various domains, including locomotive manufacturing, wagon manufacturing, special freight train operations and freight terminals.
  • Recently launched draft National Rail Plan (NRP) visualize 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 45per cent by 2050 is envisaged.

Urban Transport Infrastructure

  • Urban transport has been given a strong focus with allocations for extension of metro lines in major cities, Metrolite, Metroneo projects and for bus transportation.
  • While a metro line costs Rs.300 crore per kilometre, the Metrolite is about Rs.180crore per kilometre and the Metroneo is Rs.70crore per kilometre.
  • With these technologies, India will have a full range of mass transit technologies, starting from the conventional bus to the Bus Rapid Transit System (BRTS), Metrolite, Mctronco, the Metro and the Regional Rail Transit System.

Telecom Sector

  • The budget had a significant allocation of Rs. 9000 Crore to complete the Bharat Net Project, which envisages broadband connectivity to all the gram panchayats of the country.
  • 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.

Electricity sector

  • 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.

Agri infrastructure sector

  • The allocation for the Agri infrastructure sector is planned to come through a cess that is being levied on fuel.
  • While it will not affect the price of fuel to the end customer, a price which already includes more than half towards taxes and duties, it raises a Centre vs State issue.
  • The government has reduced duties on fuel and transferred it as a cess amount. While duties are shareable with the state, cesses are not.

Other Sectors of Infrastructure

  • Other sectors of infrastructure that found special mention were up-gradation of some fishing harbours, the water supply schemes in urban local bodies, and bringing in PPPs in more existing airports.
  • Though there was no explicit mention of the ports and shipping sector, there is an ongoing programme in this sector called Sagarmala.
  • There is also a recent visioning exercise called the Maritime India Vision for 2030 that provides a roadmap for significant growth in this sector.

Institutional Reform

  • A new infrastructural Developmental Financial Institution (DFI) is being set up with an allocation of Rs. 20,000crore.
  • While this is a welcome move, we need to learn from the lessons of the earlier institutions that were set up or catalyzed by the government.
  • These include IL&FS (which today is under serious charges of misgovernance), IDFC (which after having evolved into a bank, has diluted its intended development focus) and IIFCL.
  • The government has also set up a ‘bad bank', including an Asset Reconstruction Company (ARC) and an Asset Management Company (AMC) for taking care of non-performing assets.
  • This is a much-required step, especially since infrastructure assets are one of the primary causes of nonperforming assets.

Strategic Disinvestment and Asset Monetization

  • Strategic disinvestment and asset monetization have received significant attention in the budget, not only as a means to raise revenues for the government but also to bring in private sector efficiency.
  • Public sector companies targeted 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.
  • These are steps in the right direction since they will unlock the value of significant assets (including land) that have been created by the government.
  • The budget highlighted a long-term policy of the government that has significant implications for the infrastructure sector.
  • Various sectors are classified as Strategic and Non-Strategic.
  • Strategic sectors would have a 'bare minimum' presence of public sector enterprises, while all central public sector enterprises in the non-strategic sectors will be privatized.
  • The infrastructure domains in the 'strategic' classification include Transport, Telecommunications, and Energy (Power, Petroleum and Coal).
  • The budget has allocated Rs 50,000crore for the National Research Foundation to strengthen the 'overall research ecosystem'. Structures have also been put in place earlier to create 'specialised professionals' and focus on research through universities set up in the infrastructure sectors.


  • The budget has moved in the direction of not only recognizing the importance of infrastructure for the much-needed economic growth at a national level but also being more realistic of the requirements of wise and effective spending on infrastructure.
  • However, real outcomes can further be realized only by attention to detail and capacity for implementation.
Strengthening the Agriculture Sector


  • Agriculture and its subsidiaries demonstrated exemplary resilience amid the Covid-19 pandemic by posting a growth rate of 3.4 per cent (at constant prices, 2020-21) whereas other economic sectors performed negatively.
  • Despite many adversities due to Covid-19 induced lockdown, the total food production in the country is estimated at 296.65 million tonnes during 2019-20 (as per fourth advance estimates).
  • Excellent outputs in agriculture enhanced the share of agriculture in GDP to almost 20 per cent for the first time in the last 17 years (Economic Survey, 2020-21 ).

MSP, Mandis and Markets

  • The two key departments under the Ministry of Agriculture and Farmers' Welfare- Department of Agriculture,
  • Cooperation and Farmers' Welfare and Department of Agricultural Research and Education, have been allocated a total amount of Rs. 1,31,531.19 crore mainly to run and fund centrally-sponsored schemes.
  • In 2020, the Government had announced the increased MSP for all mandated Kharif and rabi crops for marketing season 2020-21.
  • Return to farmers over their cost of production was assured to be at least 50 per cent, however, for wheat the return was highest (106 per cent) followed by rapeseed and mustard (93 per cent), gram and lentil (78 per cent).
  • Steps were taken to push up procurement to the next level by increasing the number of procurement centres with due facilitation to farmers.

Agriculture Produce Market Committee (APMC)

  • The government has signalled its intention by announcing, 'the agriculture infrastructure fund would also be made available to APMCs for augmenting their infrastructure facilities.
  • Additionally, an increase was announced in allocation to the Rural Infrastructure Development Fund from Rs.30,000crore to Rs.40,000crore.
  • This fund will help the 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.
  • To facilitate and extend the benefits of online trading to farmers, it is proposed to integrate 1,000 more mandis with e-NAM, the electronic National Agricultural Market of India.
  • It's a pan-India electronic trading portal that links the existing APMC mandis across the country to bring transparency and competitiveness in the agricultural market.
  • To provide support to farmers when prices of agri-produce is low in the market, the FM proposed to enlarge the scope of the '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 a 50% subsidy on the cost of transportation and storage for evacuation of surplus production from producing area to the consumption centres during the glut situations.
  • Transport subsidy has been allowed on any fruit and vegetable through any rail service provided by Indian Railways.

Credits, Corpus and Curing

  • Timely and adequate credit to resource-constrained small and marginal farmers is fundamental for the success of farming activities and the welfare of farmers.
  • 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.
  • The government has enhanced the agricultural credit target to Rs.16.5lakh crore in the proposed budget.
  • In the previous budget, a provision to include the livestock sector in Kisan Credit Card was passed targeting 1.5 crore, dairy farmers.
  • As of mid-January, 2021, over 44,000 KCCs have been issued to fishers and fish farmers with over four lakh applications at various stages of issuance.
  • Due to its many benefits, micro-irrigation is being promoted in farms with subsidies for which a corpus of Rs.5,000crore was created under NABARD.
  • To support increasing demand, the Government has proposed to double it by augmenting it by another Rs.5,000 crore.
  • Survey of Villages and Mapping with Improvised Technology in Village Areas (SVAMITVA)
  • The Prime Minister launched a unique scheme, the Survey of Villages and Mapping with Improvised Technology in Village Areas (SVAMITVA) to provide a record of the right to property.
  • The scheme lets villagers use their property as a financial asset for taking institutional loans and other financial benefits.
  • The scheme was introduced for six states initially, but in the current budget, its extension to all States and Union Territories is proposed.

Fisheries and Allied Sectors

  • In the present budget, Animal Husbandry and Dairying sector has been allocated a sum of Rs. 3,289 crore, which is18 per cent increase as against the revised budget estimate for 2019-20.
  • With this higher allocation, the Government has reinforced its intent that dairy plays a stellar role in the uplift of the economy, especially in rural areas, and is critical in realising the goal of doubling farmers' income. India is the second-largest fish producing country in the world with a 7.58 per cent share in global production.
  • 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 the 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 fanning is a sunrise sector with the potential to transform the lives of coastal communities.
  • The government intends to support seaweed cultivation by proposing to establish a Multipurpose Seaweed Park in Tamil Nadu.
  • It will provide large-scale employment and additional incomes.


  • Overall, budget provisions for agriculture and allied sectors are set to energise the sector with substantial investments in building agricultural infrastructure. In addition to this, the money in the hands of farmers through the MSP regime will keep the momentum seen during the Covid times going in agriculture.
  • Covering allied sectors and important thematic areas will surely work towards the inspirational agenda of the Government.
  • Through this budget, the Government is also eyeing a paradigm shift in agriculture, 'from a rural livelihood sector to a modem business enterprise.
Education Sector


  • 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-for the purpose of energising the Indian economy recently battered by the pandemic.
  • On February 1, 2021, India had witnessed the presentation of its first digital Budget.
  • The budget was not only the first of its kind presented in the Indian Parliament but also had an allocation of Rs. 3,768 crore for making the upcoming census India's first-ever digital census.
  • In the first Budget presented after the announcement of the National Education Policy (NEP), was in need of greater allocation for its implementation.

Initiatives Taken

  • India, which boasts to have the highest in the world a total of over 250 million school going students and roughly 500 million population in the age category of 5-24 years.
  • India having had witnessed continuous increment in Budget allocation towards the education sector in the preceding three years. could see the Budget proposing an allocation of Rs. 93.224 crore.
  • This allocation is less by Rs. 6.087 crores (-6.1%) than last year which had seen a rise of 5.9%.
  • The cut in expenditure is visible in the schemes such as 'Samagru Shiksha Abhiyan' which saw slashing of allocation to Rs. 31,050.16 crore from the previous year's allocation of Rs. 38750 crore.
  • 'National Scheme for Incentive to Girls for Secondary Education' where allocation decreased by Rs. 100 crore.
  • India is expected to become the country with the largest working-age population by 2030 requiring literacy, job and life skills
  • With the intentions to equip the Indian workforce with the skill-sets matching the demands of different industries and employers, this Budget has rightly proposed amendment in the initiative viz. the National Apprenticeship Training Scheme (NATS) originally launched in 2016.
  • The amendment aims at boosting apprenticeship opportunities for Indian youth.
  • The focus of the Budget on the improvement of the employment opportunities in 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 of Rs. 500 crore to the NATS has seen the rise of Rs. 325 crore, 186 per cent more than last year‘s allocation.
  • 'Rashtriya Uchchatar Shiksha Abhiyan (RUSA)' has seen the rise of Rs. 2,700 crore.
  • The budget has proposed several new initiatives such as the opening of Bharatiya Bhasha Vishwavidyalaya and
  • Institute of Translation, Indian Knowledge System, Academic Bank of Credit, PM c-Vidya, and Multidisciplinary Education and Research Improvement in Technical Education (MERITE) in line with the recommendations in NEP.
  • lndo-Japan collaborative Training Inter Training Programme (TITP) for facilitating the transfer of Japanese industrial and vocational skills, techniques and knowledge.
  • Kendriya Vidyalayas (KVs) are set to have enhanced funds to the tune of Rs. 6,800 crore in comparison to Rs. 5,516 crore, whereas Mid-Day Meal Scheme (MOMS) and Navodaya Vidyalayas (NVs) too are to have funds increased by Rs. 500 crores each from the previous Budget.
  • The proposal to establish 750 new Eklavya Model Residential Schools in tribal areas for the learners of Scheduled Tribes with an aim to create a robust infrastructural facility for such learners may be extremely helpful in further enhancing the outreach of education to them.
  • Further, setting up a National Digital Educational Architecture (NDEAR) for providing support teaching and learning activities through the digital architecture will be of immense help in educational planning, administration and governance.


  • Budget 2021 might not appear to have ticked all the boxes but it does reflect, the reiteration of the government initiatives, firm commitments and resolves to strengthen the quality of education, enhance skills and improve employability.
  • Keeping in view the significance of India's favourable demographic dividend, it appears to have ensured to maintain the momentum and demonstrate resilience against once-in-a-century crisis, despite being presented in exceptional circumstances, for the continuance of educational reforms and achievement of SDGs.
Flattening the Climate Curve


  • The Economic Survey 2020, released a week before argued that the economy would take merely two years to reach and go past the pre-pandemic level.
  • It offered cogent reasons to believe that India is well-poised to truly be the “land of promise and hope”.
  • Recent economic data indicates that the country has already embarked on a V-shaped path of economic recovery.
  • As the government puts together a new compact for enhanced actions, it is critical to ensure that it is comprehensive, balanced, equitable.
  • Therefore, it is imperative for our policymakers to align both climate and economic policies to the extent possible.


  • 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 2030o Achieve 40 per cent of cumulative electric power- installed capacity from non-fossil fuel sources by 2030.
  • Enhance forest and tree cover to create an 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
Purpose or Scheme  Allocation
  • Clean Air
  • The budget provides an amount of Rs. 2,217 crore for 42 urban centres with a million-plus population to tackle the menace of air pollution
  • Swachh Bharat Abhiyan (Urban)
  • The Urban Swachh Bharat Mission 2.0 will be implemented with a total financial allocation of Rs. 1,41,678 crore over a period of 5 years from 202 1- 2026. The key focus areas include:
    • 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.
  • Scrapping Policy
  • The government announced a voluntary vehicle scrapping policy, to phase out old and unfit vehicles
  • Vehicles would undergo fitness tests in automated fitness centres after 20 years in the case of personal vehicles and after 15 years in the case of commercial vehicles
  • This will help in:
    • Encouraging fuel-efficient, environment-friendly vehicles.
    • Reducing vehicular pollution, and
    • Reducing the country's oil import bill.
  • Production Linked Incentive (PLI) Scheme 
  • The government has committed nearly Rs. 1.97 lakh crore, over 5 years starting FY 2021-22. This will help create manufacturing global champions that:
    Become an integral part of global supply chains
  • Possess core competence and cutting-edge technology, and
  • Provide jobs to youth by bringing scale and size in key sectors 
  • Augmentation of City Bus Service
  • The government has proposed to launch a new scheme at a cost of Rs 18,000 crore to support the augmentation of public bus transport services
  • The scheme will facilitate the deployment of innovative PPP models to enable private sector players to finance, acquire, operate and maintain over 20,000 buses. This will:
    • Provide fillip to economic growth
    • Create employment opportunities for youth, and 
    • Enhance case of mobility for urban residents
  • Expansion of Metro Rail Network
  • The government is planning to deploy two new technologies i.e., 'MetroLite' and 'MetroNeo' to provide metro rail systems at much lesser cost with the same experience, convenience and safety in Tier-Z cities and peripheral areas of  Tier-I cities
  • This will raise the share of public transport in urban areas

Green Initiatives

  • The government has been undertaking a number of measures to finance the transition to a “pollution-free India with a cleaner and greener environment.
  • It is incentivising private sector participation to scale up investments for a sustainable and transformational impact.
Purpose or Scheme Allocation
  • Non-conventional/Green Energy
  • The government has proposed the following:
  • Launch a Hydrogen Energy Mission in 2021-22 for generating hydrogen from green power sources
  • Add 100 more districts in next 3 years to the City Gas Distribution network, and take up a new gas pipeline project in the Union Territory of Jammu and Kashmir.
  • Extend the Pradhan Mantri Ujjwala Yojana to cover I crore more beneficiaries
  • Provide additional capital infusion of Rs. I000 crore to Solar Energy Corporation of India and Rs. I .500 crore to Indian Renewable Energy Development Agency
  • Manufacturing Sector
  • To build up domestic capacity and encourage domestic production, the  government will:
  • Notify a phased manufacturing plan for solar cells and solar panels
  • Raise duty on solar invertors from 5 per cent to 20 per cent, and on solar lanterns from 5 per cent to 15%.
  • Power Distribution Reforms
  • The budget provides an outlay of Rs. 3.05,984 crore over 5 years for the launch of a revamped reforms-based result-linked power distribution sector scheme
  • The scheme will provide assistance to power distribution companies (DISCOMS) for:
  • Infrastructure creation including pre-paid smart metering and feeder separation
  • Upgradation of systems
  • The government will put in place a framework to give consumers alternatives to choose from among more than one DISCOM
  • National Monetisation Pipeline
  • The government has proposed a “National Monetisation Pipeline” of potential brownfield infrastructure assets, including
    Transmission assets worth Rs. 7,000 crore via PGCIL lnvlT.
  • Oil and Gas Pipelines of GAIL, IOCL and HPCL.
  • Micro-Irrigation 
  • The government has proposed to augment the Micro Irrigation Fund created under NABARD by doubling the corpus to Rs. I 0,000 crore.
  • Conservation of Deep-Sea Bio-diversity
  • The budget provides an outlay of more than Rs. 4,000 crore, over five years for the launch of a 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

Things need to be done and way forward

  • There is a need to develop a”Climate Budget Tagging3 (CBT)” tool. This will help in identifying, classifying, weighing, and marking climate• relevant expenditures in the fiscal budget.
  • By incorporating a detailed account of social, economic, environmental, and administrative impact in every legislative proposal, the negative externalities of certain policies can be minimised.
  • The government has signalled its approach to combat climate change by proposing a number of initiatives in the Union Budget 2021-22.
  • It is time all stakeholders came together to fight climate change in an integrated, comprehensive, and holistic way. 
Foreign Direct Investment


  • With record levels of foreign direct investment (FDI), rapid deployment of technology that both handheld investors and eased supplies of mission-critical goods and services, Invest India has been at the forefront of fulfilling its vision of safety and security while maintaining business resilience.

Invest India and recent facts

  • Invest India the national investment promotion and facilitation agency under the Ministry of Commerce and Industry, has won the ‘UNCTAD' Investment Facilitation Award 2020.
  • Despite widespread shutdowns across large economics this year, India received an unprecedented
  • USD 35 billion in foreign investments between April and August 2020, the largest ever in the first five months of the fiscal year and 13 per cent higher than in the same period of the previous year.
  • Invest India has recently launched its Business Immunity Platform (BIP).


  • The pandemic exposed ourselves to severe supply-side constraints. This had two important outcomes.
  • Market players were forced to reevaluate their business models right from sourcing the raw materials to manufacturing, shipping and last-mile deliveries.
  • Many companies became keen to onshore supply chains or at least bring them closer to their markets.
  • In this process, India, which rests at important nodal points geographically and commercially, sprung up as a viable alternative.
  • With its large domestic market, vast skilled labour force and, liberal FDI regime, India began to appear as an opportunity waiting to be explored.
  • Indian MSMEs, with their quick-to-adapt businesses and frugal innovation, helped India swim through the worst initial months of the Covid-19 crisis.
  • In so doing, they exhibited the country's inherent business potential while also putting on display

Making India Investor-Friendly

  • The Government is deeply committed to enhancing the case of doing business and the ease of living in India. It has enabled key reforms, the results of which have become evident over the years.
  • A recent survey conducted by the Confederation of Indian Industries and Ernst & Young found that India is the leading choice for future investments for more than two-thirds of the multi-national company respondents.
  • Aside from our large talented workforce of millions of people, very soon India will have the single largest domestic market within one set of national boundaries (our population will be 1.4 billion people by 2025).
  • In addition, the Government has undertaken extensive revisions to existing land, labour, and insolvency laws.
  • Indian states have been at the forefront of this transformation, quick to adopt single window systems and digitisation across all government departments; changes that are having a profound impact on the investor experience in India.
  • These reforms are also aided by the very liberal FDI regime instituted by the government even in key sectors like defence, electronics manufacturing, pharmaceuticals, and renewable energy.
  • Nearly 50% of those total investments came into greenfield projects further signalling the growing faith in India's future.

Land allocation system based on GIS

  • There is also now a land allocation system based on GIS-enabled tracking which collates all industrial land resources in the country on a single platform and allows investors to explore available land across the country, providing them with all necessary details.

Production Linked Incentives (PLI) Scheme

  • The Government has expanded the highly successful Production Linked Incentives (PLI)
  • Scheme to 13 crucial sectors to include energy, auto, textiles, pharma, and electronics. among others.
  • This scheme, designed after extensive stakeholder collaboration, will play an important role in incentivizing domestic manufacturing and upscaling of projects.
  • The total budgetary outlay for the PLI scheme is Rs.1.96 lakh crore (USD 26 billion) and on average 5% of the production value is provided as an incentive.
  • This means that the minimum production value in India as a result of the PLI schemes is expected to be around USD 520 billion within five years.

Developing a Robust Infrastructure

  • To achieve the target of a USO 5 trillion economy by 2024 and meet the demands of its entrepreneurial citizenship, India must rapidly develop and upgrade its infrastructure.

Way Forward

  • Under Aatmanirbhar Bharat Abhiyan, India is envisaged as a crucial nodal point in global supply chains, with an avast, skilled, and growing workforce and a large domestic market.
  • Backward integration of global supply chains with local manufacturers and retailers will also provide a boost to Indian MSMEs and foster overall growth in the economy.
  • With its stable macroeconomic reforms, it is also building a policy environment that will support the industry and drive demand.
  • Thus, with evolving policies, up-gradation of infrastructure, easier access to clearances and a competitive tax regime, India is continuously redefining the definition of 'Ease of Doing Business.
Diplomacy in Covid Times


  • The dwindling status of world unity while dealing with the Covid-19 pandemic and the way international organisations appeared less effective has raised an important question as to whether the world would be able to move forward with the organisations, institutions and cooperation initiated during World War II.
  • India‘s role has become ever important in this new juncture of World Diplomacy.

India’s Foreign Policy

  • The foreign policy of India was founded according to the defined principles and values of our country; the objective was to safeguard our interests and widen those interests.
  • During the Cold War, the world got divided into two blocks, which had presented some doubts and challenges before India.
  • Considering those India had opted for non-alignment which seemed a better option then. India's policy of non-alignment proved to be a true representative during the Cold War period.

The 1990s:

  • The fall of the Soviet Union and the breaking of the Berlin Wall resulted in a collapse of the bipolar world system, and a unipolar world system came into existence wherein America became the power centre.
  • It became necessary that India should change its traditional path and lay down a solid foundation for its foreign policy in accordance with the requirements in the new scenario.
  • India started moving in this direction in the 1990s.
  • The then Prime Minister P.V. Narsimha Rao added a part of economic diplomacy in the traditional diplomacy which had to traverse in the direction of globalisation.
  • Nuclear Power became another way of diplomacy after Pokhran.

Global Synergy

  • Presently, India does not want to limit to only the Indian Subcontinent or South Asia. With this in view, countries situated in Eastern and South-East Asian regions are foremost followed by the countries of the Middle East.

lndo-Pacific Region

  • Indo-Pacific Region is sensitive not only from a global strategic angle but is important for India too.
  • In this region, on one side China is following the strategy of establishing a 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 the “Pivot to East” strategy.
  • India played an active role in setting up the Strategic Quadrilateral (QUAD) in the lndo-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.
  • India has been incorporating changes and making amendments in its foreign policy in order to adjust to the changing equilibrium in this triangle.

Emergence of China

  • One of the focal points of India's foreign policy is China. The reason for this being that China keeps posing challenges before India by following an expansionist policy through countering India's power in the Indian subcontinent and keeps playing new soft power war games.
  • There are also some reasons for China's success.
  • Firstly, China's increasing military power based on its expanding economic activities in the Pacific region has provided an edge over other countries of the region.
  • The cheque-book diplomacy of China has turned smaller countries in this region almost as its colonies on the basis of which it has been able to provide enough strength to its maritime strategy and defence bridge strategy.
  • Secondly, success in the construction of China-Pakistan economic corridor from Kashgar to Gwadar and building of Great Divide of New Maritime Silk Route to provide a practical shape in Indian subcontinent to the String of Pearls policy and Belt and Road Initiative under the Grand Maritime

Policy in the Indian Ocean.

  • China's military misadventures in Doklam and Galwan were probably the most serious border situations since 1962.
  • At present, the tension between the two countries seems to be the most complex and difficult in history and as of now, there appears no hope of a positive response from China.
  • In this situation, India needs to advance a few more steps towards Russia and Europe besides going towards the US.

Diplomacy with Europe

  • Europe is presently fighting against its internal contradictions posed by the refugee problem, economic imbalance, idealism versus nationalism clash and Islamic terrorism and is in no way looking to be coming out of this complex situation.
  • The conditions developed in Europe after the “Merkozy Effect” (Angela Merkel and Serkozy economic theory) have weakened the bonding between France and Germany and leakage in European Union have become visible now.
  • Brexit has shown that European Union is no more a reflection of optimum unity.
  • With France, relations based on reciprocity were encouraged. 'Rafale' from France gave a new direction to Indian Air Force and the naval exerciseVanm' concluded between the two countries strengthened the establishing of Indian presence in the Inda-Pacific region.
  • By carrying out a military exercise near Djibouti (where China is building its new military base), the two countries are showing that they are quite serious about their strategic partnership in the Indian Ocean.
  • Germany and Nordic countries were seeing potential in India but the Covid pandemic put a stop to that.

Middle East

  • India has succeeded in establishing comprehensive partnership relations with the countries of this region in the previous six years.
  • India's trade and energy security is closely connected with the security of the Hormuz Water Treaty and the Babel-Mandeb strait.
  • India has taken part in naval exercises with many gulf countries including Kuwait, Yemen, Bahrain, Saudi Arabia, Qatar, UAE and Djibouti. During this period, the lndia-Saudi Arabia relations touched a new height.
  • Presentation of their highest civilian awards by Saudi Arabia and Bahrain to PM Modi stands testimony to this.
  • Saudi Arabia is not only the home of Islam and the Arab-Islamic world leader but around 2 million Indians also live in that country out of which many Indians are in higher positions.

Indo-Afro Relation

  • India has been following the policy of the Afro-Asian Brotherhood for a long time and now except BRICS and IBSA, India has cordial relations with the African Union.
  • But, India still needs to follow such measures as it would help the partnership of India and the African countries to benefit from the potential capabilities.
  • Initiative regarding the connection between Seychelles-Chabahar may emerge as an alternative to GwadarDjibouti Connect and India may succeed in Blue Water Diplomacy.

Energy Diplomacy

  • In June 2016, India had gained membership of the Missile Technology Control Regime or MTCRWassenaar Arrangement in December and into the Australia Group last month means that India is now a member of three of the big four export control groups.
  • India would now be able to purchase higher level missile technology and its joint venture with Russia would also get a boost.
  • 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 which was launched on the initiative of PM Modi in November 2015.
  • The objective of this alliance is to aid in the implementation of the Paris Climate Agreement. This is the first agreement-based international intergovernmental organisation that is fully or partly situated between Tropics of Cancer and Capricorn.

Conclusion and Way Forward

  • India wants to maintain relations based on equality with all and that is why she is taking initiatives to improve bilateral relations with Western countries.

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