03 Feb 2021 16:15 IST

TAPMI Profs discuss hits and misses of the Budget

‘Focus on infrastructure and increase in FDI in insurance can be big employment providers’

Aditya Mohan Jadhav, Professor (Accounting, Economics and Finance Area) of the Manipal-based TAPMI (TA Pai Management Institute), has said that the Union Budget 2021-22 has some positives and some misses.

Reacting to the budget proposals, he said the increase in health budget by 134 per cent was a necessity in lieu of the pandemic, and it is a step in the right direction.

The setting up of the National Asset Monetisation Pipeline, disinvestment target of ₹1.75 lakh crore, and IPO of LIC become very important given that the fiscal deficit is expected to be 6.8 per cent of GDP.

He felt that the focus on infrastructure and increase in FDI in insurance sector will boost these two sectors that can be big employment providers.

Decision to set-up Asset Restructuring Company and recap of PSBs will release capital for loans from these banks and kickstart the economy.

He said the key miss in the budget is the focus on households. Households have taken an income hit resulting from the pandemic which is expected to result into retail banking NPA surge. “The budget was expected to take some effort to increase money in hands of the people. The Government has not taken any substantial initiatives on this front,” he said.

‘Lays a clear roadmap’

Vishwanathan Iyer Professor (Accounting, Economics and Finance Area) and Dean (Academics) of TAPMI, said the budget gives a continued push to reforms and lays out a clear roadmap for the same. Across the pillars discussed, the underlying tone is giving a push to employment - be it jobs or opportunities for entrepreneurship.

In line with her previous budgets and in response to the unexpected slowdown, the budget focuses on a Keynesian type stimulus. The large outlays for roads, ports, power and urban infrastructure lead the way into economic revival and that too in a sustainable manner, he said.

Manufacturing revival will lead to a consumption stimulus and that should help increase aggregate demand. With attention to human capital development and vulnerable populations through education and employability, the budget also stays inclusive and patient.

He said the budget instils a sense of security, continuity and courage in its choice of sector support (both short- and medium-term) and therefore gives people a positive outlook.

NEP focus

Rajiv V Shah, Professor (Accounting, Economics and Finance Area) of TAPMI, said the focus on implementing the NEP (National Education Policy) using 15,000 schools across the country as mentors is a welcome move. Also the Higher Education Commission for accreditation of colleges is much-awaited to consolidate the accreditation work currently being done by multiple agencies.

The move to pre-fill income tax returns with data from sources other than employers is a subtle move to highlight the increased use of information technology in governance. This also gives a direction to the path forward for higher education in the direction of increased IT education and skilling, he said.

FDI in insurance

Meera LB Aranha, Professor and Chairperson (Banking and Financial Services) of TAPMI, said the budget proposal to enhance investor protection to financial investors across all financial products and to amend the DICGC Act, 1961 for streamlining protection to the bank depositors are a clear positive. Again enhancing foreign direct investment in the insurance sector with adequate controls and safeguards will increase competition and lead to efficiency among the players, she said.

However, the amount set aside for re-capitalisation of banks is inadequate indicating that the Government is going ahead with its proposal of privatization of banks. Moving the stressed assets in banks to the proposed ARC Ltd will clean up the balance sheets of banks and make them attractive to private players, but early value realisation of the stressed assets will require a deeper bond market, she added.