by Vivek Ananth

It is Budget time - that time of the year when every industry maven is hoping that a certain curly-haired genie will grant their specific wish. 

Articles with their expectations for the Budget have flooded the news media over the past week, each clearly hoping that the Finance Ministry was listening. This particular Budget - coming as it does after the COVID19 pandemic hit the Indian economy like a juggernaut - is especially closely watched.

Finance Minister Nirmala Sitharaman’s remark that Budget 2021 will be a “once in a 100-year budget” has left investors and various industries hopeful. But considering the negative response of the stock market has already shown to the tabling of the Economic Survey 2020-21 in the Lok Sabha, there may be disappointment on February 1.

We looked at the various expectations from industries and market participants leading up to Monday and the Finance Minister's speech. Here we break down some of the major hopes and dreams from select industries for Budget 2021.

Real Estate looks for buyer incentives

To kickstart the economic revival, the real estate industry will have a big part to play as a recovery here would give a fillip to steel consumption, cement consumption, and many other allied industries, apart from generating employment for unskilled labour. With the government’s focus on affordable housing over the past couple of budgets, the industry expects some more incentives for buyers, in the form of higher caps on interest deductions from their income.

For property developers, the expectations are almost endless. The main ones are increased allocation for the government’s interest subvention scheme for affordable housing, and extension of the time period of income deductions for developers of affordable housing projects. There has also been some clamour to remove the cap of Rs 45 lakh for affordable houses, which would make more buyers eligible for the interest subvention scheme.

Infrastructure hopes for an NIP roadmap

With the government planning a big push on infrastructure projects to get the Indian economy out of its rut, the industry will be looking at the funding plans of the Rs 100 crore national infrastructure pipeline of projects (NIP).

The NIP has various projects planned, which stretch from railways, power projects (including transmission), metro rail, roads and highways as part of Bharatmala Pariyojana, etc. which will be implemented till 2025. The government expects to contribute nearly Rs 20 lakh crore in NIP projects. A roadmap on how the remaining Rs 80 lakh crore will be mobilised for the NIP is expected in Budget 2021.

The government already announced that there will be a new bailout package for the power sector, which will subsume the older UDAY scheme that was meant to rejuvenate state power distribution companies (discoms). An incentive-based (linked to reforms) Rs 3 lakh crore scheme, that will increase the efficiency of the distribution sector and reduce losses, is also expected to be announced. Hopefully, this will not end up like previous schemes that didn’t move the needle far enough to clean up the mess in state discoms.

Insurance eyes higher deductions for taxpayers

To increase the penetration of insurance, be it various general insurance products or life insurance, the industry is hoping for higher deductions for taxpayers on life and health insurance premium payments.

There is also a demand to increase the Foreign Direct Investment limit for the insurance section to 74% from the current 49%. With the increased capital flow in the industry, this would result in an increase in underwriting and penetration of insurance in India.

Pharmaceuticals keen on PLI scheme for bulk drugs

With expectations rife that Budget 2021 will overwhelmingly be focusing on healthcare, the pharma industry is keeping its fingers crossed. After the rollout of the production-linked incentive (PLI) scheme, the pharma industry is hoping for a similar PLI scheme for the bulk drugs sector to reduce imports for Active Pharmaceutical Ingredients or APIs.

There is also a clamour to reinstate the weighted income deductions for research and development expenditure. This was reduced to just 100% of the R&D expenditure from 200% a few years ago. Going with the government’s new ‘Atmanirbhar’ slogan, this would go a long way in boosting R&D spend by pharma companies.

Banks & NBFCs count on refinance plans for MSMEs

For PSU banks, recapitalisation is the need of the hour, considering they will need more equity to meet regulatory capital requirements. This becomes even more important considering the rise in NPAs that are expected because of the damage to finances of businesses and individuals due to the pandemic induced economic slowdown. A further roadmap of consolidation of PSU banks is also something that will be keenly watched.

The government had introduced a refinance program for medium, small and micro enterprises to overcome the liquidity crunch caused by the current economic recession. The MSME sector which is reeling under the impact of the pandemic is seeking more measure to ease the pain.

The buzz about the government rolling out a bad bank has grown louder by the day. Considering that the government is planning another asset quality review (according to the Economic Survey 2020-21), the idea has many takers. If this does get rolled out, it will impact the entire PSU banking space and investors in these banks will be looking at the fine print of such a new bank.