Union Budget 2021-22 Review
Please refer to important disclosures at the end of this report
Deficit spending by the Government to revive growth
The Government surprised the markets with a bold budget which focus on reviving
growth by deficit spending. Government expenditure for the year was revised to
₹34.5 lakh cr. from the budget estimate of ₹30.4 lakh cr. The Government surprised
the markets and went for much needed deficit spending with the fiscal deficit for
the year being relaxed to 9.5% from 3.5%. The fiscal deficit figure was significantly
above market estimates of ~7% for FY21. Moreover the fiscal deficit figure for
FY2022 at 6.8% was also well above market estimates.
Revenue expenditure for the year was increased to ₹30.1 lakh cr. from budget
estimates of ₹26.3 lakh cr., while capital expenditure was also revised to ₹4.4 Lakh
cr. from ₹4.1 lakh cr. The sharp increase in revenue expenditure by the Government
was on account of increased spending on food and fertilizer subsidies which are
expected to boost the rural economy.
Total subsidies for FY2021 are budgeted to increase by 147% yoy to ₹6,48,736
crore as compared to budget estimates of ₹2,62,109 crore. The jump in subsides
are on account of sharp increase in food and fertilizer subsidies as the Government
has ramped up its spending and has tried to provide support to the rural economy
in the aftermath of the Covid-19 pandemic.
The Government is clearly looking to stimulate the economy through increased
spending. While overall spending is expected to grow by 1.0% in FY2022 due to
2.7% yoy decline in revenue expenditure, capital expenditure is budgeted to grow
by 26.2% yoy. The cutback in revenue expenditure is driven by 43.0% yoy decline
in subsidies to ₹3.7 lakh cr. in FY2022.
Key Highlights of the Budget
While rural economy, manufacturing, infrastructure and real estate continues to
remain the key focus areas for the Government, this time around there is a focus
on health and well being which has witnessed significant increase in allocation. Key
measures announced by the Government are:
• Increase in allocation for health & well being from ₹94,452 crore in FY2021 to
₹2,23,846 crore in FY2022.
• Additional deduction of ₹1.5 lakh on affordable housing extended till March
2022 along with Sec 80IBA which provides tax holiday to affordable housing
• Increase in import duties on electronic components like Printed circuit boards,
compressors, Inputs and parts of LED lights, solar inverters and solar lamps.
• Increase in import duties on various agricultural products, chemicals, plastics,
leather and auto parts to benefit MSME and other domestic manufacturing
• Reduction in customs duty raw materials and inputs used by domestic
manufacturers for reducing cost of inputs and correction of inverted duty
• FDI Limit in insurance companies to be increased to 74% from current 49%
subject to safeguards.
Fiscal deficit for FY2022 at 6.8%, while
deficit for FY2021 revised to 9.5%.
Deficit spending by the Government is
positive for the economy
Key focus areas on rural India,
infrastructure, manufacturing and
Significant increase in outlay for health
and well being positive for healthcare
Tax breaks for affordable housing
extended by one more year
Continued hike in import duties on
various items positive for domestic