Budget 2021 Impact and Analysis

The Union Budget 2021 was heralded as a difficult one for the Finance Minister, as it was the first one after the breakout of the pandemic in 2020. The global economy has been going through a tough time, and India’s is no different. Even so, international economic bodies have predicted a stronger recovery and growth for India (11.5%) and China (8.1%) than for the rest of the world.

In this scenario, how was the Budget received and what was its impact on key sectors? Let’s find out.

Stock market: The Budget impact upon the stock market has popularly been described as “No news is good news”. There were rumors of tax hikes in the form of LTCG (Long Term Capital Gains) tax and STT (Securities Transaction Tax). But the government even did away with the predicted Covid tax and instead focused on raising money from a buoyant market with disinvestment and privatization measures. Hence, both Sensex and Nifty showed bullish trends right after the Budget announcement. Morgan Stanley has projected Sensex to reach 55,000 by the end of the calendar year.

Personal taxation: While tax slabs in Budget 2021 remained unchanged, a few more initiatives have been announced for individual taxpayers. Senior citizens above 75 years of age with income from pension or interest are now exempt from filing tax returns. The date of sanction of eligible affordable housing loans for tax deduction on interest has also been pushed in an effort to boost home buyers.

Apart from these, the LTC (Leave Travel Concession) Cash Voucher scheme, the taxation of high proceeds from ULIPs (Unit Linked Insurance Plans), and amendments to promote digitization and swifter compliance were some other highlights for individual taxpayers.

 While there was no bad news for individual taxpayers in Budget 2021, you must not forget to focus on your investments all year round. Remember that investments are key financial power tools and not just end-of-FY measures to save tax. To wade through the complex web of investments and begin your journey with lucrative mutual fund investments, turn to Tata Capital’s Moneyfy app. It has features such as goal-based investing, instant redemption, and fund comparison to make your job much easier.

Additional Read: Has the Budget Simplified the Income Tax Regime or Complicated it?

Healthcare sector: One of the key winners of Budget 2021 has been the healthcare sector. The Budget impact on healthcare was much expected, given the healthcare crisis we’ve been through. It was, hence, no surprise that the health overlay was increased by a good 137%, with Rs.35,000 Crore allocated for the Covid vaccine. The FM has also stated that more funds will be provided for the same if required. As per experts in medicine, this Budget has moved from a focus on curative care to preventive  care. This was much needed with the pandemic shock and the understanding that we need to be prepared for health emergencies better.

There are quite a few initiatives contributing to this. One of them is the PM Swasthya Yojana, which focuses on primary, secondary, and tertiary healthcare facilities even in the remotest of areas in the country. Another is the PM’s Atmanirbhar Health Yojana, which received a huge allocation of more than Rs.60,000 Crore. All experts, financial and health, have welcomed these measures as holistic and appropriate. However, how these investments work on the ground after implementation remains to be seen.

Insurance sector: The two biggest announcements of the Budget after health overlay were that of LIC’s possible IPO and the FDI in insurance hike from 49% to 74%. The insurance sector needed this kind of boost, and increased investment will greatly help insurers in rising back up from the 2020 debacle. This is happening in tandem with increased risk awareness amongst people, especially with regard to life and health insurance.

The penetration of insurance in the country is already increasing. With the huge increase in health overlay, health insurers can now come up with better products and services. With the motor scrapping policy, motor insurance will also get a boost. Both life and general insurance policies are receiving a boost, which is great for the country both economically and socially.

Additional Read: Key Things to Know about the Union Budget 2021

Conclusion

This was a recap of the key Budget 2021 highlights. There have been many more minor impacts that the Budget has also caused, which are interesting to note. What now remains to be seen is how the short term Budget impact translates into long-term positive impact.

While the markets are not in your hands, your own investments certainly are. Start investing wisely right now in order to gain sustained returns all year and earn much more than tax saving. Start your investment journey now with a choice of mutual funds that you can invest in from the Tata Capital Moneyfy app. It features a Mutual Fund Scanner to help you make the right decision, along with other aids such as theme-based investments, insurance, loans, etc.