2021 witnessed Private Equity/Venture Capital (PE-VC) firms investing a record $63 billion across 1,202 deals in Indian companies, registering a 57 per cent rise over the $ 39.9 billion (across 913 deals) invested in the previous year, which included venture capital type investments but excluded PE investments in real estate. The $ 23.4-billion invested in the IT sector dominated the list of Unicorns and accounted for more than 37 per cent of the overall value of PE-VC investments in 2021. The fourth quarter saw over $ 5 billion (across 25 deals) being invested in such companies.
Finance Minister Nirmala Sitharaman presented the Union Budget 2021-22 in Parliament. With significant changes to the taxation process, Sitharaman announced the scrapping of income tax for senior citizens under certain conditions, new rules for removal of double taxation for NRIs, and a reduction in the time period of tax assessments, among other measures. Startups were to get an extension in their tax holiday for an additional year. In a year, when the Covid-19 pandemic ravaged the world, FM gave health the attention it merited. Health allocation jumped 137% to Rs 2,23,846 crore in 2021-22 compared with Rs 94,452 crore in 2020-21. She also provided Rs 35,000 crore for the Covid-19 vaccine and promised to provide further funds if required.
Further ahead, after dithering for almost six years, the government finally decided to set up an asset reconstruction company that will take over banks’ bad loans, giving them the flexibility to finance the economic recovery.
The budget was welcomed by many like Kiran Mazumdar Shaw, executive chairperson, Biocon Ltd., who stated, “Overall, a reassuring Budget with no negative surprises that has buoyed overall sentiment. Healthcare & well-being has received top priority in this Budget, with more than doubling the outlay to ₹2,23,846 crore, including the allocation of ₹35,400 crores towards COVID-19 vaccination and ₹64,184 Cr for a new scheme to strengthen the country’s primary, secondary and tertiary health infrastructure. Other positives include the higher spending on infrastructure, the push for bank privatisation, increased funding for strengthening the public sector R&D and innovation ecosystem, as well, as increasing the FDI cap in insurance from 49% to 74%. The monetisation of public sector assets including land is an important policy plan which must be implemented expeditiously to support the mega infra projects.”
Moreover, Manoj Purohit, BDO India, commented, “To ease access of finance and augment funds for the infra sector, the proposal of providing FPIs an entry into debt financing of REITs and InvITs will open up a large source of fresh funding for the infrastructure and real estate sectors. This will also open up a new avenue for FPIs to invest in a growing market like India.” He further said, “Increase in FDI limits from 49% to 74 % for the insurance sector is a welcome step and will help insurance companies to raise funds to ensure their solvency is maintained in line with growing business needs. This will also augment foreign inflows and help attract more foreign companies.”
Though much appreciated, the budget wasn’t deprived of criticisms. Mr Chidambaram stated his concerns saying, “We welcome the spending on infrastructure but after eight quarters of a slowdown and four quarters of a pandemic, the same kind of emphasis should have been given to the poor, working-class, migrants, agricultural labourers and so on.” Mr Chidamabaram also objected to the government using the Finance Bill provisions to make amendments to non-money bill issues and says it is being done to deny Rajya Sabha its right.
Overall, the Budget of 2021-22 received many criticisms and appreciations. The criticisms are being looked into to accommodate the changes in the upcoming budget, for which the Finance Minister held a pre-budget meeting with all the state finance ministers on 30th December 2021. This was a part of a series of consultations held in the run-up to the Union Budget 2022-23.
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