Union Budget 2021-22: Spend More, Borrow More

Mr. Shashikant Hegde, CEO, Projects Today
Mr. Shashikant Hegde, CEO, Projects Today

The key mantra of the Union Budget 2021-22 appears like Spend More, Borrow More, but ignore the resultant spikes in the fiscal deficits for the next couple of years. Given the economic conditions the country is confronting at present, the decision looks bang on.

Finance Minister Nirmala Sitharaman, presenting her most awaited Budget, claimed that the government has spent around Rs 27.1 lakh crore (13.5 percent of GDP) during the COVID-19 induced lockdown period to keep the economy going and reduce the pain of economic shutdown.

The Atmanirbhar Bharat packages totalling Rs 27.1 lakh crore announced during 2020-21 to sustain the falling economy pushed the fiscal deficit to 9.5 percent in 2020-21. The government’s intention to pump prime the economy in 2021-22 with record outlays in sectors like Highways, Healthcare, Rural Infrastructure, etc is expected to maintain the deficit figure at around 6.8 percent in 2021-22.

In order to revive the economy and rebuild the nation in the post COVID-19 era, emphasis is laid on infrastructure building, strengthening health facilities and further increase the ease of doing business.

Capital Expenditure

As against the capital expenditure of Rs 4.39 lakh crore in 2020-21, a sum of Rs 5.54 lakh crore will be spent on capex in 2021-22, indicating a healthy rise of 34.5 percent. Additionally, the Centre will provide around Rs two lakh crore to states and autonomous bodies for funding their project expenditures.

In order to ensure adequate funds for the proposed infrastructure and other developmental projects, the government aims to set up a Development Finance Institution (DFI) with an initial equity of Rs 20,000 crore. The government also mulls allowing the private sector to set up DFIs in future. The DFI is expected to have a lending portfolio of around Rs five lakh crore in the next three years. To allow more lending, public sector banks will be further recapitalised by a sum of Rs 20,000 crore during this fiscal. Further, a sum of Rs 1,75,000 crore will be collected through disinvestment of PSU units and two PSU banks.

Debt Financing by Foreign Portfolio Investors will be enabled by making suitable amendments in relevant legislations. To attract increased FDI into the insurance sector, the upper limit of permissible FDI has been increased from 49 percent to 74 percent, with some riders.



The National Infrastructure Pipeline (NIP), announced in December 2019, has 7,400 projects worth Rs 111 lakh crore which are ongoing. The execution of the projects listed in NIP is expected to gain traction in FY22.

Roads & Highways

The Budget mentions that more than 13,000 km length of roads at a cost of Rs 3.3 lakh crore has already been awarded under the Rs 5.35 lakh crore Bharatmala Pariyojana. Of which around 3,800 km has been commissioned.

By March 2022, the government will be awarding another 8,500 km and complete an additional 11,000 km of national highways. Of the proposed investment, a sizeable amount will be spent in Assam, Kerala, Tamil and West Bengal.

Additionally, the budgetary allocation to the Ministry of Road Transport and Highways has been increased from Rs 1,08,230 crore to Rs 1,18,101 lakh crore in 2021-22. This is the highest-ever allocation the Ministry has received.

Urban Infrastructure

In order to strengthen the urban public transport system, a new scheme worth Rs 18,000 crore has been launched in the Budget. The scheme will allow private sector players to finance, acquire, operate and maintain over 20,000 buses under the PPP model.

The ongoing Metro expansion in 27 cities will be expedited and the government proposes to deploy MetroLite and MetroNeo technology to control the cost of the projects.

Affordable Housing

The tax incentive provided in July 2019 Budget for buyers of new affordable housing has been extended by another year till 31 March 2022. Under this scheme, an additional deduction of Rs 1.5 lakh crore will be allowed to the new house buyers.


In order to ensure the viability of Distribution Companies, a result-linked power distribution sector scheme will be launched with an outlay of Rs 3,05,984 crore over the next five years. The scheme will provide assistance to Discoms for infrastructure creation, including pre-paid smart metering and feeder separation, upgradation of systems, etc.

In order to give a further boost to the non-conventional energy sector, the Budget plans an additional capital infusion of Rs 1,000 crore to the Solar Energy Corporation of India and Rs 1,500 crore to the Indian Renewable Energy Development Agency.


The Budget outlay for Health and Wellbeing is Rs 2,23,846 crore in 2021-22 as against Rs 94,452 crore in 2020-21, an increase of 137 percent.

In addition to Rs 35,000 crore for vaccination of the nation, the health sector received the highest-ever budgetary allocation of Rs 64,180 crore in the Budget. The amount will be spent over the next six years to enhance capacities of primary, secondary and tertiary care health systems. Facilities will be set up to detect and cure new and emerging diseases.

Under the proposed Jal Jeevan Mission (Urban), water supply in 4,378 Urban Local Bodies and liquid waste management in 500 AMRUT cities will be established over the next five years at a total outlay of Rs 2,87,000 crore.


In a move to help the manufacturing units to acquire core competence and cutting-edge technology, the PLI scheme has been extended to 13 core sectors. For this, the government has committed Rs 1.97 lakh crore, over the next five years between 2022 and 2027.

In order to make the textile industry globally competitive, attract large investments and boost employment generation, seven Mega Investment Textiles Parks (MITRA) will be launched over the next three years.

Under the proposed automobile scrapping policy, nearly 1.5 crore vehicles are going to be replaced with new and energy-efficient vehicles. Further, the increase in customs duty on some key auto components is expected to help the MSMEs who have the capabilities to manufacture those components domestically.

Projects Today observes that while the budgetary allocations to key sectors look very impressive and are the need of the hour, the benefits of these programmes will accrue to the economy only if the projects are executed in a time-bound manner. To encourage Indian private companies to participate in infrastructure building, the government has to not only create shelf-ready projects, but also remove hurdles they face during the execution phase. This will also persuade foreign investors to pour in more funds into India.


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