Union Budget 2021: Auto Components Special
Auto Components India|March 2021
The Union Budget 2021 attempts to offer the necessary “succour” to the automotive components industry. Ashish Bhatia takes you through the key budgeted allocations and brings out the expert opinions.
Ashish Bhatia

The Union Budget 2021 was deemed as the “once in a century budget” even before it was made public. After a pandemic marred 2020, the ask was for bold reforms to address and alleviate pain points, both from the supplyside and demand-side perspective. Finance Minister Nirmala Sitharaman was dealing with expectations that had skyrocketed. On February 01, 2020, when she uttered the first word from her speech on the ‘Made In India’ tablet, the departure from the traditional practice of reading out from the “Bahi-Khata” or cloth ledger was interpreted by pandits as a metaphor for change. The government, in an attempt to tone down the soaring expectations, had on the eve of the budget, cited the sector specific ‘tranches’ as having already addressed most pain-points in the form of ‘mini-budgets’. This Union Budget was deemed as a consolidated account of the mini-budgets. The government , it was evident, walked the rope of maintaining a tight fiscal plan with the RE 202021 at 9.5 per cent compared to the budgeted level of 3.5 per cent of GDP (attributed to increased expenditure on various schemes announced by the government in light of the pandemic). The industry, however hoped for additional support to reverse the negative impacts of the pandemic induced de growth as it had repeatedly sounded off the expectations on both the supply-side and the demand-side concerns ahead of the D-day.

Budget outlay for the sector

The Union Budget 2021 came on the back of sector-specific provisions like collateral-free loans for Micro Small and Medium Enterprises (MSMEs), Funds of funds, subordinated debt, disallowing global tenders of up to Rs.200 crore and change in the definition of MSMEs. With a holistic approach to health as an obvious priority, the Finance Minister allocated Rs.2,23,846 crore as against 94,452 the previous year. Posing limitations to allocations for sectors alike she cited the unprecedented contraction in the global economy. She drew attention to only three budgets having followed a contraction in the economy assuring that the current budget would help sustain the desired economic recovery. Under the Production Linked Incentive (PLI) scheme, Rs.1.97 Lakh crore was allocated for creating “global manufacturing champions” across 13 sectors including industries and services. A five-year outlay beginning FY2021-22, the latter (services) commands a majority stake in the sector-wise share in Gross Value Added (GVA) terms.

Rs.2,217 crores for 42 urban centres to tackle air pollution, voluntary vehicle scrappage policy, innovative PPP models to augment public bus transport were among other announcements expected to boost the prospects of the sector. Besides the government also committed to extending social security benefits to gig workers. On the human capital front, it resorted to realigning the national apprenticeship training scheme for graduate and diploma holders of engineering. It will also leverage the partnership with the UAE and Japan on the fronts of skill development and recognition. For R&D, National Research Foundation would be formed with an outlay of Rs.50,000 crore over a five year period. Innovation and R&D found a mention among the cited six pillars of the economy. The eligibility for claiming tax holidays for startups was proposed to be extended by an additional year.

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