Union Budget Reaction: Shachindra Nath, Executive Chairman & Managing Director, U GRO Capital

By Shachindra Nath, Executive Chairman & Managing Director, U GRO Capital

Broadly evaluating, the Union Budget 2021 is a significant attempt by the government, to accept a higher fiscal deficit and enhance expenditure towards economic revival. It is appreciative of the government to put a special emphasis on providing relief to the taxpayers and reducing the burden posed by COVID-19. One of the key highlights of the budget is the setting-up of the development finance institution (DFI) towards infrastructure financing and institutional framework to purchase corporate bonds, which would solve the issue of liquidity for the infrastructure sector and corporate bond market. Also, with the path-breaking initiative of instituting Asset Reconstruction Company (ARC) and asset management company (AMC) for NPA consolidation, banks have been allowed to streamline their focus on the much-needed growth.

The government has reduced the threshold for NBFCs to initiate recovery under the SARFAESI Act, 2002. This is an effective step towards ushering credit discipline and in the long-term will increase the penetration of credit to small businesses. The government has also doubled its allocation towards MSMEs, which would greatly support their revival and eventual growth. Holistically, the Union Budget 2021 is an encouraging event, yet we optimistically look forward to distinctive support for NBFCs, with a framework to provide them sufficient liquidity, while also furthering the credit guarantee scheme support to the MSMEs.