Government May Propose Corona Cess, Says HDFC Securities

Finance Minister Nirmala Sitharaman will present the Union Budget for financial year 2021-22 on February 1 amid the ongoing Covid-19 pandemic. "Many of the key themes in the Budget will revolve around Covid-19, either directly on health issues (vaccines) or regulatory support to sectors most affected (e.g. hospitality, retail, aviation)," HDFC Securities said in a report titled Pre-Budget 2021 Expectations. In this backdrop, HDFC Securities said that the government could impose "Corona Cess" to meet the Covid vaccine-related costs.

"To meet the covid vaccine related costs, the finance minister could introduce a 'corona cess,'" HDFC Securities said.

"Disinvestment target for next year is likely to be ambitious as certain planned disinvestments for FY21 spill over into the next fiscal," the Mumbai-based financial services company added.

Ms Sitharaman has already said her upcoming Budget will be like never before and alluded to it as "unlike anything seen in the last 100 years." Budget 2021-22 assumes special significance in wake of the Covid-19 pandemic. It will be the first Budget of the NDA government in the midst of the ongoing Covid19 pandemic. And in a significant break from tradition, this will be the first time in the history of independent India that the Budget will be paperless.

Among other things, HDFC Securities expects the fiscal deficit to rise to 7.6 per cent of gross domestic product (GDP) in current financial year and it expects government to peg fiscal deficit target at 5.2 per cent for the upcoming fiscal year. The nominal GDP may rise 13-15 per cent in the next financial year.

"To come back on fiscal correction path, the government has limited resources to boost spending by a large per cent. A lot of reshuffling between expense heads may be undertaken so that needy sectors get funds, while the overall fiscal discipline is maintained. US may go for a big stimulus (Biden's plan), which may offset the need for heavy domestic pump-priming in India," HDFC Securities added.