Government Doubles Healthcare Spending, Opens Up Insurance In 'Get Well Soon' Budget

India proposed doubling healthcare spending in an annual budget unveiled on Monday and lifted caps on foreigners investing in its vast insurance market to help revive an economy that suffered its deepest recorded slump as a result of the pandemic. Delivering her budget statement to parliament, Finance Minister Nirmala Sitharaman projected a fiscal deficit of 6.8 per cent of gross domestic product for 2021/22, higher than the 5.5 per cent forecast by a recent Reuters poll of economists. The current year was expected to end with a deficit of 9.5 per cent, she said, well up from the 7 per cent expected earlier. India, which has the world's second-highest coronavirus caseload after the United States, currently spends about 1 per cent of GDP on health, among the lowest for any major economy.

Here are some reactions from Indian businesses, economists and analysts:

Dilip Jose, Managing Director & CEO, Manipal Hospitals, Bengaluru

"The finance minister has accorded special attention to the healthcare sector, increasing the overall outlay to health and wellbeing to nearly 2.25 trillion rupees, an increase of more than 135% over last year. The enhanced allocation, along with the plan to look at healthcare wholistically – including nutrition, sanitation, clean drinking water and pollution control, certainly augur well for the country. The allocation of 350 billion rupees towards COVID-19 vaccination is also a very welcome step."

Aditi Nayar, Vice President, Principal Economist, ICRA, Gurugram

"A substantially higher-than-expected expenditure, including support to FCI, has pushed the fiscal deficit for FY2021 and FY2022 well above our projections. However, the dated market borrowings are only somewhat higher than what we had foreseen, casting a discordant note. In our view, yields are expected to sustain a hardening bias, in the absence of frequent OMOs."

"Moreover, the glide path for the correction in the Government of India's fiscal deficit is both back-ended and more modest than expected. A higher fiscal deficit anchor for the state governments should allow them to prioritise capex and NIP funding."

Anand Mahindra, Executive Chairman, Mahindra And Mahindra Limited

"In a time of unprecedented economic stress, the govt's responsibility was to spend enough to revive the economy or else face enormous human suffering. So, I had one expectation from this budget: that we should be very liberal in terms of the targeted fiscal deficit. Box ticked."

Radhika Rao, Economist, DBS Bank, Singapore

"The FY22 budget prioritised investments over consolidation, evidenced by a strong supply-side push towards infrastructure, healthcare, lift in FDI cap, farm sector and formation of specialised institutions, among others." 

"A sharp jump in capital expenditure points to a firm medium-term push, but the onus of a delay in consolidation notwithstanding a cyclical recovery falls squarely on the ability to finance the gap. For now, the revenue burden is squarely on market borrowings, disinvestment and indirect taxes (import tariffs and cess). This is also reflected in the divergent impact on markets, as bond markets fret on the higher issuance while equities cheer growth-oriented announcements and no outright increase in direct/indirect taxes."

Mahesh Singhi, Founder & MD, Singhi Advisors, Mumbai

"Even as the government navigates the tightrope of balancing economic growth and addressing fiscal concerns, a hike in infrastructure spending by FM Nirmala Sitharaman in budget 2021 holds the potential to propel the Indian economy on a high growth trajectory." 

"The proposal to enable entry of FPIs into debt financing of Infrastructure Investment Trusts will boost global and domestic investor sentiments in the country's infrastructure sector and open new funding avenues. The move holds the potential to position India as a dominant player in the global infrastructure segment."

Shashank Mendiratta, Economist, IBM, New Delhi

"The Budget FY22 has a dual focus on physical infrastructure and social sector. The emphasis on public spending on rural segment, public distribution, transport, and health are likely to boost growth potential in the medium term. Spending push is likely to provide support to key growth drivers."

"Higher allocation for capital spending in FY22 is expected to support recovery with a multiplier effect. The realisation of FY22 fiscal deficit target and concomitant spending targets nonetheless depend on attaining high disinvestment estimates."

Sakshi Gupta, Senior Economist, HDFC Bank, Gurugram

"The 2021-22 budget announced some long-awaited reforms and was a big bang in many ways. The government refrained from consolidating the fiscal deficit significantly and focused on supporting growth."

"The set-up of a development finance institution to finance the infrastructure pipeline is a significant step. The introduction of an asset reconstruction company is likely to provide the much-needed support for banks as stressed assets rise due to the pandemic."

Rajosik Banerjee, Partner and Head, Financial Risk Management, KPMG, Mumbai

"To address concerns around asset quality, credit loss and liquidity stress, this budget has been proactive to infuse additional capital of 200 billion rupees to PSU banks for providing continued credit access to wholesale and retail borrowers, and therefore push growth agenda."

Rupa Rege Nitsure, Group Chief Economist, L&T Financial Holdings, Mumbai

"A strong capex push of 5.54 trillion rupees ($75.76 billion) is growth positive. This, combined with the enhanced spending on the health sector, will go a long way in supporting economic recovery. However, the actual revenue generation, both via tax and non-tax receipts during FY22 will be instrumental in the management of fiscal situation."