Why Sensex Jumped Over 2,000 Points On Budget Day – Free PDF Download

What has happened?

• Indian stock market gave thumbs up to Union Budget 2021, with BSE benchmark Sensex rising over 2,000 points in intraday trade and NSE Nifty breaching 14,000 levels.
• The market rally was driven by gains in banking, financial and auto stock.

Absence of new tax

• What appealed most to the stock market was the absence of moves like wealth tax or increase in LTCG on equity investments.
• Absence of the much-feared COVID cess and the surcharges on Income Tax Hike in FDI limit in insurance to 74%
• The FM proposed increasing the FDI limit in insurance to 74 per cent in the Budget 2021.
• Currently, the FDI limit is capped at 49 per cent.
• She also proposed to allow foreign ownership and control with certain conditions.
• The finance minister proposed an amendment to the Insurance Act for the same.

Divestment & recapitalisation plan PSB

• The FM announced strategic divestment in two public PSU banks and one insurance company, in the next fiscal year.
• She added that the legislation required for disinvestment in the PSBs will be brought in the ongoing Budget session of the Parliament.
• She also announced further capital infusion of Rs 20,000 crore for state-owned banks.

Scrappage policy

• Sitharaman stated that under the voluntary vehicle scrapping policy, personal vehicles would undergo,
• A fitness test after 20 years, whereas commercial vehicles would need to take it after completing 15 years.
• The finance minister further added that this will promote fuel-efficient as well as environment friendly vehicles while helping the government slash India’s massive import bills. 

LIC IPO

• Finance Minister Nirmala Sitharaman said in her budget speech said that Life Insurance Corporation of India (LIC) will go for an initial public offering in 2021-22.
• The much-awaited LIC IPO is likely to be the largest share sale on Dalal Street.
• Government which has been seen liquidity drying out in the capital market due to the coronavirus lockdown may conduct the IPO of the public sector insurer in tranches selling 25 per cent stake.

Disinvestment target pegged at Rs 1.75 lakh crore

• The government has budgeted Rs 1.75 lakh crore from stake sale in public sector companies and financial institutions, including 2 PSU banks and one insurance company, in the next fiscal year.
• The Budget decided to focus on economic growth by raising expenditure and allowing for a wider fiscal deficit in these pandemic times.
• Besides the widely expected allocation increases to housing, infrastructure, health and textiles,
• The move to curb prolonged tax scrutiny and firm mindset shown to privatise certain PSUs,
• Creation of ARCs for bad loans are steps in the right direction.

Q) The Fiscal Responsibility and Budget Management (FRBM) Act aimed for?

1. Eliminating both revenue deficit and fiscal deficit
2. Giving flexibility to RBI for inflation management

1. 1 only
2. 2 only
3. Both 1 & 2
4. None of the above

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