Union Budget 2019-2020 Analysis

jyoti
By jyoti July 6, 2019 13:04

Recently Finance ministry presented Union Budget 2019-2020. The central government stated that “It is a citizen-friendly, development-friendly Budget.”This budget is to be viewed as a medium for a progressive path for the country, the finance minister said. Read this article to know more about Union Budget 2019-2020.

Budget at Glance

budget at glance

What is the budget?

  • The budget is a report presented by the government.
  • It is a report of the government finances which includes revenues and outlays.
  • Thus, the budget can be defined as the most comprehensive report of the government’s finances in which revenues from all the sources and outlays for all activities are consolidated.
  • In simple terms, the budget is an annual financial statement of the revenue and expenditure of a government.
  • The term ‘Budget’ is not mentioned in the Indian Constitution, the corresponding term used is ‘Annual Financial Statement’ (Article 112).

Why budget is necessary?

  • Article 265: provides that ‘no tax shall be levied or collected except by authority of law’ i.e., Taxation needs the approval of Parliament.
  • Article 266: provides that ‘no expenditure can be incurred except with the authorization of the Legislature’ i.e., Expenditure needs the approval of Parliament.
  • Article 112: President shall, in respect of every financial year, cause to be laid before President, Annual Financial Statement.

Railway budget

  • Till 2016, the budget of the Indian Railways was presented separately to Parliament and was dealt with separately.
  • Even then the receipts and expenditure of the Railways formed part of the Consolidated Fund of India and the figures relating to them are included in the ‘Annual Financial Statement’.
  • The last Railway Budget was presented on 25 February 2016.
  • Since 2017, Railway Budget is presented along with the Union Budget.

Highlights of the budget

On indirect taxes

  • 17 taxes and 13 cesses became one tax under GST.
  • In the initial phase, GST witnessed teething problems, and the Centre and States worked to make it better.
  • Relief of above ₹92,000 crore per year has been given.
  • GST to be further simplified to a single monthly return.
  • Defense products not manufactured in India are exempt from basic customs duty.
  • Proposed to increase customs duty on gold and other precious metals from 10 % to 12.5%.
  • Special additional excise duty on the fuel of ₹1 per liter.
  • Analysis: The budget from an indirect tax perspective was mostly aligned to the Government’s Make in India, cleaner India and ease of business agenda.

On digital payments

  • TDS of 2% on cash withdrawals exceeding ₹1 crore in a year from bank accounts, to discourage business payments in cash.
  • No charges or merchant discount rates shall be imposed on customers or the merchants. RBI and banks will absorb these costs.
  • Those in the highest income brackets will have to pay more surcharge for those in the ₹2-5 crore, and ₹5 crore and above, increasing the effective tax rate by 3% and 7% respectively.

On Taxation

  • Indirect taxes, due to a slew of efforts, the revenue has increased by over 78% to ₹11.37 lakh crore.
  • ₹5 lakh minimum limit announced for taxpayers.
  • Additional deduction on loans up to March 31, 2020, for buying affordable houses giving ₹7 lakh benefit to home buyers.
  • Lower rate of 25% so far only applicable to companies with a turnover of ₹250 crore. Propose to increase this limit to companies with an annual turnover of ₹400 crore. This will cover 99.3% of companies.
  • GST rate on electric vehicles already proposed to be lowered to 5%.
  • Additional income tax deduction of ₹1.5 lakh on interest on loans taken to purchase electric vehicles.
  • To resolve the angel tax issue, start-ups will not be subjected to any scrutiny with respect to valuation.
  • Funds raised by start-ups will not require any scrutiny by the I-T department.
  • Period of exemption for capital gains arising from the sale of the house for investment in start-ups to be extended to March 31, 2021.
  • Additional deduction of ₹1.5 lakh for interest paid on loans for affordable housing borrowed up to March 31, 2020. This will come up to enhanced interest reduction of up to ₹3.5 lakh on loans for affordable homes.
  • PAN and Aadhaar to be interchangeable, and to allow those without PAN to file income tax by using Aadhaar number.
  • Faceless and anonymous assessment system for income tax being rolled out this year in phases.

tax reforms for new India

On the banking and finance sector

  • Financial gains from cleaning up of the banking sector are clearly visible. NPAs of commercial banks have come down by ₹1 lakh crore.
  • The number of public sector banks reduced by 8, through consolidation.
  • ₹70,000 crore recapitalization for public sector banks.
  • NBFCs that are fundamentally sound should continue to get funding from banks and mutual funds.
  • Govt will provide one-time 6-months partial credit guarantee for public sector banks, for the purchase of pooled assets of financially sound NBFCs.
  • The National Housing Bank is also the regulator of the housing finance sector.
  • The budget proposes the regulation to be returned to the RBI.
  • ₹100 lakh crore investment in infrastructure over the next five years.
  • Pension Fund Regulatory Authority to be separated from the National Pension Scheme Trust.
  • To improve capital inflows, govt to realign its holdings in CPFCs.
  • Strategic disinvestment of select CPFCs will continue to remain a priority.
  • Air India disinvestment to be reinitiated. Govt sets an enhanced target of ₹1.05 lakh crore from disinvestment.

investment

On India’s soft power

  • Ministry mentions the International Yoga Day as an example of India’s soft power and proposes Aadhaar cards for NRIs with Indian passports, after their arrival in India without waiting for the mandatory 180 days.
  • In March 2018, govt approved the opening of 18 new Indian diplomatic missions in Africa. 4 embassies to be opened in 2019-20.
  • 17 iconic tourism sites are being developed as world-class destinations. Digital repository proposed for preserving tribal history.

On Women

  • In India’s growth story, particularly in the rural economy, the role of women is a sweet story.
  • Govt wishes to encourage and facilitate the role of women and proposes to form a broad-based committee for gender analysis.
  • It cites record turnout of women voters in the recent elections and says that the Parliament has a record of 78 women MPs.
  • Minister proposes to expand the women SHGs interest subvention to all districts in India.
  • For every verified woman SHG member having a Jan Dhan account, an overdraft of ₹5,000 shall be announced.
  • One woman in every SHG will be made eligible for a loan of up to ₹1 lakh under the Mudra scheme.

women encouraging

On ease of living

  • This government aims to bring greater ease of living in the lives of its citizens.
  • 35 crore LED bulbs have been distributed through Ujala Yojana, leading to a cost-saving of ₹18,341 crore annually. India is going to be free of incandescent bulbs.
  • A massive program for railway station modernization to be launched.

On the youth

  • Ministry cites the new National Education Policy.
  • National Research Foundation to assimilate all research grants given by different ministries independent of each other.
  • Ministry states that the Massive Open Online Courses through SWAYAM has been successful and proposes the program Study in India to bring in foreign students.
  • Draft legislation for setting up of Higher Education Commission will be presented later this year. 10 million youth to take up industry-relevant skill training under the Kaushal Vikas Yojana.
  • Multiple labor laws to be streamlined into four labor codes.

On ease of living

On Urban Sector

  • Over 81 lakh houses at an investment of Rs 4.83 lakh crore have been sanctioned and construction has started in about 41 lakh houses, under PMAY-Urban. More than 95% of all cities have declared themselves open defecation free.
  • Rashtriya Swachchta Kendra to be inaugurated at Gandhi Darshan on October 2, 2019.
  • Metro Rail initiatives to be enhanced by encouraging PPPs and faster completion. Dedicated freight corridor is almost complete.

On Rural Sector

  • The Minister moves on to the rural portion of the Budget. “Gaon, GareebaurKisan at the center of all our policies.”
  • “All villages and almost 100% of houses have been provided with electricity.”
  • Ministry assures that by 2022 every single rural family, except those who are unwilling to take the connection, will have electricity and clean cooking gas.
  • The completion of houses has come down from 314 days per house in 2015-16 to 114 days now.
  • The Department of Fisheries will establish a Fisheries Management Network, said by the Ministry.
  • Further states that the government’s rural road scheme has brought about socio-economic improvements.
  • “All-weather connectivity has now been provided to over 97% of such habitations.” 30,000 km of roads in this scheme have been built using green technology.
  • Under phase three of PM Gram Sadak Yojana, 1.25 lakh km of road to be built in the next five years. Project cost estimated at over Rs 80,000 crore.

On ease of living

On Agriculture

  • Govt to support private entrepreneurs in agriculture. The government will focus more on agricultural infrastructure.
  • “Ease of doing business and ease of living should apply to farmers” and govt. proposes zero-budget farming, as a model for farmers. “Steps such as this can help to double farmers income.”
  • Zero- Budget Farming is natural farming which is neither chemical-loaded nor organic with its reliance on manure.  It’s a form of gardening as a self-sustainable practice with minimum external intervention.
  • This concept of zero budget natural farming (ZBNF) was first propagated 25 years ago by SubhashPalekar as a movement for farmers who were in debt due to the Green Revolution and is now being used by a large number of farmers across the country.

On ease of living

  • The Jal Shakti Ministry was created by integrating many water management ministries.
  • To all rural households by 2024, water will be supplied.
  • Govt will explore additional funds for Jal Shakti by accessing the Compensatory Afforestation Fund Management and Planning Authority fund.
  • 6 crore toilets have been constructed till now. More than 5.6 lakh villages have become open-defecation free. She proposes to expand Swachch Bharat to solid waste management in every village.
  • Over 2 crore rural Indians have been made digitally literate.

On ease of living

For investments and markets

  • Investment by FIIs and FDIs in debt securities in infrastructure debt funds to be allowed.
  • Minimum public shareholding in listed companies can be increased from 25% to 35%, says the Minister, saying this is being considered.
  • A social stock exchange is proposed, for social and voluntary organizations, to raise capital, equity, and debt.
  • Global FDI fell to $1.3 billion from $1.5 trillion, but inflows in India remained strong at $54.37 billion, a growth of 6%.
  • “100% FDI for insurance intermediaries. Local sourcing norms to be eased for FDI in single-brand retail.”
  • Global Investors Meet to happen in India. Limit on FPI in a company increased to 24%. NRI investment in Indian capital markets is comparatively less. NRI investment to merged with FPIs.

On Transport

  • The government’s cites about transport infrastructure schemes such as Sagar Mala, UDAN, etc.
  • “This government has given a massive push to all forms of physical connectivity.
  • The time is right for India to enter into aircraft financing, critical for the self-reliant aviation industry.”
  • “Government will do a restructuring of the national highway program. In the second phase of Bharat Mala, States will be helped to develop State highways.”
  • “Government envisions using rivers for cargo transport.”
  • The Minister proposes 50cr investment for Railway Infrastructure between 2018 and 2030 and using public-private partnerships unleash faster development, completion of tracks, passenger freight services.
  • “Recommendations of the high-level committee on retiring old power plants, and addressing the under-utilization of power plants will be taken up now. A package for power sector tariffs and reforms will be announced soon.

For MSMEs

  • The Minister proposes a modern tenancy law.
  • Loans of up to ₹1 crore to be given to MSMEs for ease of access.
  • The government will create a payment platform for MSMEs to enable them to pay bills, and save time.
  • The Government will extend pension benefits to 3 crore retail traders and shopkeepers who have a revenue of less than ₹1.5 crore.
  • This will be called the PM Karam Yogi MaanDhan scheme.

Also read: Gender Budgeting In India- Requirement & Status

Union Budget 2019-20 – Full Explanation

jyoti
By jyoti July 6, 2019 13:04