India Union Budget 2019 - 2020
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The Union Budget 2019-20, presented by Finance Minister Piyush Goyal, is a populist precursor to the elections, focusing on aiding farmers, the middle class, and small traders with initiatives like the PM-Kisan scheme providing income support to farmers and a full tax rebate for individuals earning up to INR 500,000. Highlights include increased allocations for defense and infrastructure, alongside ambitious goals for a 'New India' by 2030. However, concerns remain about funding these initiatives and the overall effectiveness of the budget in addressing economic issues and supporting growth.
India Union Budget 2019 - 2020
- 1. Contact the PA practice:Edelman India Private Limited @EdelmanIndiaPA UNION Budget2019 - 2020 Contact the PA practice: Medha Girotra, Head - Delhi and Public Affairs Lead [email protected] Edelman India Private Limited Vatika Triangle, 6th Floor, Sushant Lok-1, Block A Gurugram, Haryana 122 002, India @EdelmanIndiaPA UNION Budget2019 - 2020 Medha Girotra Head - Delhi & Public Affairs Lead Amid thumping applause, Finance Minister Piyush Goyal presented the interim budget for 2019-20 in the Lok Sabha today. As soon as the applause subsided, interesting quips started pouring in. While some said that it was an “Account for Votes”, others called it the “Pradhan Mantri Re-election Yojana”. All said and done, this budget was everything that an interim budget usually is – a populist precursor to the elections. Following the same pattern, this year’s budget appealed to the segments that are key to the ruling BJP – farmers, middle class, and small traders. The key highlights of the budget included big ticket announcements for the farmers in the form of the PM-KISAN programme; full tax rebate for individuals with taxable annual income up to INR 500,000; rise in standard deduction for salaried people to INR 50,000 from INR 40,000, among others. Even the corporate sector found solace in the fact that no additional taxes were imposed. For the first time, the budgetary allocation for defence crossed INR three trillion. Surprisingly, this budget did not toe the expected line of loan waivers in the education sector as was widely anticipated after the recent farm loan waivers. Outlining the government’s vision for a ‘New India’ in 2030, the finance minister listed ten dimensions including ease of living, robust and digital infrastructure, housing for all, healthy and clean environment, minimum government, maximum governance and making India a USD 10-trillion-econo- my. These dimensions not only mark the government’s vision for the next ten years but also set the agenda for the BJP as far as the upcoming general elections go. Reacting positively to the budget, the BSE Sensex settled 0.59% higher at 36,469.43 points today while the Nifty 50 closed at 10,893.65 points signify- ing a growth of 0.6%. The budget speech had little information on how the government will fund these big-ticket programmes. Has it stepped into a financial landmine? Or will the next general budget provide a clear roadmap for achieving this vision? The bigger question, however, is whether the voters will interpret this interim budget positively as they gear up for the next general elections.
- 2. UNION BUDGET 2019-20 2 MAJOR Highlights AGRICULTURE RURAL DEVELOPMENT TAXATION INDUSTRY SOCIAL SECTOR HEALTHCARE INFRASTRUCTURE ` • Pradhan Mantri KIsan Samman Nidhi (PM-KISAN) to provide direct income support of INR 6000 per year to each farmer with less than 2 hectares of land. Scheme to benefit 120 million small and marginal farmer families. Outlay of INR 750 billion for PM-Kisan in 2019-20 • MSP of all 22 crops fixed at minimum 50% more than the cost • Separate Department of Fisheries • Benefit of 2% interest subvention to farmers pursuing animal husbandry and fisheries activities, through Kisan Credit Card; to get an additional 3% interest subvention for timely loan repayment • Farmers affected by natural calamities to get 5% interest subvention • Income up to INR 500,000 - No tax • Standard deduction raised to INR 50,000 from INR 40,000 • TDS threshold on interest from bank deposits, postal savings raised to INR 40,000 from INR 10,000 • TDS threshold on rental income raised to INR 240,000 from INR 180,000 • Capital gains from residential property sale will be eligible for exemption under Section 54 for 2 properties • No income-tax on notional rent on second self-occupied home • Government e-Marketplace (GeM) platform now being extended to all CPSEs • Scheme for loans of upto INR 10 million in 59 minutes launched for MSMEs • GST-registered SME units to get 2% interest rebate on incremental loan of INR 10 million • SMEs sourcing by Government enterprises increased to 25%; at least 3% from women owned SMEs • National Programme on 'Artificial Intelligence' to be launched; National Centre of AI to be established along with a national AI portal • 22nd AIIMS announced in Haryana; 14 out of 21 have been announced in last 4 years • Ayushman Bharat Programme to provide medical treatment to nearly 500 million people; close to 1 million patients have benefited with free treatment till now, resulting in INR 30 billion savings • Allocation of INR 190 billion under Pradhan Mantri Gramin Sadak Yojana (PMGSY); construction of rural roads tripled • Allocation of INR 600 billion under MNREGA; additional amount will be provided if required • Setting up of "Rashtriya Kamdhenu Aayog"; allocation for Rashtriya Gokul Mission to INR 7.5 Billion • Allocation of INR 1.3 trillion for SC and ST welfare • 100,000 digital villages to be set up over next five years • Capital support of INR 645.87 billion to Railways • 100 operational airports with commissioning of the Pakyong airport in Sikkim • Fastest highway developer globally – 27 km of highways built everyday • North East allocation up 21% to INR 581.16 million • Mobile monthly data increased by over 50 times in last 5 years; mobile & mobile component manufacturing companies increased from 2 to 268 • Mega INR 5 billion pension scheme 'Pradhan Mantri Shram-Yogi Maandhan' for the 100 million unorganised sector workers with monthly income up to INR 15,000; assured monthly pension of INR 3,000 to be provided from the age of 60 years • Gratuity limit increased from INR 1 million to 2 million • 98% rural sanitation coverage achieved; 545,000 villages declared "Open Defecation Free" • Allocations under Swachh Bharat reduced from INR 169.78 Billion to INR 127.50 Billion for FY2019-20 • 1.43 billion LED bulbs provided leading to consumer savings of INR 500 billion per year in power bills • EPFO membership increased by nearly 20 million in two years • 10 million youth trained under Pradhan Mantri Kaushal Vikas Yojana • 75% of woman beneficiaries under PM Mudra Yojana
- 3. UNION BUDGET 2019-20 3 TOTAL EXPENDITURE 27.8 DEFENSE 3000 PMKY 750 RAILWAYS 646 MGNREGS 600 N-E DEVELOPMENTS 582 UREA SUBSIDY 502 ROAD WORKS 489 NATIONAL EDUCATION MISSION 386 NATIONAL HEALTH MISSION 323 DIRECT BENEFIT TRANSFER 295 AMRUT & SMART CITIES 139 SCHEDULED CASTE & TRIBE 1300 TRILLION ALLFIGURESININRBILLION Revised Estimates FY 18-19 Budget Estimates FY 19-20 FISCAL DEFICIT REVENUE DEFICIT GROSS TAX REVENUE 3.4% 3.4% 2.2% 2.2% 22.5INR TRILLION 25.5INR TRILLION “ This is not merely an Interim Budget, but a medium of the country's development journey. We have given a decisive leadership, whose intent is clear, policy is transparent and integrity is resolute ”
- 4. UNION BUDGET 2019-20 4 While there haven’t been specific announcements for the social sectors, the 10 dimensions for Vision 2030 for India outlined is slated to be driven by NextGen technologies for social and infrastructure development, including Artificial Intelligence, Electric Vehicles and electric storage devic- es, thereby reducing the nation’s import dependence and ensuring energy security. These dimensions of growth would also include digital infrastruc- ture and economy, rural industrialization, clean rivers and inland waterway development, space, farm productivity, distress-free healthcare, and responsible governance and bureaucracy. On one hand, it is laudable that the government is adopting an integrated and systemic approach to devel- opment as a whole. While on the other, it also indicates heavy reliance on capital-intensive investments and technologies. We see that consecutive governments’ long term vision documents are well conceived, but imple- menting them efficiently, with accountability has been the biggest challenge. Shalabh Srivastava Country Director, RTI International India VISION 2030 IS CAPITAL INTENSIVE: SUBOPTIMAL ENERGY SECURITY FOCUS: The focus on electric vehicles and storage devices for energy sector may not be enough to address India’s energy security. The government should also look at investing in other Cleaner Energy Security measures such as coal to methanol economy; waste to energy systems and microgrid technologies for the energy-dark pockets that still exist in India today. Even the focus on thermal and wind energy have missed the required push in the budget. Investment in research and innovations is integral to improving the competitive advantage of nations and compa nies. This becomes even more relevant in today’s world, where globalization and the advent of the 4th Industrial Revolution coupled with innovative technologies and business models actively impact the socio-economic landscape of a country. • India spends only 0.69% of its GDP on R&D, compared to the 2.0% spent by China and 4.3% spent by Republic of Korea. • India filed only 11 patents per million people in 2017. As a country, India ranks far behind its peers, especially leading global economies like China (899) and USA (902). The R&D expenditure as a percentage of GDP needs to increase with focus shifting towards a two-pronged invest ment in technology and sustainability, specifically Clean Energy Security. Further, emerging segments such as robotics, AI, blockchain, nanotechnology and bio-medical engineering are key areas of research & development in order to create a competitive advantage relative to other countries and drive economic growth for the country. India, with its myriad development requirements, needs an increase in R&D investment particularly in the area of sustainability. R&D AMISS AGAIN:
- 5. UNION BUDGET 2019-20 5 In this year’s Interim Budget, the Government has made a number of major political statements, which is understandable in an election year. Interestingly, the Budget has outlined not only short-term schemes but a long-term vision and outlook. Outlining long-term statements are seen very positively, and I feel they should be vigorously debated in detail, rather than stated as a communication of intent. Another feature of long-term planning – it usually quantifies resource allocation and investment numbers, which were lacking here. It will also be interesting to see how the subsequent government will propose to modify any of these measures, if at all. However, one of the very promising features within this Budget is the proposal of tax reform on which the Government is clearly on a strong wicket. An anonymised system of tax returns, which is completely free of the intervention of tax officials, is not only more efficient, but can also mean less corruption. A matter of questionable fiscal prudence, but also understandable in a pre-election budget, is the compari- son of Revised Estimates from the previous year with a subsequent Budget Estimates for the current and next year. Budgetary allocations are normally made at Y.K. Alagh Indian Economist & Former Union Minister, Government of India THOUGHTS ON THE INTERIM BUDGET a higher number and revised down to a lower number (as Revised Estimates) because of considerations made to maintaining and reducing fiscal deficit. BEs in principle must be compared with BEs and not REs. The new proposed Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) gives direct annual income support to farmers with a land holding of two hectares, supporting the government’s stated goal of doubling farmer income. The consolidated figure should however be based on a cost concept that includes rent and on-farm investments. It is true that in a Ricardian sense rent is unearned income from a scarce asset: land. But surplus unearned income from scarce resources is allowed in other sectors such as scarce imports by corporates, so it should be allowed in agriculture. rent is unearned income from a scarce asset: land. But surplus unearned income from scarce resources is allowed in other Prof. Geethanjali Nataraj Professor of Applied Economics, Indian Institute of Public Administration POLL YEAR BUDGET: ON EXPECTED LINES Amidst huge expectations from the middle class, the farming community, and corporates, the Union government today delivered its last interim budget before the general elections. It was a challenge for the Government to not only control the fiscal deficit, but also ensure that the budget gave a much-needed boost to the economy in crucial sectors such as agriculture and Infrastructure. The budget was very much on these lines. The middle class received much-needed relief as the government declared full tax rebate of up to Rs. 5 lakhs annual income after all deductions. In fact, the government’s tax reforms were one of the budget’s highlights. These include electronic tax assessment; processing of income tax returns within 24 hours; increase in standard deduction from Rs. 40,000 to Rs. 50,000, and exemption on tax on second self-occupied house. Defence expenditure and infrastructure spending were also increased with special emphasis on highways, railways and the Sagarmala project. A flagship program of the Government, the Sagarmala project aims to enhance the performance of India’s logistics sector and unlock the potential of its waterways and coastlines. Further, an outlay of Rs.5.35 lakh crore has been announced for phase 1 of the Bharatmala project, which focus on road infrastructure. To address agrarian distress, the budget has given much-needed attention to the agriculture sector. Under the Pradhan Mantri Kisan Samman Nidhi scheme, the government will give Rs. 6,000 per year to farmers with less than two-hectare landholding. With an allocation of Rs. 75,000 crores, the scheme is expected to benefit over 12 crore farmers. With stakes high for the Modi government in the election year, it is important to note that it has maintained a commendable fiscal deficit of 3.4% of GDP. In sum, the budget has addressed economic issues such farmer distress, increased allocation for defence, social and physical infrastructure, and implemented tax reforms. These will sustain the economy’s growth till a full-fledged budget is announced by the next government.
- 6. UNION BUDGET 2019-20 6 This was a budget the Government was not meant to present. What was expected was a simple statement of accounts. Instead, a full-fledged budget was delivered to a lively Lok Sabha. The recent bonhomie between the PM and Bollywood was evident. The Finance Minister announced single-window clearance for Indian filmmak- ers, which was previously available only to foreign filmmakers. This was followed by a proposal to introduce an anti-camcording provision in the Cinematography Act and reduction of GST on cinema hall tickets. This was a budget for the middle class, as evidenced by the exemption for TDS for rental income below INR 240,000 a year; exemption of INR 40,000 on interest earned on deposits; the proposal for two houses instead of one for offsetting long term capital gains, and a rebate to those earning less than INR 500,000. The beauty of this move is that it does not impact reve- nues in a big way, as the sum total will not exceed INR 100 billion . AMIR ULLAH KHAN Economist & Adjunct Professor MCRHRD Institute MISSING A TRICK With the dominant civil society narrative aggressively highlighting rising inequality, there was a danger that the government would seek to strike against the India Inc. Instead, along with no new announcement of cess or tax, more disposable income for the middle class should stimulate the currently dormant state of consump- tion. In the light of concessions given to the middle class, an automatic corollary would have been a corresponding increase in taxes for the super-rich. Now we must wait to identify where the revenue replenishment will come from. Also interesting was a hefty increase in expenditure on fisheries, clearly targeting West Bengal, Orissa and Andhra Pradesh. A special mention was made, in the form of a modest allocation to another scheme for the cow, in the form of a Kamdhenu Aayog, i.e. a national cow board. Despite prior large-scale criticism of poor Ayushman Bharat allocation, there was no new outlay for the scheme. Instead, the FM only noted that a large number of citizens have benefitted, and several AIIMS are coming up. A big worry remains on the fiscal front. Where is the money for these schemes? GST collection should have been at least 13 lakh crores by March 2019. With what has happened this financial year till now, we will clearly be woefully short. Instead of increases in income tax rates or slabs, we have a downward revision and a rather confusing rebate. The Government is clearly signalling that it intends to relax its stance on direct taxes and depend more on indirect taxation for revenue mobilization. With GST rates as high as 18 percent for a bulk of goods and services, demand will not grow sharply. And with new e-commerce and retail curbs, growth antici- pated from middle-class consumption might not happen. Further, the budget speech completely ignored unemployment, and praised demonetization, a subject that needs no further discussion. Overall, the budget speech was along expected lines. The interesting announcements were on digital villag- es, solar power and on urban infrastructure in villages. However, it is a mystery why the government did not go all-out to woo India’s recalcitrant farmers. There is a 2 percent interest rate rebate, and 3 percent for well-behaved borrowers, but this will only impact an insignificant ten percent that borrows from banks. Why is this dole restricted to a mere INR 500 a month per farming household, and why only for those who have less than 2 acres of land? What will this do to help farm distress? The guarantee of a reasonable income for all farming household would have been a game-changer. However, Piyush Goyal missed a chance to be gener- ous - and that is why the voter might not be impressed
- 7. UNION BUDGET 2019-20 7 “ This is not merely an Interim Budget, but a medium of the country's development journey. We have given a decisive leadership, whose intent is clear, policy is transparent and integrity is resolute ” Inland Waterway Development 10 DIMENSIONS OF VISION 2030 The interim Finance Minister, Mr. Piyush Goel presented a populist budget today. With the aim of catapulting the nation into a 5 trillion-dollar economy in the next 5 years, the FM laid down the 10 dimensions of the growth story for India. Acknowledging the contribution of the middle class and salaried tax payer to nation building, various tax benefits have been introduced for them. Taxpayers with taxable income upto INR 5 lakhs would not be paying taxes now on account of the enhanced rebate. For taxpayers holding more than one self-occupied house property, notional rent on second house property would not be taxable. Standard deduction has been raised from INR 40,000 to INR 50,000 for salaried tax payers. Minimum Government & Maximum Governance 1 2 3 4 5 Satellites & Space Exploration Farm Productivity Health assurance & infrastructure 6 7 8 9 10 Physical & social infrastructure Clean Rivers & Irrigation Digital India Electric Vehicles & Energy Storage Rural Indutrialisation A once in a lifetime benefit of rollover of long-term gain on sale of residential property has been introduced for investment made in 2 residential houses if the gain is below INR 2 crores. Enhancing the threshold for TDS on interest from banks and post office deposits to INR 40,000 and on rental payments to INR 2, 40,000 annually will bring relief again for middle class taxpayers. Anti-tax abuse moves like demonetization have increased tax filing base by 1.06 crore and also anti-black money laws have got INR 1.30 lakh crore additionally into the tax net. The Government continues to focus on use of technology to simplify overall tax process. Measures like process- ing of tax return and refund in 1 day and fully automated e-asseements are steps in that directions. Overall, interim-Budget 2019 is a welcome move from the Government. Parizad Sirwalla Partner & Head, Global Mobility Services-Tax, KPMG in India
- 8. UNION BUDGET 2019-20 Edelman India’s Public Affairs (PA) practice combines industry, regulatory affairs and communications knowledge to develop and execute PA campaigns based on research and insights that inform impactful strategies. We work with our clients to anticipate issues, plan and respond to the emerging challenges at national, state and local levels. At the core of the offering, is the ability to develop long term relationships with key stakeholders and maintain constant engagement instead of an ad-hoc approach. Our team includes public policy specialists, senior industry professionals, domain experts, researchers and writers from a wide range of backgrounds; we also have an extended panel of advisors with backgrounds in Indian Administrativea wide range of backgrounds; we also have an extended panel of advisors with backgrounds in Indian Administrativea wide range of backgrounds; we also have an extended panel of advisors with backgrounds in Indian Administrative Services, media and civil society who help us navigate the vast and complex stakeholder universe in India. With theseServices, media and civil society who help us navigate the vast and complex stakeholder universe in India. With these diverse backgrounds and a deep understanding of the policy making ecosystem, we have successfully run policy advo- cacy programs to further our clients’ points of view. Edelman India has 8 offices in Mumbai, Delhi & Bangalore, amongst others, and a vast network of representatives in state capitals. For further information, please contact: Medha Girotra, Public Affairs Lead, Edelman India E: [email protected] | M: +91.981.145.4594; | T: +91 (124) 413.1449 Images and illustrations used may be subject to copyright restrictions. (C) 2017 Edelman. All rights reserved. The purpose of use of this report is strictly non-commercial.