After getting a massive mandate by the people of India, the Modi-led government introduced the Union Budget for the Financial Year 2019-20. As opposed to the vote-on-account or the interim budget; which was presented by Piyush Goyal in February earlier this year; this was a thorough financial statement. This enabled the government to tweak tax rates and formulate new economic policies.
It started with a departure from the tradition of carrying budget documents in a briefcase. Finance Minister Nirmala Sitharaman walked in the Parliament with a Bahi-Khata; but wrapped in a red cloth with the national emblem on it. On being asked about the reason behind the move, she said that the briefcase was reminiscent of a colonial tradition. She said its high time we move on from the hangover.
Meanwhile, there was a lot of talk surrounding the budget as it was the first one of Modi 2.0. Everyone was looking forward to how the government will set up the vision for the next five years. Job creation is at a four decade-low at 6.1%. Similarly, the growth rate saw a plunge to 5.8% in the last fiscal of FY 2018-19. The onus, thus, was on government to increase investments and generate employment.
Sitharaman started the presentation by listing out the vision for the next decade. This included social infrastructure building, digital India outreach, focus on manufacturing, water management, space programmes and self-sufficiency. Talking about the economy, she informed the house that India will become a $3 trillion economy in the current year itself. She also stressed on the need for structural reforms to get to the 5 trillion mark in the next six years.
Let us now look at the some of the key takeaways from the union budget 2019:
- There is no change in the income tax slabs.
- Individual incomes upto Rs 5 lakhs will be exempt from tax.
- The Budget proposed to increase the surcharge on individual income of Rs 2-5 crore and over Rs 5 crore by 3% and 7% respectively.
- Corporate tax rate will see a lowering to 25% from the existing 30% for companies with an annual turnover of upto Rs 400 crores.
- To discourage business payments in cash, 2% TDS (Tax deduction at source) will be levied on cash withdrawals of more than Rs 1 crore in a year.
- To promote the use of electric vehicles in the country, a tax relaxation of about Rs 1.5 lakh is available on loans for purchase of electric vehicles. The budget also proposes reducing the GST on EVs from 12% to 5%.
- One of the biggest announcements is the Aadhar-PAN interchangeability. This paves way for smooth filing of tax returns with the Aadhaar number in case someone does not have a PAN card.
- In an announcement which was followed by sounds of disapproval from a section of legislators, the Finance Minister proposed to increase the excise duty on petrol and diesel by Re 2.5 & 2.3/Litre, respectively.
- The Finance Minister announced that a new education policy will be rolled out with an endeavour of strengthening India’s higher education system.
- She stressed on the importance of research and assured that the government will promote research in a big way by giving grants.
- The government will also introduce a Study in India programme, to attract foreign students.
3. Women Empowerment
With an aim of increasing the onus of women in social and economic spheres, the minister announced a committee known as “Naari tu Narayani”. Every verified woman SHG (Self Help Group) member having a Jan Dhan Bank Account will be allowed an overdraft of Rs.5,000. Also, one woman in every SHG will also be eligible for a loan of up to Rs. 1 lakh under the MUDRA Scheme.
As part of the bank capitalization programme, the budget proposed to provide a booster shot to Public Sector banks, amounting to Rs 70,000 Crore.
5. Start-ups and Skill Development
- Under this, 20 technology business incubators will be coming up with an aim to create a pool of entrepreneurs in agro-rural sectors.
- The Minister also announced the launch of a TV programme on DD National, dedicated to startups.
6. Physical Connectivity
- Creation of National Highways Grid.
- The government envisages using rivers to boost inland water transport, thus, reducing the load on road and rail.
- There will be a continuous investment in flagship schemes like Bharatmala, Sagarmala, UDAN to boost regional connectivity and bridge the urban-rural divide.
7. Rural India
- The Finance Minister announced that every single rural family will have access to electricity and clean cooking gas by 2022.
- Around 1.95 crore houses will be delivered to eligible people as part of the second phase of Pradhan Mantri Awas Yojana-Gramin(PMAY-G).
8. Small and Medium Scale Traders
There is an introduction of a new pension scheme called Pradhan Mantri Karam Yogi Man Dhan Scheme. Here the benefit will be passed on to 3 crore retail traders with an annual turnover of less than 1.5 crore.
9. Non-Banking Financial Companies
NBFCs have been having some very tough months since mid last year. Thus, the government has announced some steps for revival of the industry. To enhance liquidity access for the sector, the government will provide a booster here as well. A one-time 6-month partial guarantee of Rs 1 lakh crore to state-run banks. This amount is for purchasing consolidated high-rated pooled assets of financially-sound NBFCs. Finance Minister also proposed permitting investments made by foreign institutional and portfolio investors. This will be in form of debt securities by Infrastructure Debt Fund-NBFC. And can be transferred or sold to any domestic investor within specified lock-in period.
So here is peak into what the government is looking at to achieve in this financial year.
Check out our article on the pre-budget expectations here and compare what areas did the government actually pick up, off them.