3rd Feb 2020 : Budget 2020 Analysis : The Hindu Editorials Notes : Mains Sure Shot
Question – Analyse the Budget 2020 and express your views.
Context – The presentation of the Union Budget by the FM.
- The Union Budget has been structured on the overall theme of “Ease of Living.” This has been achieved by farmer friendly initiatives such as Agriculture credit target of Rs 15 lakh crore for 2020-21; schemes of “Kisan Rail” and “Krishi Udaan” for a seamless national cold supply chain for perishables; and expansion of PM-KUSUM to provide 20 lakh farmers for setting up stand-alone solar pumps.
- In the health sector, the Budget proposes more than 20,000 empanelled hospitals under PM Jan Arogya Yojana for poor people; and expansion of Jan Aushadhi Kendra Scheme to all districts offering 2000 medicines and 300 surgicals by 2024.
- Infrastructure receives a boost, with 100 more airports by 2024 to support Udaan scheme; and operation of 150 passenger trains to be done through PPP mode.
- Starting apprenticeship embedded courses through 150 higher educational institutions by March 2021 and a proposal to establish Indian Institute of Heritage and Conservation are some of the other major highlights.
- To achieve seamless delivery of services through Digital governance
- To improve physical quality of life through National Infrastructure Pipeline
- Risk mitigation through Disaster Resilience
- Social security through Pension and Insurance penetration.
- The budget is woven around three prominent themes:
- Aspirational India in which all sections of the society seek better standards of living, with access to health, education and better jobs.
- Economic development for all, indicated in the Prime Minister’s exhortation of “SabkaSaath, SabkaVikas, SabkaVishwas”.
- Caring Society that is both humane and compassionate, where Antyodaya is an article of faith.
The three components of Aspirational India are- a) Agriculture, Irrigation and Rural Development , b) Wellness, Water and Sanitation and c) Education and Skills
- Agriculture, Irrigation and Rural Development;
- A budget allocation of ₹2.83 lakh crore for the sector comprising agriculture and allied activities.
- Doubling farmers incomes by 2022.
- Agri-credit availability set at ₹15 lakh crore for 2020-21.
- Comprehensive measures for 100 water stressed districts.
- Provide 20 lakh farmers to set up standalone solar pumps. Help another 15 lakh farmers to solarise their power grid.
- Village storage scheme proposed to be run by women SHGs.
- Indian Railways to have refrigerated coaches capability in ‘kisan trains’ to carry perishables and milk.
- Krishi UDAN on international and national routes.
- b) Wellness, Water and Sanitation:
- An allocation of ₹69,000 crore for the health sector.
- ₹12,300 crore for Swachh Bharat this year.
- Proposal to set up hospitals in Tier-II and Tier-III cities with the private sector using PPP.
- Expand Jan Aushadhi scheme to provide for all hospitals under Ayushman Bharat by 2025.
- c) Education and Skills:
- ₹99,300 crore for education sector in 2021 and about ₹3,000 crore for skill development.
- Urban local bodies to provide internship to young engineers for a year.
- Degree-level full fledged online education programmes by institutions ranked in top 100 in NIRF rankings, especially to benefit underprivileged students.
- A national police university and a national forensic science university is proposed to be setup.
- IND SAT exam for students of Asia and Africa to promote “study in India” programme.
Industry, Commerce and Investment:
- An Investment Clearance Cell will be set up to provide “end to end” facilitation. It is proposed to develop five new smart cities in collaboration with States in PPP mode.
- A National Technical Textiles Mission would be set up with a four-year implementation period from 2020-21 to 2023-24 at an estimated outlay of Rs 1480 crore to position India as a global leader in Technical Textiles.
- To achieve higher export credit disbursement, a new scheme, NIRVIK is being launched to support mainly small exporters. Government e-Marketplace (GeM) is moving ahead for creating a Unified Procurement System in the country for providing a single platform for procurement of goods, services and works.
- Budget proposes to provide ₹1.7 lakh crore for transport infrastructure in 2021
- National Logistics Policy to be released soon.
- Chennai-Bengaluru Expressway to be started.
- Aim to achieve electrification of 27,000 km of lines.
- Plan to have a large solar power capacity for Indian Railways.
- The government also proposes a Bengaluru suburban rail project at a cost of ₹18,600 crore.
- Govt to monetise 12 lots of national highways by 2024.
Women and Child, Social Welfare:
- Rs 35,600 crore proposed for nutrition-related programmes for the financial year 2020-21. Rs 28,600 crore proposed for programs that are specific to women. Moreover, Rs 85000 crore would be allocated towards the welfare of Scheduled Castes and Other Backward classes for 2020-21.
- Similarly, for furthering development and welfare of Scheduled tribes, Rs 53,700 crore is proposed for 2020-21. She said, the government is mindful of the concerns of senior citizens and Divyang. Accordingly, an enhanced allocation of Rs 9,500 crore is being provided for 2020-21.
Culture and Tourism:
- On Culture and Tourism, establishment of an Indian Institute of Heritage and Conservation under Ministry of Culture proposed with the status of a deemed University. 5 archaeological sites to be developed as iconic sites with on-site Museums – Rakhigarhi (Haryana), Hastinapur (Uttar Pradesh) Shivsagar (Assam), Dholavira (Gujarat) and Adichanallur (Tamil Nadu).
Environment and Climate Change:
- States that are formulating and implementing plans for ensuring cleaner air in cities above one million to be encouraged. Allocation for this purpose is Rs 4,400 crore for 2020-21.
- Dwelling on the issue of Governance as clean, corruption-free, policy driven and good in intent and most importantly trusting in faith.
- Setting up of a National Recruitment Agency (NRA) as an independent, professional, specialist organisation for conduct of a computer-based online Common Eligibility Test for recruitment to Non-Gazetted posts. A test-centre in every district, particularly in the Aspirational Districts would also be set up.
- It is also proposed to evolve a robust mechanism for appointment including direct recruitment to various Tribunals and specialised bodies to attract best talents and professional experts. Deliberation to strengthen the Contract Act is also on.
- A new tax regime has been announced. Those who want to be in the old regime with exemptions, can continue to pay at the old rates.
- To make sure India stays globally competitive and a favoured destination for investment, a bold historic decision was taken to reduce the corporate tax rate for new companies in the manufacturing sector to an unprecedented level of 15%. For existing companies, the rate has been brought down to 22%. As a result, our corporate tax rates are now amongst the lowest in the world.
- Over 70 deductions have been removed.
- Companies will no longer be required to pay Dividend Distribution Tax (DDT).
- Aadhaar-based verification for GST compliance to be introduced.
- The Finance Minister noted that during their formative years, Start-ups generally use Employee Stock Option Plan (ESOP) to attract and retain highly talented employees. Currently, ESOPs are taxable as perquisites at the time of exercise. In order to give a boost to the start-up ecosystem, the Finance Minister has proposed to ease the burden of taxation on the employees by deferring the tax payment for five years or till they leave the company or when they sell their shares, whichever is earliest.
- An eligible Start-up having turnover upto 25 crore is allowed deduction of 100% on its profits for three consecutive assessment years out of seven years if the total turnover does not exceed 25 crore rupees. The Finance Minister has proposed to increase this limit to Rs. 100 crore. She has also proposed to extend the period of eligibility for claim of deduction from the existing 7 years to 10 years.
* Aadhaar-PAN interchangeability
Budget proposed to make Pan Card and Aadhaar card interchangeable to file tax returns. In addition to that, those who do not have PAN can simply quote their Aadhaar number wherever PAN is mandatory to quote.
* EVs on a faster road
Budget announced that upfront incentive will be offered on purchase of electric vehicles, adding that the government has already moved GST Council to cut rate for EVs to 5% from 12%.
Other big announcement on EVs pertained to (a) tax deduction of Rs 1.50 lakh on EV loan interest, and (b) No custom duty on certain parts of EVs.
* One nation, one card for seamless mobility
This inter-operable transport card runs on RuPay card and would allow the holders to pay for their bus travel, toll taxes, parking charges, retail shopping and even withdraw money.
This will enable people to pay multiple kinds of transport charges, including metro services and toll tax, across the country.
* Rs 70,000 crore for banks
Budget proposed to provide banks with Rs 70,000 crore of capital to boost credit. There has been a record recovery of over 4 lakh crore of bad loans through IBC in the last 4 years.
* NRIs to get Aadhar on arrival
The budget proposes to consider issuing Aadhaar Card for NRIs with Indian passports after their arrival in India. As of now, they have to wait for a period of 180 days.
* Breather on Angel Tax
In a major breather for startups, it was announced that startups and investors who file requisite declarations and provide information in their returns will not be subjected to any scrutiny on valuation.
* Govt waives MDR charges on cashless payments
Merchant discount rate won’t be charged on businesses with yearly turnover of over Rs 50 crore and also on their customers. RBI and banks will absorb these costs. The move is expected to be a major push to cashless payment.
* Rs 3,000 pension per month for informal sector workers
Around 30 lakh workers are now covered under the Pradhan MantriShram Yogi MaandhanYojana, the scheme that provides a monthly pension of Rs 3,000 to informal sectors workers after they turn 60.
* Reform of rental housing
Rental laws will be reformed. Modern tenancy law will be shared with states to promote house renting. The current mechanism doesn’t adequately address the relationship between the tenant and the landlord.
*Local sourcing norms to be eased for single brand retail
The budget announced that local sourcing norms for FDI in single-brand retail will be eased. The proposal is expected to solve a long-standing problem in the sector.
* To merge NRI portfolio with FPI route
With an aim to give NRIs better and easier access to Indian equities, finance minister proposed to merge the NRI-Portfolio Investment Scheme Route with the Foreign Portfolio Investment Route.
step would be taken to replicate zero-budget farming in all of India, currently practiced in a few states.
It considered ‘zero budget’ because costs of raising the main crop are offset by the income that farmers earn from intercrops. Under this method, chemical fertilizers and pesticides make way for locally available cow dung and cow urine, jaggery and pulse flour.
There will soon be a new education policy, and that higher education in the country will be reformed comprehensively. Efforts will be made to bring in foreign students under a Study in India plan. The government will make renewed efforts to promote research in the country.
* Shareholding norm tweak for listed cos
Thegovt would consider raising minimum public shareholding in the listed firms to 35% from 25% at present.
Analysts say many MNCs listed on Indian stock market may consider delisting, if increase public shareholding is implemented. In case of many midcap and smallcap stocks it was better to have more promoter skin in the game since India’s capital market is in a developing phase .
* Corporate tax
Under a phased reduction plan for corporate taxes, the budget proposed to bring under 25% tax ambit companies with an annual turnover of up to Rs 400 crore, in place of the earlier cap of Rs 250 crore.
The move came under criticism from experts who said the tax regime should have been applicable to all companies and not just a select section.
It is a bad sign that something that the government had promised for five years has not come about even in the sixth year.
At a time when India’s security risks are at an all-time high, no specific mention of the forces in the budget came as a major dampener for both the forces and the country at large.
Nothing done to ease one of the biggest problem India is facing today.
* Tax dampener
Standard deduction and TDS threshold didn’t find a mention in budget. It increases burden on salaried taxpayer.
* LTCG remains a pain in the neck
Nothing done to address LTCG tax on equities.
* Super-rich have bad news
For the wealthy, budget was a big blow. The finance minister shunned the wealth tax, but increased the surcharge for the rich, proposing to increase the surcharge for those earning Rs 2-5 cr 3 per cent and for those earnings above Rs 5 cr to 7 per cent.
The government is increasingly making the economy uncompetitive with neighbours, with high levels of corporate tax and income tax.
* Fuel bill
Increase in Special Additional Excise duty and Road and Infrastructure Cess each by one rupee a litre on petrol and diesel.
* Raiding the RBI
The government expects higher dividend payout from the Reserve Bank of India, bringing a contentious issue back into focus.
- Analysing both the pros and the cons we can hope that the benefits of the pros exceed the cons.