- The General Budget 2019-20 was presented by the Union Finance Minister Nirmala Sitharaman her maiden Budget in the Lok Sabha.
- This article provides a summary of it.
- Finance Minister Nirmala Sitharaman became only the second woman in the history of Independent India to present the Union Budget.
- Indira Gandhi was the first woman to have presented the Union Budget. In 1970, she presented the Union Budget of India for 1970-71, after she took briefly over the finance portfolio.
- She carried the budget documents in a ‘Bahi Khata’ (traditional Indian ledger), a red parcel like bag with a key hole on the emblem, breaking the age-old tradition of carrying a briefcase.
Vision for the decade
- During her budget speech, the Finance Minister reiterated the “Vision for the Decade” that was presented during the interim budget in February.
Annual Financial Statement
- Under Article 112 of the Constitution, a statement of estimated receipts and expenditure of the Government of India has to be laid before Parliament in respect of every financial year (1st April to 31st March). The Annual Financial Statement (AFS) is the main Budget document and is commonly referred to as the Budget Statement.
Note to students: Go through the following graphics carefully. For example, what forms part of capital/revenue income/expenditure, which tax income is highest, which subsidy is the most etc. They could be important for prelims.
- No change in personal income tax rates
- Custom duty hike on fuel by 1 rupee, gold and precious items; Petrol & diesel to get costlier.
- 3% surcharge on an income of Rs 2 crore; 7% on Rs 5 crore and above.
- Corporate tax with turnover of up to Rs 400 crore slashed to 25 per cent from a current rate of 30 per cent.
- Interchangeability of PAN and Aadhaar for ITR for those who don’t have PAN cards.
- GST Council advised to reduce tax rate on EVs from 12 per cent to 5 per cent.
Minimum Public Shareholding (MPS) raised
- The government has proposed to increase the minimum public shareholding (MPS) in listed companies. It has asked the SEBI to consider raising the current threshold of 25% to 35%.
- Further, foreign shareholding limits would be raised to the maximum permissible sector limits for all PSU companies which are part of Emerging Market Index.
- It has been proposed to rationalise and streamline the existing Know Your Customer (KYC) norms for FPIs to make it more investor friendly without compromising the integrity of cross-border capital flows.
- Proposal to allow investments made by FIIs/FPIs in debt securities issued by Infrastructure Debt Fund – Non-Bank Finance Companies (IDF-NBFCs) to be transferred/sold to any domestic investor within the specified lock-in period.
- FPIs to be allowed to subscribe to listed debt papers of REITs.
- Relief has been proposed in levy of Securities Transaction Tax (STT) by restricting it only to the difference between settlement and strike price in case of exercise of options.
- Currently, traders who exercised the options contracts had to pay a huge STT as typically the settlement value is significantly higher than the premium.
- Even though India is the world’s top remittance recipient, NRI investment in Indian capital markets is comparatively less.
- With a view to provide NRIs with seamless access to Indian equities, it has been proposed to merge the NRI-Portfolio Investment Scheme Route with the Foreign Portfolio Investment Route.
Social stock exchange for start-ups
- As part of its attempts to boost fund-raising by start-ups and ventures, especially those in the social field, the government has proposed a novel idea in the form of a social stock exchange (an electronic fund-raising platform).
- The exchange, which would be under the regulatory purview of the SEBI, would be for listing social entities and voluntary organisations working towards a social welfare objective so that they could raise capital as equity, debt or as units like a mutual fund.
- Social stock exchange with a policy, centric to promote sustainable impact investments, will generate large societal benefits apart from achieving financial goals.
Banking and Finance
- Capital infusion of Rs 70,000 crore for PSU Banks, to spur lending to growth sectors in the economy.
- A liquidity window of Rs 1 lakh crore to public sector banks through the Reserve Bank of India to buy pooled assets of NBFCs and a one-time six month credit guarantee for first loss of up to 10%.
- To enable better supervision of the sector, housing finance companies, will come under the RBI’s regulatory ambit.
- A long-standing demand of NBFCs for equitable treatment with banks in the matter of taxing interest receivable on bad loans has been conceded. They will not need to maintain a Debenture Redemption Reserve on public placements that was leading to locking-up of funds, which is their raw material for business.
- Higher regulatory RBI monitoring over NBFCs, will lead to drive for consolidation of NBFCs.
Private sector involvement in Railways
- Current Status:
- At present, engines and wagons that are part of railway rolling stock are the ones that are manufactured privately.
- Laying tracks and railway services have not been opened up yet though private port railways are operational in some stretches.
- PPPs for growth:
- Going forward, the Indian Railways will make significant use of public-private partnership(PPP) projects for growth.
- PPP is proposed to unleash faster development and completion of tracks, rolling-stock manufacturing and delivery of passenger freight services.
- A steep jump in private sector investment will be difficult in the current situation, where the Indian Railways is both the operator and regulator.
- To make this happen, the establishment of an independent railway regulator is essential.
Urban transit system:
- Railway infrastructure has been given an important link with urban transit systems.
- RRTS: Railways would be encouraged to invest more in suburban railways through special purpose vehicle (SPV) structures such as Rapid Regional Transport System (RRTS) proposed on the Delhi-Meerut route.
- Metros: It has also proposed to enhance the metro-railway initiatives, while supporting Transit Oriented Development (TOD) to ensure commercial activity around transit hubs.
- Budget made proposals to restructure the National Highways programme to ensure inter-linking of highways through a grid.
- National Highway Grid of desirable length and capacity will be created using a financiable model. It is expected to connect 12 major ports, 45 out of 53 million plus cities and 26 State capitals apart from linking tourist destinations and religious places.
- After completing Phase 1 of the Bharatmala project, the Ministry of Road Transport and Highways will assist State governments to develop State Highways.
- The government has set an investment target of Rs 80,250 crore for phase three of the Pradhan Mantri Gram SadakYojana, under which the government wants to build 1,25,000 km of village roads.
- The earlier phases of this scheme led to the construction of 30,000 km of village roads with green technology, which will continue
- The Budget has proposed an enhancement of foreign direct investment in the civil aviation sector.
- It will bring the necessary investments and would lead to healthy competition.
- Increasing FDI limits is also likely to help troubled airlines such as Air India and Jet Airways find buyers.
Aircraft leasing and finance
- Most Indian airlines lease aircraft from overseas-based companies due to a dearth of domestic options.
- Hence, the government will implement measures to make the country a hub of aircraft leasing and aviation finance.
- This is critical to the development of a self-reliant aviation industry, creating aspirational jobs in aviation finance, besides leveraging the business opportunities available in India’s financial special economic zones (SEZs).
- However experts claim that unless it gives tax exemptions and creates a robust mechanism that prevents double taxation, foreign leasing companies will not be interested to set up business in India.
- The government is also keen to provide an enabling ecosystem for growth of maintenance, repair and overhaul (MRO) industry in the country to achieve self-reliance in the aviation sector.
- Most Indian carriers service their aircraft abroad as domestic MRO attracts high taxes, which further increases costs of airlines.
- It will not only boost the local industry but also contribute to the government’s tax revenues.
- The budget stressed the need to enhance port-led development through the Sagarmala. The scheme would enhance port connectivity, modernisation and port-linked industrialisation.
- In line with the announcement, the allocation for Sagarmala was enhanced from Rs 381 crore to Rs 550 crore, an increase of 44%.
- It also stressed on the importance of development of inland waterways to use rivers for cargo movement, to decongest road and rail networks, reduce the cost of transportation as well as cut oil import bill.
- While a multi-modal terminal at Varanasi was launched last year, two more terminals at Sahibganj in Jharkhand and Haldia in West Bengal apart from a navigation lock at Farakka would be completed within the current fiscal
- The contribution to the Inland Water Transport Authority of India, too, went up from Rs 385 crore in the last fiscal to Rs 450 crore, a 17% increase.
- The mission will focus on integrated demand and supply side management of water at the local level, including creation of local infrastructure for source sustainability like rainwater harvesting, groundwater recharge and management of household wastewater for reuse in agriculture.
- Despite the emphasis on Jal Shakti Abhiyan the allocation for the Ministry of Jal Shakti has decreased by almost 10 per cent.
- The total budget estimate for the Department of Drinking Water and Sanitation and the Department of Water Resources, River Development and Ganga Rejuvenation — the ministries that were brought under the umbrella of Jal Shakti Ministry this year — is Rs 28,261 crore. In 2018-19, the combined budget estimate for the two ministries was Rs 31,216 crore.
- Many schemes of the two departments have seen a marked dip in budgetary allocation over the previous year, including Groundwater Monitoring and Regulation (from Rs 450 crore to Rs 250 crore), National Ganga Plan and Ghat Works (Rs 2,250 crore to Rs 700 crore), and the centrally sponsored component of HarKhetKoPani (2,600 crore to Rs 1,069 crore).
- The National Rural Drinking Water Mission has seen an increase to Rs 10,000 crore from last year’s Rs 7,000 crore.
- The Rural Development Ministry’s Mahatma Gandhi National Rural Employment Guarantee Act, under which 75 per cent of the permissible works come under the water conservation category, too has not seen any increase from its revised budget of last year.
- Lower rate of 25 % Corporate Tax extended to companies with annual turnover up to Rs 400 crore from earlier cap of uptoRs 250 crore.
- Rs 350 crore has been allocated for FY 2019-20 under the Interest Subvention Scheme, for 2% interest subvention for all GST registered MSMEs, on fresh or incremental loans.
- Creation of a payment platform for MSMEs to enable filing of bills and payment. This will help eliminate delays in payment and give a boost to investment in MSMEs.
- The Scheme for Promotion of Innovation, Rural Industry and Entrepreneurship’ (ASPIRE) would be consolidated for setting up of 80 Livelihood Business Incubators (LBIs) and 20 Technology Business Incubators (TBIs) in 2019-20 to develop 75,000 skilled entrepreneurs in agro-rural industry sectors.
- Businesses with annual turnover more than Rs. 50 crore to offer low cost digital modes of payment; no MDR charges to be imposed on customers/ merchants.
- Loan of Rs 1 crore for MSMEs would be cleared within 59 minutes through an online portal.
Pradhan MantriKaram Yogi Maandhan Scheme:
Pension benefit will be extended to about three crore retail traders and small shopkeepers whose annual turnover is less than Rs.1.5 crore under a new Scheme Pradhan Mantri Karam Yogi Maandhan Scheme.
- There would be upfront incentive in terms of GST rate reduction to 5 percent from 12 percent earlier on purchase of EVs.
- Income tax deduction of Rs 1.5 lakh on the interest paid on loans taken to purchase electric vehicles.
- Customs duty is also being exempted on the select imports related to electric vehicles to reduce the cost of vehicles.
- Additionally, support would be given to include solar batteries and set up the charging network.
- The budget announced plans to invest widely in agricultural infrastructure.
- The government also seeks to promote Zero Budget Farming, for which farmers are already being trained in this practice in a few states.
- The government plans to form 10,000 new Farmer Producer Organizations, to ensure economies of scale for farmers over the next five years.
- Dairying through cooperatives shall also be encouraged by creating infrastructure for cattle feed manufacturing, milk procurement, processing & marketing.
- This Government will work with State Governments to allow farmers to benefit from e-NAM.
- Annadata can also be Urjadata. The government will support private entrepreneurships in driving value-addition to farmers’ produce from the field and for those from allied activities, like Bamboo and timber from the hedges and for generating renewable energy.
- Considering the fact that majority of people still live in villages and depend on agriculture and traditional industries, the ‘Scheme of Fund for Upgradation and Regeneration of Traditional Industries’ (SFURTI) aims to set up more Common Facility Centres (CFCs).
- These Centers will facilitate cluster based development to make the traditional industries more productive, profitable and capable for generating sustained employment opportunities.
- The focused sectors are Bamboo, Honey and Khadi clusters.
- The SFURTI envisions setting up 100 new clusters during 2019-20 which should enable 50,000 artisans to join the economic value chain.
- Further, to improve the technology of such industries, the Scheme for Promotion of Innovation, Rural Industry and Entrepreneurship’ (ASPIRE) has been consolidated for setting up of Livelihood Business Incubators (LBIs) and Technology Business Incubators (TBIs).
- The Scheme contemplates to set up 80 Livelihood Business Incubators (LBIs) and 20 Technology Business Incubators (TBIs) in 2019-20 to develop 75,000 skilled entrepreneurs in agro-rural industry sectors.
Pradhan Mantri Matsya Sampada Yojana (PMMSY):
- Fishing and fishermen communities are closely aligned with farming and are crucial to rural India.
- Through a focused Scheme – the Pradhan Mantri Matsya Sampada Yojana (PMMSY) – the Department of Fisheries will establish a robust fisheries management framework.
- This will address critical gaps in the value chain, including infrastructure, modernization, traceability, production, productivity, post-harvest management, and quality control.
Proposals for Women
- The Women and Child Development Ministry saw a 17.7% increase in its budgetary allocation, to Rs 27,584 crore during 2019-2020.
- The total budget under the Mission for Protection and Empowerment of Women was increased to more than Rs 1,300 crore.
Stand-Up India Scheme:
- The scheme has delivered enormous benefits, with the country witnessing emergence of thousands of entrepreneurs from women and also from the SC/STs.
- The Scheme would be continued for the entire period coinciding with the 15th Finance Commission period of 2020-25.
Commitee to assess gender allocation:
- Gender analysis of the budget aimed at examining the budgetary allocation through a gender lens has been in place for over a decade.
- Now the government proposed to form a broad-based Committee with Government and private stakeholders to evaluate and suggest action for moving forward.
- The allocation for the Pradhan Mantri Matru Vandana Yojana (PMMVY), a maternity benefit programme, was more than doubled to Rs 2,500 crore.
- Under the programme, Rs 6,000 is given to pregnant women and lactating mothers for the birth of the first living child.
- Working women hostels got a two-fold hike at Rs 165 crore.
- For schemes on the safety of women, Rs 500 crore has been set aside for the Nirbhaya Fund.
- The allocation for the Mahila Shakti Kendras has been increased to Rs 150 crore.
- The allocation for the National Creche Scheme was also enhanced from Rs 30 crore to Rs 50 crore, which will enable working women to safely leave their children in crèches while they are away at work.
- The budget for Ujjawala, a scheme for prevention of trafficking, rescue and rehabilitation of the victims, has been increased from Rs 20 crore to Rs 30 crore.
- Similarly, the budget for widows’ homes was increased from Rs 8 crore to Rs 15 crore.
- The budget annouced expanding the interest subvention scheme for women self help group (SHG) to all districts in India.
- Announcement was also made allowing loans of up to Rs 1 lakh for one woman in each self help groups (SHGs) across the country.
- Furthermore, for every verified women SHG member having a Jan Dhan Bank Account, an overdraft of 5,000 shall be allowed.
Announcements for the benefit of children
- The allocation for the Child Protection Services programme under the Integrated Child Development Services (ICDS) was increased to Rs 1,500 crore from Rs 925 crore.
- Anganwadi services have seen an 11% hike in their grant to Rs 19,834 crore.
- The National Nutrition Mission, which strives to reduce the level of stunting, under-nutrition, anaemia and low-birth weight babies and aims to benefit 10 crore people across the country, was allocated Rs 3,400 crore.
- The Government will bring in a New National Education Policy to transform India’s higher education system to one of the global best education systems.
- Massive online open courses through the SWAYAM initiative have helped bridge the digital divide for disadvantaged section of the student community.
- To up-grade the quality of teaching, the Global Initiative of Academic Networks (GIAN) programme in higher education was started, aimed at tapping the global pool of scientists and researchers.
- The IMPRINT or IMPacting Research INnovation and Technology scheme began as a Pan-IIT and IISc joint initiative to develop a roadmap for research to solve major engineering and technology challenges in selected domains needed by the country.
- The Finance Minister proposed to establish a National Research Foundation (NRF) to fund, coordinate and promote research in the country. NRF will assimilate the research grants being given by various Ministries independent of each other.
- Higher educational institutions are becoming the centres of innovation. An amount of 400 crore has been provided under the head, “World Class Institutions”, for FY 2019-20.
- A draft legislation for setting up Higher Education Commission of India (HECI), would be presented in the year ahead.
Study in India:
- The government proposed to start a programme, ‘Study in India’, that will focus on bringing foreign students to study in our higher educational institutions.
- Education: Under the Pradhan Mantri Gramin Digital Saksharta Abhiyan, over two crore rural Indians have so far been made digitally literate.
- Infrastructure: To bridge rural-urban digital divide, Bharat-Net is targeting internet connectivity in local bodies in every Panchayat in the country. This will be speeded up with assistance from Universal Service Obligation Fund and under a Public Private Partnership arrangement.
- This Government aims to bring greater ease of living in the lives of its citizens. Digital payments are gaining acceptance everywhere including by the Government. Use of technology is an effective way to ensure this.
- To discourage the practice of making business payments in cash, TDS of 2% will be levied on cash withdrawal exceeding 1 crore in a year from a bank account.
- Business establishments with annual turnover more than 50 crore shall offer such low cost digital modes of payment to their customers and no charges or Merchant Discount Rate shall be imposed on customers as well as merchants.