Economics Prelims cum Mains

Budget is all about incremental measures

In News:
  • Union Finance Minister Nirmala Sitharaman presented her maiden Budget in the Lok Sabha.
  • She sought to tackle several pain points in the economy through incremental steps rather than opting for the spectacular announcement route.
News Summary:
  • 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. The Annual Financial Statement (AFS) is the main Budget document and is commonly referred to as the Budget Statement.
  • 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.
  • Breaking the age-old tradition of carrying a briefcase to Parliament for presenting the Union Budget, she carried a ‘bahi khata’ (traditional Indian ledger), a red parcel like bag with a key hole on the emblem.
 
Incremental steps:
  • The budget is being described as an incrementalist budget as no really bold measures were announced.
  • The Budget appeared to be of a continuum of the last with an emphasis on social welfare.
  • Some of the measures in various sectors include:
    • Farmers: The announcements for the farm sector this time were more on structural issues related to farmers. Much of the allocations for farmers was done in February’s interim Budget, including the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN).
    • MSMEs: Rs 350 crore has been allocated for FY 2019-20 for 2% interest subvention for all GST registered MSMEs on fresh or incremental loans.
    • Hike in fuel duties and cess: The Budget proposed hiking the duty (Special Additional Excise Duty) and cess (Road and Infrastructure Cess) on petrol and diesel by Rs 2 per litre each, in light of the lower crude prices.
    • Corporate tax cut for some companies: The budget incorporated a number of positive tax reforms such as lowering the corporate tax rate for companies with an annual turnover of less than Rs 400 crore.
    • More allocations for Housing and Rural roads schemes: Announcements of targets for the construction of 1.95 crore houses under the Pradhan Mantri Awas Yojana (PMAY) and an allocation of Rs 80,250 crore for the upgrade of rural roads under the Pradhan Mantri Gram Sadak Yojana were also made.
    • Capital infusion in PSBs: One of the biggest announcements made was of a Rs 70,000 crore capital infusion in public sector banks (PSBs) to be used as growth capital, now that the legacy issues plaguing the sector have been addressed.
    • Increased taxes on rich: The rich (those with incomes between Rs 2 crore and 5 crore and Rs 5 crore and above) have been hit with a hike in surcharge.
    • Easing of Angel tax norms: To encourage start-ups in the country, those which file requisite declarations will not be subject to any kind of scrutiny in respect of valuations of share premiums.
Fiscal deficit target revised downwards:
  • The government is estimating a fiscal deficit of 3.3% of GDP in financial year 2019-20, lower than the 3.4% estimated earlier in the interim Budget presented in February.
  • The main reason for this is an increase on the revenue side, while expenditure is being controlled.
    • To achieve this goal, it is relying on one-off disinvestment income, as well as higher taxes on the rich, and increased excise duties on petrol, diesel, precious metals and tobacco products.
    • Notably, the government has cut the allocations for several major schemes. Most significant of these is the Rs 4,334 crore cut for the Swachh Bharat scheme.

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