Today marked the first day of the maiden budget of FM Nirmala Sitharaman. This is also the first budget of the second session of the Narendra Modi led Government. 

We have summarised the key takeaways from the Union Budget 2019 in this piece. Once the Finance Bill and the Budget gets available, we would also come out with the detailed analysis of the measures undertaken.

 

 

(A) Indian Economy

 

1. Fiscal deficit in FY 19 at 3.3% of the GDP 

2. Targets to become a $3 trillion economy in FY20, $5 trillion in a few years

3. Proposes changes to kick-start domestic and foreign investment

4. Blue prints for gas, regional airports, water grids in actions

5. The majorly successful Swachch Bharat scope to be extended to include solid waste management in every village

6. Setting up enhanced disinvestment target of Rs 1,05,000 crore in FY 20 as  against Rs 90,000 crore set in the Interim Budget

7. Jal ministry to focus on providing adequate drinking water, which is a primary area of concern

8. Investment linked tax benefits for lithium batteries, solar products proposed

9. Govt will start raising part of its gross borrowing programme in external markets in external currencies

10.  Import of defence equipment, not manufactured in India, is being exempted from basic customs duty

11. India has emerged as a major space power. Time has come to harness this ability commercially. New Space India Limited, a public sector enterprise, has been incorporated to tap the benefits of R&D carried out by Isro. The company will spearhead commercialization of various space products.

12. To build 17 iconic sites to encourage arrival of tourists in India. Documentaries with anthropological details will be stored for tourists

 

13.  Under Pradhan Mantri Grameen Digital Saksharata Abhiyan, Bharat Net is targeting internet connectivity in local bodies in every panchayat in the country; this will be speeded under Universal Service Obligation Fund.

14. Propose to consider issuing Aadhaar to NRIs with Indian passports after their arrival in India without the mandatory wait of 180 days

15. FM Nirmala Sitharaman has proposed Rs 100 lakh crore investment for infrastructure over 5 years.

16. Defence sector needs modernization. Import of defence equipment is being exempted from basic customs duty – Customs duty being exempted on certain parts of EVs

17. Propose to increase special additional duty and road and infrastructure cess on diesel and petrol by Re 1

(B) On the Rural -Urban Sector/Agriculture & Fisheries

1. The Minister moves on to the rural portion of the Budget. “Gaon, Gareeb aur Kisan at the centre of all our policies.”

2. All villages and almost 100% of houses have been provided with electricity. By 2022, every single rural family, except those who are unwilling to take the connection, will have electricity and clean cooking gas.

3. The Department of Fisheries will establish a fisheries management network, says the Minister.

4. Zero-Budget farming is natural farming which is neither chemical-loaded nor organic with its reliance on manure.  It’s a form of gardening as a self-sustainable practice with minimum external intervention. This concept of zero budget natural farming (ZBNF) was first propagated 25 years ago by Subhash Palekar as a movement for farmers who were in debt due to the Green Revolution and is now being used by a large number of farmers across the country.

5. 9.6 crore toilets have been constructed till now. More than 5.6 lakh villages have become open-defecation free. She proposes to expand Swachch Bharat to solid waste management in every village.

6. Over 2 crore rural Indians have been made digitally literate.

7. Rashtriya Swachchta Kendra to be inaugurated at Gandhi Darshan on October 2, 2019.

8. Support private entrepreneurship in value addition in agriculture.

9. Proposes Pradhan Mantri Matsya Sampada Yojana to address critical infrastructure gap in fisheries sector

(C) On Ease of Living and Youth

 

1. This government aims to bring greater ease of living in the lives of its citizens.

2. 35 crore LED bulbs have been distributed through Ujala Yojana, leading to a cost-saving of ₹18,341 crore annually. India is going to be free of incandescent bulbs.

3. She cites the new National Education Policy. National Research Foundation to assimilate all research grants given by different ministries independent of each other.

4. Massive Open Online Courses through SWAYAM has been successful, she says.  She proposes the programme Study in India to bring in foreign students.

5. Draft legislation for setting up of Higher Education Commission will be presented later this year. 10 million youth to take up industry-relevant skill training under the Kaushal Vikas Yojana.

(D) On Transportation and Aviation

1. The Minister proposes ₹50 lakh crore investment for Railway infrastructure between 2018 and 2030,  and using public-private partnerships unleash faster development, completion of tracks, passenger freight services.

2. Recommendations of high-level committee on retiring old power plants, and addressing the under-utlilisation of power plants will be taken up now. A package for power sector tariffs and reforms will be announced soon.3. 

 

3. In second phase of Bharat Mala project, states will be helped to develop roadways.

4. 1,25,000 km of roads will be upgraded under Pradhan Gram
Sadak Yojana under Phase III at estimated cost of Rs 80,250 crore.

5. Time right for India to enter into aircraft financing and leasing.

6. Will create congenial atmosphere for development of MRO servicesIndia has emerged as a major space power.

7. Time has come to harness this ability commercially. New Space India Limited, a public sector enterprise, has been incorporated to tap the benefits of R&D carried out by Isro. The company will spearhead commercialization of various space products.

8. Railways to be encouraged to invest more in suburban rail network via special purpose vehicles (SPVs) and enhance metro rail network through public-private partnerships.

9. Railway station modernisation programme will be launched this year.

10. Metro Rail initiatives to be enhanced by encouraging PPPs and faster completion. Dedicated freight corridor is almost complete.

11. 1. 25 lakh kilometers of roads will be upgraded.

12. Under phase three of PM Gram Sadak Yojana, 1.25 lakh kms of road to be built in the next five years. Project cost estimated at over Rs 80,000 crore.

 

(E) On Education

1. Allocate Rs 400 crore for world-class higher education institutions in FY 20.

2. Propose to establish National Research Foundation to fund and coordinate research in India.

3. The government proposes a National Education Policy to transform and take India’s higher education system to global standard. National Education Policy (NEP) will have a National Research Foundation to promote research. This will help fund research ecosystem among universities across the country, without any external funding.

4. India will be soon a hub of higher education. ‘Study in India’ initiative will be started for the exchange of foreign student.

5. To popularize sports at all levels, National Sports Education Board for development of sportspersons to be set up under Khelo India.

(F) For Women Entrepreneurship

1. ‘Nari to Narayani’: The government wishes to encourage and facilitate role of women

2. To further encourage women entrepreneurship, Women SHG Interest Subvention Programme to be expanded to all districts in India.

3. Every verified woman SHG member having a Jan Dhan account, an overdraft of Rs 5m000 will be allowed. One woman in every SHG shall be made eligible for a loan of Rs 1 lakh under MUDRA scheme

 

(G) On Soft Power

1. In March 2018, govt approved opening of 18 new Indian diplomatic missions in Africa. 4 embassies to be opened in 2019-20.

 

(H) On Banking & Finance

1.Financial gains from cleaning up of banking sector are clearly visible. NPAs of commercial banks have come down by ₹1 lakh crore. Number of public sector banks reduced by 8, through consolidation.

2 .Pension Fund Regulatory Authority to be separated from the National Pension Scheme Trust.

3. NBFCs that are fundamentally sound should continue to get funding from banks and mutual funds. Govt will provide one-time 6-months partial credit guarantee for public sector banks, for the purchase of pooled assets of financially sound NBFCs.

4. To improve capital inflows, govt to realign its holdings in CPFCs. Strategic disinvestment of select CPFCs will continue to remain a priority.

5. Air India disinvestment to be reinitiated. Govt sets an enhanced target of ₹1.05 lakh crore from disinvestment.

6. To allow FIIs and FPIs investment in debt securities issued by NBFCs

7.  For purchase of high-rated pooled assets of financially sound NBFCs amounting to a total of Rs 1 lakh crore, govt will provide a one-time six-month partial credit guarantee to PSBs for first loss up to 10%

8. The government has proposed to allocate Rs 70,000 crore for PSU Bank recapitalisation.

 

(I) On Direct Taxation including Personal taxation

1. Currently, the lower rate of 25% is applicable to firms with annual turnover of Rs 250 crore. I propose to widen this to all companies with annual turnover of up to Rs 400 crore. This will cover 99.3% of all companies.

2. Additional income tax deduction of Rs 1.5 lakh on interest paid on loans taken to buy electric vehicles. This leads to a benefit of Rs 2.5 lakh crore over the tax period of the loan for the loan payer.

3. To resolve the issue of Angel Tax the startups and investors who file requisite declarations will not be subjected to any kind of scrutiny in respect of valuation of share premium. A mechanism of e-verification will be put in place and with this, the funds raised by startups will not require any tax scrutiny.

4. Propose to extend period of exemption of capital gains arising from sale of residential house for investment in startups to 31-3-2021.

5. The Securities Transaction Tax or STT is proposed to be restricted to the difference between settlement and strike price of options

6. Propose to allow an additional tax deduction of Rs 1.5 lakh on interest paid on housing loans for self-occupied house owners. This means those purchasing affordable house will get tax relief up to Rs 3.5 lakh on interest paid.

7.  Interchangeability of PAN and Aadhaar card to be allowed for ease and convenience to taxpayers. ITR can be filed without PAN by quoting Aadhaar

8. To discourage practice of making business payments in cash, proposal to levy TDS of 2% on cash withdrawal exceeding Rs 1 crore a year from a bank account

9.  BHIM, UPI, Aadhaar Pay, NEFT, RTGS can be used to promote less cash economy. Business establishments with annual turnover of Rs 50 crore will have to use these modes of payments with no charges or merchant discount rates will be imposed on customers or merchants. RBI and banks will absorb these costs.

10.  Those in highest income bracket need to contribute more to national development. Propose to enhance surcharge on individual income of Rs 2-5 crore and over Rs 5 crore by 3-7%

11. Custom duty on gold increased by 2%

12. Legacy Dispute Resolution Scheme proposed.

 

(J) On Indirect taxation 

1. Government has already moved GST Council to lower GST on EVs from 12 percent to 5 percent.

2. GST rates have been eased with a relief of Rs 92,000 crore provided during the year. Further measures are being worked out to ease filing returns and tax compliance. A simplified single monthly return is now being ruled out. Taxpayers with an annual turnover of less than Rs 5 crore will have to file only quarterly returns

(K) On MSMEs

 

1. Social fund raising platform – to raise money in form of debt, equity, mutual funds for social causes.

2 .To extend pension benefit to three crore retail traders with an annual turnover less than Rs 1.5 crore under Pradhan Mantri Karmyogi Mandand scheme.

3. Centre will create a payment platform for MSMEs for payment of bills.

4.2% interest subvention for new loan upto 1 cr for MSME’s (For new and incremental loan)

5.  100% FDI will be permitted for insurance intermediary

6. Govt will create a payment platform for MSMEs to enable filing of bills and payment on the platform itself

7. The government proposing to streamline multiple labour laws into a set of ‘four labour codes’

8. TV Channel for startups, designed and executed by startups under Doordarshan bouquet. Will help meet them VCs and promote themselves

9. Local sourcing norms to be eased for single-brand retail FDI

 

 

 

(L) On Market Reforms

1. NRI investment in Indian capital market is less. Proposal to  merge the NRI portfolio investment scheme route with FPI route

2.  Electronic Fundraising Platform, a social stock exchange, to be set up to list social enterprises and voluntary organizations working for social welfare objectives

3. To implement enabling measures to boost International Financial Service Centres (IFSCs)

4. To set up a Credit Guarantee Enhancement Corporation

5. To initiate steps for electronic fund raising programme for listing of social enterprises, voluntary organizations

6. To hike statutory limits for foreign investments in some companies

7. SEBI to evaluate hiking minimum public shareholding to 25percent from 35 percent

8.  Government will work with exchanges to allow AA bonds to be used as collateral

9. Proposes rationalising and streamlining of KYC (know your customer) norms for Foreign Portfolio Investors (FPIs) to make it investor-friendly

10. NRI portfolio route to be merged with FPI for seamless investment in stock markets

11. Credit Guarantee Enhancement Corporation will be set up in 2019-20, action plan to deepen markets for long-term bonds with specific focus on infra sector to be put in place.

12. Will take up measures to make RBI and SEBI depositories inter-operable

 

 

 

(M) On Housing/Real Estate

1. 1.95 crore houses proposed to be provided under PMAY Grameen by 2021

2. A modern tenancy law will be finalized and given to the states

3. Govt proposes to return the regulation authority over housing finance sector from National Housing Board to the RBI

 

 

We will be back with detailed analytical pieces on the major sectors soon. Watch this space for more.

 

 

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