How has the Union Budget 2019-20 Turned Out?

On Feb 01, 2019, Union Budget for 2019-20 was presented by the Interim Finance Minister Mr. Piyush Goyal in the Parliament. In this article, let’s look at what the Budget has in store for India. The main focus of the government for this Union Budget was clearly on providing the agrarian economy of India the much-needed boost. The government announced farm package along with plans for lifting the consumption economy through the announcement of full tax rebate of up to Rs. 5 lakh for the middle-class salaried people of India.

 

It might be safe to conclude that this Union Budget is a pro-election one just ahead of the general elections of the Lok Sabha in 2019. The interim FM Mr. Piyush Goyal while presenting the Budget to the Parliament said that India is the fastest growing major global economy. The FM stated that India has achieved an annual average GDP growth during the past five years, which is higher than the growth that has been achieved by any Indian government right since the beginning of the economic reforms in 1991. Starting its journey as the 11th largest global economy in 2013-14, as of today, India has become the 6th largest global economy. Further, Indian economy is all set to touch the $5 trillion-mark by around 2024. Thereafter, the Indian economy aspires to touch the $10 trillion-mark.

 

 

Key points pertaining to Fiscal Deficit discussed in the Union Budget 2019-20

 

Highlights % of GDP
Revised Fiscal Deficit target largely due to farm income support for the current fiscal worth Rs. 20,000cr during Dec 2018 to Mar 2019 3.4% (earlier 3.3%)
Fiscal Deficit for FY20 3.4%
Fiscal Deficit for FY20 excluding the farmer support scheme 3.1%
Fiscal Deficit target for FY21 3%

 

The debt-to-GDP of India came in at 46.5% in 2017-18. The government will be focusing on debt consolidation by planning to bring down debt-to-GDP to 40% by FY25. This is especially considering the Fiscal Deficit consolidation programme. Moreover, the government is confident that it will achieve its divestment target for FY19 of Rs. 80000cr.

Other key points discussed in the Union Budget 2019-20

 

Highlights Achievement
Average monthly GST tax collection in the current fiscal Rs. 97,100 crore per month (Rs. 89,700 crore per month during the previous fiscal)
Gross market borrowing for FY20 Rs. 7.1 lakh crore
Net market borrowing Rs. 4.48 lakh cr

 

key points discussed regarding stamp duties, taxes, and SMEs in the Union Budget 2019-20

Highlights Update
Stamp duties

Will be levied on one instrument relating to one transaction and will be collected at one place through the Stock Exchanges. The collected duty will be shared with the State Governments seamlessly on the basis of domicile of buying client.

Returns

The government will process all returns within 24 hours and issue refunds simultaneously. The government within the next two years plans to ensure that almost all verification and assessment of returns selected for scrutiny would be done electronically.

SMEs

The sourcing requirement of government enterprises from SMEs has been increased to 25%. Of this, the government enterprises will be sourcing up to 3% of this material from women owned SMEs.

 

Sector-wise key highlights of the Union Budget 2019-20

Agriculture and Rural Sectors

In the Union Budget 2019-20, the interim FM Piyush Goyal reaffirmed the government’s commitment towards the growth and welfare of the agricultural and rural economies. Some of the key new schemes and other measures announced include:

 An assured income support to the small and marginal farmers under the launch of historic programme “Pradhan Mantri Kisan Samman Nidhi (PM-KISAN)”
Farmers holding cultivable land of up to 2 hectares will be provided direct income support at the rate of Rs. 6,000 per year.
The programme would be effective Dec 01, 2018 and will entail an annual expenditure of Rs. 75,000 crore.
Increased allocation under MNERGA from Rs. 55000cr in FY19 to Rs 60000cr in FY20.
Increase in urea subsidy from Rs. 44995cr in FY19 to Rs. 50164cr in FY20, up 11.5% YoY.
Increased allocation under Pradhan Mantri Krishi Sinchai Yojna from Rs. 8251cr in FY19 to Rs. 9516 in FY20, up 15.3% YoY.
Setting up of Rashtriya Kamdhenu Aayog to upscale sustainable genetic upgradation of cow resources and to enhance production and productivity of cows.
2% interest subventions to farmers pursuing activities of animal husbandry and fisheries who avails loan through Kisan Credit Card. In case of timely repayment of loan, they will also get an additional 3% interest subvention.

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Under natural calamities, farmers to benefit from interest subvention of 2% and prompt repayment incentive of 3% for the entire period of re-schedulement of their loans.

 

Infrastructure Sector

The backbone of India’s national economic development, the infrastructure sector came under focus in the Union Budget 2019. Measures announced by the government to boost the infrastructure activity for various sectors such as metro, railway, renewable, roads, water, and power include:

 

Development of Container cargo movement in North Eastern India. Allocation of Rs. 58166 cr for North Eastern areas, increased by 21% over 2018-19 Budget
Capital support for the railways sector is proposed at Rs. 64,587 crore in 2019-20 (BE), up 21% over FY19 Budget
Increased allocation for power sector under Integrated Power development scheme and Deen Dayal Upadhyaya Gram Jyoti Yojana by 33% and 7% respectively to Rs. 5280cr and Rs. 4066cr respectively.
Under Amrut and Smart Cities mission, Budget allocation increased by 11% to Rs. 13900cr.
Increased allocation under metro projects from Rs. 14865cr in FY19 to Rs. 17714cr in FY20, up 19.2% YoY.
Increased allocation under Pradhan Mantri Krishi Sinchai Yojna from Rs. 8251cr in FY19 to Rs. 9516 in FY20, up 15.3% YoY.
Increased allocation for road sector under Pradhan Mantri Gram Sadak Yojana by 22.5% from Rs. 15500 in FY19 to Rs. 19000cr in FY20.
Increased allocation under green energy corridor from Rs. 500cr in FY19 to Rs. 700cr in FY20
Increased allocation under Sagarmala Projects by 44% from Rs. 381cr in FY19 to Rs. 550cr in FY20.

 

Key initiatives pertaining to digitization

In keeping with the government’s vision of Digital India, the announced measures include:

Government plans to convert 1 lakh villages into Digital Villages over the next five years.
Increase in allocation for optical fibre cable-based network for defence network from Rs. 2500cr in FY19 to Rs. 4725cr in FY20, up 89% YoY.
Expansion of rural industrialization using modern digital technologies

 

Moves to boost the real estate sector:

High inventory and implementation of RERA have brought in a lot of stress to the real estate sector. To relieve the real estate sector of this stress, following announcements were made:

Under affordable housing, the benefits under Section 80-IBA of the Income Tax Act is being extended for one more year for housing projects approved until Mar 31, 2020.
The Union Budget proposes to extend the exemption period from levy of tax on notional rent on unsold inventories from one year to two years, from the end of the year in which the project is completed.
TDS threshold for deduction of tax on rent increased from Rs. 1,80,000 to Rs. 2,40,000.
Rollover of capital gains tax benefit under section 54 of the Income Tax Act increased from investment in one residential house to two residential houses for a tax payer having capital gains of up to Rs. 2 crore

 

In the Union Budget, the FM announced that the Defence Budget for FY2019-20 will be Rs. 3,00,000Cr, the highest ever. This move has been made for strengthening India’s defence system. If required, additional funds will be provided.

Budget highlights pertaining to direct taxes

TDS threshold on interest earned on bank/post office depositsRaised from Rs. 10,000 to Rs. 40,000. This will benefit small depositors and nonworking spouses.

 

Highlights Update
Individual taxpayers with taxable annual income of up to Rs. 5 lakhs. Will get a full tax rebate. The tax rebate provided U/S 87A has been increased to Rs. 12,500 from existing Rs. 2,500.
An individual having gross income of up to Rs. 6.50 lakhs. Will not be required to pay any income tax if he makes investments, which are deductible under Chapter VIA of Income Tax Act. There is no modification in the tax slabs.
Standard Deduction Raised from the current Rs. 40,000 to Rs. 50,000.
The above move Will provide an additional tax benefit of Rs. 4,700 crore to more than Rs.3 crore salary earners and pensioners.
TDS threshold on interest earned on bank/post office deposits Raised from Rs. 10,000 to Rs. 40,000. This will benefit small depositors and nonworking spouses

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Overall, the Budget promises a lot for the agrarian and rural economies of India as well as the middle-class population. How the results will pan out, only time will tell.

 

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