When the Finance Minister of India, Nirmala Sitharaman of the freshly elected government was making her way to the parliament, the entire country sat in anticipation of better days coming out of the Union Budget 2019 presented by her on July 5, 2019. Shattering the age old traditions, she carried the budget document in a traditional Indian red cloth instead of the usual practice of carrying a briefcase. It gave the common man of India large hopes. It gave the struggling farmers an assurance ‘Hold on! for things will get better’. It gave the common Indian trader, waiting anxiously for the contents of the budget to become public, a reason to smile.
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Plenty of talking points were there in the budget speech which promise India of good things to come especially after witnessing the lowest GDP growth in the last six months. The first full time female finance minister of India came out in high spirits with her budget speech. The budget speech aimed to touch all the crucial sectors and stressed on boosting infrastructure and foreign investment.
Nirmala Sitharaman, the centre of attention, described that in the focus of the budget and in all government policies were the poor, the farmers and the villages in India. With huge problems of unemployment and unsatisfactory growth staring India, this budget and its implementation, as she said, is going to be one of the most important in the history of the country.
Union Budget 2019: Highlights
The highlights of the 2019-20 annual budget include:-
- The government increased customs duty on gold. According to the Budget proposals, import duty to be hiked on gold and precious metals to 12.5%, from current level of 10%.
- Increase in special additional excise duty and road and infrastructure cess each one by 1 rupee a litre on petrol and diesel finally leading to a Rs.2 per litre price increase on Petrol and Rs.2.50 on Diesel.
- To provide further impetus to affordable housing, additional deduction of Rs.1.5 lakh on interest paid on loans borrowed upto 31 March 2020 for purchase of house up to Rs.45 lakhs.
- Additional income tax deduction of 1.5 lakh rupees on the interest paid on the loans taken to purchase Electric vehicles allowed.
- To discourage the practice of making business payments in cash, the government proposes to levy TDS of 2% on cash withdrawal exceeding Rs.1crore in a year from a bank account.
- PAN & AADHAR card will be interchangeable. Those who don't have PAN to file returns, can do so by simply quoting AADHAR number and use it wherever they require to use PAN.
- Public sector banks to be provided 70,000 crore rupees to boost capital and improve credit.
- A new series of coins of Re 1, 2, 5, 10, 20 easily identifiable to the visually impaired were released by the PM on 7th March 2019. These coins will be made available for public use shortly.
- Regulation authority over housing finance sector to be returned from National Housing Bank to RBI.
- To further encourage women entrepreneurship, Women Self Help Group (SHG) Interest Subvention Program to be expanded to all districts in India.
- India has emerged as a major space power. To harness India's space ability commercially, a public sector enterprise, New Space India Limited (NSIL) has been incorporated to tap the benefits of ISRO
- The minimum public shareholding in the listed companies to be increased, Government has asked market regulator SEBI to consider raising the current threshold of 25% to 35%.
- TV channel to be launched to promote startups and to help in matchmaking for funds.
- NRIs to be provided AADHAR card immediately after returning to India. The earlier practice was to hand them the identity proof only after the completion of their stay for more than 180 days.
- To resolve the angel tax issue, government decides that startups will not be in any scrutiny in respect to any valuation. Funds raised by startups will not be under scrutiny by the Income Tax department.
- The pension benefit will be extended to 3 crore retail traders under PM Karam Yogi Maan Dhan scheme. It requires only Aadhar numbers and bank accounts.
- TDS of 2% on cash withdrawals, exceeding rupees 1 crore in a year from bank accounts to discourage business payments in cash.
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How Good is Budget? Experts Analyse
The budget got mixed reviews from the economists and experts:
Shyamal Mukherjee, chairman of PwC India had his say on the budget. He said, “The Finance Minister’s Budget speech re-iterates the government’s thrust on minimum government and maximum governance. Ramping up infrastructure investments to ₹20 lakh crores a year would help India move to the 8% growth trajectory. Resource mobilisation through further disinvestment and increase in tax rates, and encouraging banks to take risks in lending to NBFCs through partial guarantees to ease credit flow is likely to have a positive impact. The focus given to the MSMEs and the rural sector is welcome.”
Amit Gupta, director of Deloite rated the budget positively. Offering advice, he said, “The Budget places a holistic focus on demand for connectivity across rural and urban markets. RRTS, metro rail, and TOD are expected to improve connectivity to congested urban agglomeration and foster development outside cluttered city centres. The key to success, however, lies in leveraging private sector developments and ensuring coordination across multiple development authorities and alignment of objectives. Similarly, building large infrastructure projects and affordable housing on large land parcels through pooling/joint models by central/state agencies—as announced in the Budget—will need leadership and monitoring, possibly through empowered program/project-focused agencies.”
Fr. P. Christie, S.J., Director, XLRI- Xavier School of Management welcomed the budget and said, “A robust education system forms the bedrock of a strong and progressive nation. The Government’s initiative in bringing in the New National Education Policy in the near future is a welcome step. There is need for Better Governance framework within the education sector and the government’s announcements like bringing reforms in the Higher Education Regulatory Arms to promote greater autonomy and focus on better academic outcomes and the allotment of Rs.400-crore for “World Class Institutions” are steps in the right direction to build a robust education system” and added further “The government’s move to strengthen research and innovation and emphasis on start-ups are positive steps. We welcome the government's plan to have a DD TV channel for start-ups. The government’s vision of developing the National Research Foundation (NRF) will set the implementation process in motion and help not only in intellectual advancement of the youth but of the nation at large. The government’s decision to promote skill training and sports awareness would definitely help in holistic development of the youth.”
Dr. Bappaditya Mukhopadhyay, Professor, Great Lakes Institute of Management, Gurgaon said, “The announcement to promote service sector is exemplary. For India, this is one sector which has the capability to absorb many without much pressure on additional constrained resources (land, environment etc.) as well as can employ many with varied skill levels. Indeed, identifying 17 iconic model tourist place is the right move.”
Budget: Not Successful for Change
Criticizing the budget, P. Chidambaram, former finance minister gave a detailed review and declared the budget to be failing to make radical changes which Indian economy desperately needs after its growth was derailed by demonetization. He said “The Budget is an insipid one, like the old wine in a new bottle.”
Chidambaram, stressed on the fact that the vision of the government to make India a $5 Trillion economy can’t be achieved with the current GDP growth rate and a GDP growth rate of 8% is needed to achieve such a feat. He observed that the budget has presence of no solid reforms and contains only incremental changes which are insufficient to solve the current economic problems.
Attitude & Execution: Key to Success
The budget holds promise definitely yet nothing can be said with certainty whether it is powerful enough to solve the major problems. There were hardly any mention of how the government aims to collect revenue. Nothing major was mentioned regarding making powerful changes in the ailing agricultural sector or the power sector. As experts declared, mainly reiteration of the old policies took place. Yet everything as it is commonly known, depends on attitude and execution.
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