Budget 2020- Consistency not a T20 Battle

When the non-economic issues were dominating the national headlines annual ritual, the budget was presented by finance minister Ms Nirmala  Seetharaman in the last week. Equity markets had already witnessed unexpected buoyancy in spite of slowdown in India as well as in the global markets. Capital market participants, individuals residing in urban and semi-urban areas, SME sector, industrialists   and farmers had variety of expectations from the Finance Minister (FM). 

Government had its own limitation to spend more on account of swelling the fiscal deficit. At a time when WEF Itself is discussing about slide in the global growth rate and India’s sizeable contribution to the world growth ,spending thrust by the government was a must. The discipline is definitely laudable but at such a situation even the rating agencies can understand the mathematics. So as expected the revised estimates government rightfully set fiscal deficit at 3.8% of GDP. This was welcome as well as inevitable move.

With the GDP rate at six years low it was expected that lot will be given to the consumers to spend more. FM had done enough by in the form of drastic rate reduction from 30 % to 22%giving room for the industrialists to invest the savings in the last year. This time FM further provided relief to the corporate sector by scrapping DDT but making it taxable in the hands of investors at the individual slab rates. The Long Term Capital Gain tax imposed two years back had already made the market nervous. Market participants were expecting some changes/relaxation/scrapping of the same. On the individual investors’ front nothing positive came out from the budget which resulted in extreme reaction ant the market indices tanked close to 2.6%. To add to that disappointment the new tax regime albeit optional failed to impress the investors.

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FM has laid emphasis on three aspects Aspirational India, Economic development for all & Caring society. The aspiration rightly included Agriculture, Irrigation, water, education and Rural Development while economic development emphasised on Industry, Commerce, Investment and infrastructure and finally Women & child,     Social Welfare Culture and Tourism.Apparently this budget conveys a message that government will continue its work on the same path as last year indicating that we are not in hurry. So anyone expecting a fire work like T20 matches it was clear that government is looking at a long innings. Following is the allocation in the three araes:

For Aspirational India which includes  agriculture and Rural Development  the budget has allocated Rs 4,82,401 crs. with highest contribution of Rs 75,000 crores for Pradhan Mantri Kisan Samman Nidhi (PM-KISAN). There is no significant change in the allocation from the last year in fact amount spent on MNRGA is proposed to be reduced. Sixteen point programmes for thrust has some new themes like providing Viability Gap Funding for setting up efficient warehouses at the taluka level on a Public Private Partnership (PPP) basis , mapping and geo-tagging of agri-warehouses, refrigerated coaches in Express and Freight trains. Additionally agriculture funding will be extended to Rs15 lakh crores this year. Allocation to Water and Sanitation is pegged at  Rs 96,885 crore with lion’s share goes to health sector which is Rs 69,000 crore while Jal Jeevan Missio will get  Rs 11,500 crore.Education and skill development will get 99,000 crores and special mention is to provide  degree level full-fledged online education programme and develop Skill Development to the  workforce which gets employed abroad.

Economic development for all : SABKA SAATH SABKA VIKAS has been the theme of the government. In order to help the exporters new initiative NIRVIK is being launched. This will provide for higher insurance coverage, reduction in premium for small exporters and simplified procedure for claim. Total allocation in infrastructure would be Rs 1,69,637 crore. Allocations for various long term projects like Accelerating development of highways, build Data Centre park and Fibre to the Home (FTTH) connections is being proposed.

Caring society: Allocation for Women & Child, Social Welfare is Rs 53,876 crore. Women being in the forefront an amount fo Rs 29,300 is set aside for them while other areas cover nutrition-related programmes, towards senior citizens and Divyang. For the welfare of Scheduled Castes (SC) and Other Backward classes (OBC), and Scheduled tribes Rs 133500 crores atre allocated.

The budget proposed various other measures firstly enhancing the protection of insurance by increasing Deposit Insurance Coverage for a depositor, from Rs 1 lakh to Rs 5 lakh per depositor. Forex is likely to flow in coming days to India on account of increasing the limit for FPI in corporate bonds which  currently stands  at 9% of outstanding stock to  to 15% of the outstanding stock of corporate bonds. This budget has set a ambitious target of disinvestment to the tune of 2.10 lakh crores. Major decision is to sell a part of its holding in LIC (Life Insurance Corporation of India) by way of Initial Public Offer (IPO). Roughly 10% holding is likely to be diluted. Besides the entire stake in IDBI bank will be disposed off making IDBI purely private bank. Finally in order to win the trust of the tax payers it has been decided that Central Board of Direct Taxes (CBDT) will adopt a Taxpayers’ Charter which will create a bridge between a taxpayer and the tax administration to ensure no harassment and cordial relations.

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