The 2020-21 Union Budget has made a decisive push to reverse the slowdown of the Indian economy by unveiling a multi-pronged set of far-reaching measures. This ranges from putting more money into the pockets of the people, helping the agrarian sector to double the farmers’ income to the removal of dividend taxation on companies to boost the business bottom lines.
Devising a budget in fiscally challenging times is an onerous task but, Finance Minister Mrs. Nirmala Sitaraman did a dexterous balancing act by apportioning adequate outlays for capital expenditure by ensuring that a large part of government borrowings would go towards this. The government thus, indicated its’ continuing push towards infrastructure projects over and above the creation of capital assets in sanitation and water conservation as part of the overall goal to bring Ease of living for every citizen so as to “leapfrog to the next level of health, prosperity and well-being”, as the budget eloquently explained.
Under the ‘National Infrastructure Pipeline’ project of Rs. 102 lakh crore spread over five years, a sum of Rs. 22,000 crores was allocated this fiscal year for equity to fund scores of infra finance companies. This would help leverage it manifold and extend much-needed long-term finance for infra projects across domains.
As the requisite relief measures to the real sectors of the economy entailed deviation from the Fiscal Responsibility and Budget Management (FRBM) Act, fiscal deficit for 2019-20 would overshoot the target of 3.3 percent of GDP to 3.8 per cent. This 0.5 per cent spurt is justified on the ground that a vibrant economy like India cannot afford to lose its growth steam. The budget kept the deficit number sustainable to ensure inter-generational equity in fiscal management.
Among the broad category of economic stakeholders, in the agriculture, irrigation and rural development, new proposals encompass viability gap funding for creation of efficient warehouses, a seamless national cold supply chain for perishables and higher provision of farm credit of Rs. 15 lakh crore for the next fiscal. A massive outlay of Rs. 99,300 crore for education and about Rs. 3200 crore for skill development has been set apart for the next fiscal.
In order to ensure that people are left with enough disposable incomes after discharging their tax liabilities, the budget has come out with a simplified and new tax regime as an option to the old one sans the plethora of exemptions and reliefs for the optional beneficiaries. In a bid to end tax disputes for fostering trust in taxpayers, disputed tax dues is to be settled, only the amount of the disputed taxes would have to be paid and interest and penalty would be waived for a short span till June 2020. To stabilize receipts from goods and services tax (GST) simplified GST return and fully automated refund process would be in place.
For companies to grow to their full potentials, the concessional corporate income tax rate of 15 per cent to new domestic companies in manufacturing announced in last September would be extended to the power sector. For Sovereign Wealth Funds (SWFs) of foreign governments and other foreign investment, tax concession is to be provided, while the extant tax benefits to ‘Start-Up’ by way of deduction of 100 per cent of their profits are enhanced by increasing turnover limit and period of eligibility. Specified categories of government securities would be opened for non-resident investors. Foreign Portfolio Investment (FPI) limit for corporate bonds would be increased from 9 to 15 percent in order to deepen the domestic debt market.
The Budget has provided for concessional tax rate for cooperatives and hike in turnover threshold for audit of micro, small and medium enterprises to ensure a hassle-free milieu.
The government is hopeful of raising additional resources to fund its development programmes mostly through sale of strategic assets with the disinvestment target at Rs. 2.10 lakh crore for the next fiscal, against Rs. 65,000 crores in 2019-20. The budget is an adroit and healthy mix of tax cuts and investment for productive segments to revive the growth. The projected nominal GDP for the next fiscal is 10 per cent.
Script: G. Srinivasan, Senior Journalist