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5th of July, 2019 will be earmarked as a historic event; India’s first woman finance minister presented her maiden budget on behalf of the second-time-elected BJP government. Post the pre-election Interim Budget that was presented in February 2019, Union Budget 2019, was designed to boost infrastructure, aid the economy and promote foreign investment in the backdrop of the impending economic slowdown. The tax slabs for direct taxes remain as they were proposed in the Interim Budget 2019.
Sitharaman mandated adequate changes to spur the growth of the nation and laid down the ambitious plan of the $5 trillion economy. Let’s take a look at some of these proposals:
The first full-time finance minister Nirmala Sitharaman has made some major announcements for women welfare and empowerment.
In her speech, Nirmala Sitharaman paid attention to women in a segment she titled ‘Naari to Narayani’. She was quick to highlight women had made significant contributions to every segment of economic growth in India.
Sitharaman’s maiden budget focussed on women empowerment proposing to set up a high-level committee to suggest more ways. The committee will have stakeholders from both Public and Private sectors to ensure gender equality.
Every woman who is part of the self-help groups and posses verified Jan Dhan accounts will be allowed an overdraft of Rs 5000. Furthermore, there was also an announcement on a loan worth Rs 1,00,000 for women under the Mudra scheme.
In her budget speech, the Finance Minister proposed to allocate Rs 400 crore to higher education. With her New National Educational Policy, she hopes to transform India's higher education system. The government will also promote “Study in India” programmes and invite students from across the globe to pursue various courses in India.
Apart from this, the National Research Foundation will fund, coordinate and assimilate research grants. The funds from all ministries will be directed to NRF for its development.
To spread awareness about Mahatma Gandhi's ideas amongst the youth of the nation, the Finance Minister announced the development of "Gandhi-pedia." Education will be made more accessible as a result of which the Swayam Initiative will be launched--an online education programme. Additionally, IT and IISC together will pool in resources to resolve major research and engineering challenges.
Over the last year, the non-performing assets (NPAs) of commercial banks have reduced by more than Rs 1 lakh crore. In the last four years, a record recovery of more than Rs 4 lakh crore has been achieved due to Insolvency and Bankruptcy Code (IBC) and other measures. The Provision Coverage Ratio (PCR) is at its highest in seven years, and there is an increase of 13.8% concerning domestic credit growth.
With the legacy issues addressed, the Public Sector Banks (PSBs) are now proposed to be rendered with a capital of Rs 70,000 crore to boost credit. PSBs will use technology, render online personal loans and provide doorstep banking assistance. Also, PSBs will be enabling customers of one specific PSB to have access to services across all PSBs. Reforms will be implemented to improve governance in PSBs.
The Committee has proposed to suggest the structure as well as the required flow of funds via development finance institutions. An investment of Rs 100 lakh crore in relation to infrastructure is intended for the following five years. Steps will be taken to separate the NPS Trust from PFRDA.
Rs 1,05,000 crore worth disinvestment receipts is the target set for the FY 2019-20. The government will be reinitiating Air India’s strategic disinvestment process, and it will be offering more Central Public Sector Enterprises (CPSEs) so that there is vital participation of the private sector.
The government will also be undertaking the following measures to expand the investment space:
The finance minister has considered the fact that India still has a majority of the population living in villages and is dependant on agriculture and traditional industries. Therefore, the budget specified the government’s initiative to invest widely in agriculture infrastructure.
Nirmala Sitharaman announced that the government is planning to support private entrepreneurship in adding value to farmers’ produce from the field and other allied activities such as bamboo, timber from hedges, and generating renewable energy. The Finance Minister stated “Annadata can also be Urjadata” meaning a farmer can even produce electricity.
In addition to actual crop raising, farmers can start dairying through cooperatives. The government will support these farmers to create infrastructure cattle feed manufacturing and milk procurement, processing, and marketing.
Nirmala Sitharaman appreciated the farmers for making the nation self-sufficient in pulses’ production. She also expressed that the same success is expected in the production of oilseeds leading to a reduced import bill. Further, the government hopes to form 10,000 new Farmer Producer Organisations to ensure economies of scale over the next five years.
As a part of the Digital India initiative, the Central Government will work with State Governments so that more farmers can enjoy the benefits of e-NAM. e-NAM is an online trading platform for agricultural commodities in India. At this point, Sitharaman shared that ease of doing business and ease of living should apply for farmers too.
Another interesting aspect, here, is the concept of Zero Budget Farming. This innovative module has been followed in a few states already. However, the 75th year of independence is high time to preach this method of farming so that farmers can double their income, she said.
Under the Jal Jeevan Mission, the department of drinking water and sanitation will focus on integrated demand and supply side of water management at the local level. This includes creating infrastructure for source sustenance locally in terms of rainwater harvesting, groundwater recharge, and managing household water for reuse in agriculture.
On the GST front, the budget has declared a reduction in tax rates from 18% to 12% on specified agricultural, horticultural, forestry, harvesting, and other threshing machinery. The same rate change applies for other supplies such as bamboo furniture, jute and cotton handbags, and other handicrafts.
The Union Budget 2019 came as a breather for several start-ups having a hard time dealing with angel tax. Angel tax is imposed when a privately-held company raises funds at a premium, more than its ‘fair valuation’. The income tax law contains a provision to levy a tax on the amount received in excess of fair value. It was introduced in 2012 in a bid to curb money laundering. Now, they have proposed to exempt the start-ups from scrutiny assessments.
The start-up sector has been reeling under a three-pronged challenge, namely, high cost of credit, lack of adequate funding, and numerous regulatory bottlenecks.
The BJP-led National Democratic Alliance (NDA) proposed setting up of a TV programme on Doordarshan exclusively for start-ups. In Nirmala Sitharaman’s words, “The programme will be for the start-ups, of the start-ups, and by the start-ups’. This will serve as a platform to bring the venture capitalists and the start-ups together.
This programme will also be designed and executed by start-ups. The government has also eased the FDI rules for such companies and proposed improvements and incentives for EV start-ups and digital payment system start-ups.
Furthermore, the Finance Minister said that there will be no more scrutiny on the valuation of share premiums for start-ups. A mechanism will be put in place for e-verification.
The Finance Minister continued saying that the funds received by these start-ups such as Category II AIF funds will not be evaluated by the IT department. The maiden Budget speech also proposed an extension of the period of exception of capital gains for start-ups. So, the date has been extended to 31 March 2021 for carrying forward and set-off of loss from capital gains from the sale of residential houses.
All-in-all, the Union Budget 2019 aims to take the Indian economy to the $5-trillion mark, empower women, start-ups, farmers and agriculture. The tax slabs haven’t changed from what was proposed in the Interim Budget 2019.