Glimpses of India's budget 2019-20
July 9, 2019 | 7:27 PM
by A.V. Manohar*
A.V. Manohar. - Supplied picture

Muscat: India’s Budget 2019–2020, recently presented by Nirmala Sitharaman, FM looks like a second dose of vitamins being given to boost the Indian Economy and also in continuation of the same prescription as left by her predecessor Arun Jaitly. Of course, this year’s Budget lacks the usual flavor of figures and graphs, to the disappointment of conventional readers but certainly portrays a whole set of steps encompassing the strategic vision for the next 5 years. However, certain couplets and narratives, rolled out during the powerful presentation added gaiety to this exercise.

“India is set to become US$5 trillion economy in the next 5 years,” Nirmala Sitharaman thunders with high optimism. Yes. It will become a reality, going by its recent achievement of reaching US$2.7 trillion, that too in a five year span. India’s global position in terms of economic size jumped to 3rd from 11th rank. Garnering a 6 per cent growth in FDI (Foreign Direct Investment) inflows in 2018-19 (US$64.375 billion), while the Global FDI inflows slide by 13 per cent, add credence to this lofty dream. Hope this ambitious target gets translated into higher per capita income, that measures the real growth at grass root level, in the coming years.

Following economic indicators brought out in the Budget 2019–20 add testimony to the growth achieved in the recent past:

Gross Domestic Product (GDP) indicating the market value of production and services in the country, to grow at 12 per cent as against 10 per cent achieved in 2018-19 (Positive).

Revenue Deficit i.e. excess of Revenue Expenditure over Revenue Receipts, works out to 2.3 per cent of GDP as against 2.2 per cent reported for 2018-19 (Negative).

Fiscal Deficit i.e. excess of Cash Outflows over Inflows without Borrowings, works out Rs703.8 million Crores which is 3.3 per cent of GDP as against 3.4 per cent reported for 2018-19 and 3.5 per cent reported for 2017-18 (Positive).

The above fiscal deficit shall be bridged by borrowings and Interest Cost is budgeted at 23.7 per cent of the total expenditure, which is a sizable outlay (Neutral).

The real growth of the economy was 6.8 per cent in 2018-19, showing a reduction from 7.2 per cent in 2017-18 (Negative).

Inflation based on Consumer Price Index declined to 3.4 per cent in 2018-19 from 3.6 per cent in 2017-18 (Positive).

Trade deficit increased to US$183.5 billon during 2018-19 from US$162 billion in 2017-18 (Positive).

Direct tax revenue increased by 78 per cent from Rs6.38 lakh cores in 2013-14 to Rs11.37 lakh crore in 2018-19 (Positive).

Keeping an eye on this ‘Big Picture’, allocations and actions are formulated, prioritising on ten vital movers of the economy namely Infrastructure development, Digital expansion, Pollution-free environment, Indigenisation of Industries, Water Management, Utilisation of Ocean Resources, Space Exploration, Self-sufficiency in Food Resources, Citizen’s Health and Efficient Governance System. So much of action points stipulated for the future and to be monitored at various levels by the Government. The spending and development agenda involves an outlay of Rs2.79 million crores, as against Rs2.46 million crores spent in 2018-19 and this 13.4 per cent increase is intended to spur growth in the economy.

The buoyancy in tax collection is evident in the Revenue side of the Budget that indicates an increase by 9.5 per cent over 2018-19 and by a whopping 28 per cent over 2017-18. It justifies that better compliance and bold monetary reforms initiated during the last few years are beginning to bestow positive results.

Attracting more FDI and resorting to external borrowings are the actions set in place towards plugging the Fiscal Deficit. Opening up the window further to the International Investors for select FDI Avenues such as Aviation, Media and Insurance and increasing the permissible limit of Investment for Foreign Portfolio Investors (FPI) are the budgeted actions in this direction. Permission will be granted for 100 per cent FDI in the case of Insurance Intermediaries. Besides these targeted investment inflows, external borrowing, which is at present at a low level of 5 per cent of the GDP shall be resorted to bridge the gap in the overall funding structure.

Internal generation through disinvestment of Central Public Sector Enterprises (CPSE) is proposed to garner a sizeable chunk of Rs105 Crores. To achieve this target, the Government proposes even to reduce its stake from the present 51 per cent level.

Re-capitalisation of Public Sector Banks by infusion of Rs70,000 crores shall kick start the availability of credit in the system, that will aid in rapid industrialization and generation of new employment opportunities. Thanks to Government’s efforts in overhauling the banking system, that resulted in reduction and recovery of NPAs (Non-Performing Assets) aggregating to a whooping Rs5 lakh crores.

The Budget has expanded the Pension Scheme i.e. Rs3,000 per month on attaining age of 60 years to workers, to cover 3 crore retail traders and small shop keepers with annual turnover of less than Rs1.5 crores. This move is laudable and has made the Budget Senior Citizen Friendly.

Much is done in terms of tax concessions and credit facilities for the promotion of Electric Vehicles that will save the power to the nation and also to MSMEs that will bestow jobs to the youth. Capital Market shall witness a buoyancy when the SEBI agrees to implement increasing public shareholding from 25 per cent to 35 per cent, that will result in offloading 10% by the major shareholders. But this move will be viewed with caution as this will dilute the equity of the Foreign Shareholders, leading to long term implications. Individuals remain untaxed till Rs5 lakhs and for corporates, 25 per cent tax slab is now extended to companies whose annual turnover is up to Rs400 crore, from the earlier Rs250 crore limit.

The Budget galores with so many concessions and relaxations in the tax system; so many facilities and comforts for the individuals, so many incentives and funding facilities for the corporates; so many modifications and simplifications in the administration procedures. All in all “Make India Better India” seems to be the tone set up in this Budget.

* The author is the Chief Financial Officer of Oman & Emirates Investment Holding Co.

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