Towards Sustainable Growth
Budget 2019 had many innovative provisions which will lay the foundations of a New India in the coming years
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A set of comprehensive reforms introduced in the interim Budget on 1 February, 2019 by Finance Minister Piyush Goyal aimed at “realising a New India by 2022’’ and had a strong focus on sustainable growth and achieving a better quality of life for all citizens of India. The well-balanced Budget, with its primary focus on the farm economy along with transformational reforms to address socio-economic challenges, will ensure that the Indian economy is firmly on track.
A notable feature of this year’s Budget was the ambitious “10-dimensional vision for 2030” – a roadmap for India to become a $5 trillion economy in the next five years and a $10 trillion economy across eight years thereafter. In this vision, India is envisaged to become a modern, technologically driven, innovative, transparent and equitable nation, backed by strong reforms. The key dimensions are broadly in accordance with the CII’s [email protected] Vision document.
A major focus of the Budget was on alleviating rural distress, while ensuring farmers’ progress and increasing farmers’ incomes. In a historic move, the government introduced the Pradhan Mantri Kisaan Samman Nidhi, which would provide direct income support of Rs 6,000 per year to small and marginal farmers with cultivable land of up to two hectares. With around 12 crore farmer families to benefit from this scheme, a farm package of this kind was the need of the hour and industry lauds the government for such a path-breaking measure. Additional benefits, such as up to five per cent interest subvention for farmers in the sector affected by natural calamities, would be provided under the Kisan Credit Card scheme, which would enable timely access to credit and loan relief to farmers.
Measures were also announced to provide a fillip to the non-farm sector. Measures to enable easy access to credit, including interest subvention and simplified forms under the Kisan Credit Card scheme were announced for workers engaged in the fisheries and animal husbandry sector.
Budget 2019 also saw various tax relief measures for salaried individuals which would greatly boost the economy through increased consumption spending. Individual tax payers with annual income of up to Rs 5 lakhs would now get full tax rebate. This would mean that incomes of individuals earning a gross income of up to Rs 6.5 lakh would be tax free, taking into account investments and other interest incomes.
Other measures such as increased standard deductions for salaried individuals from Rs 40,000 to Rs 50,000 and capital gains exemption for investment in a second residential house once in a lifetime, would greatly benefit the common man by increasing his disposable incomes.
Measures were announced for providing an impetus to the real estate sector, which has experienced slow growth over the last few years. The measures include extending the period of exemption from tax levy on notional rent on the second self-occupied house, benefits under the Affordable Housing scheme that has been extended for another year for all housing projects approved till 2020, among others. These housing and real estate reforms would bolster economic growth of the nation through a multiplier effect on income.
In a move to simplify the direct tax system and easy filing of returns, it was announced that within two years, the entire verification process, along with assessment of returns, would be done online through an anonymized back office with the help of tax experts and officials, without any personal interface between tax payers and tax officials. A more assessee - friendly system aided by modern technology, would not only simplify the system, enable easy processing and timely refunds, but would also greatly encourage timely filing of returns.
For improving the welfare of the workers in the unorganised sector, a mega pension scheme, the Pradhan Mantri Shram -Yogi Mandhan Yojana, was announced, in which workers with monthly income of up to Rs 15,000 would get an assured monthly pension of Rs 3,000 after attaining the age of 60 years. Around 10 crore people in the largely fragmented informal sector are likely to benefit from this pioneering scheme.
The micro, small and medium enterprises (MSMEs) sector, which is the backbone of the Indian economy, also received a significant boost in Budget 2019. A two per cent interest subvention was announced for loans of up to Rs 1 crore for all MSMEs registered with the Goods and Services Tax (GST). The government will, moreover, procure 25 per cent of its requirements from SMEs.
Budget 2019 had many innovative provisions which will lay the foundations of a New India in the coming years. It is commendable that while ensuring that the growth momentum for the economy is maintained, the Budget has taken the path of fiscal prudence. Although, the fiscal deficit has been revised to 3.4 per cent of the GDP in contrast to the 3.3 per cent anticipated earlier, the fiscal slippage is minor in nature in the light of the fact that the major announcements for providing income support to farmers were much needed for bringing about socio-economic equity in the country.
Overall, the industry has welcomed the pioneering measures introduced in Budget 2019 and is happy to note that many recommendations are in line with the industry’s vision, such as tax relief for salaried individuals and increasing farmers’ income and pension for the unorganised sector. Given the multiple and complex challenges the government faced before an impending election, this is a well-balanced Budget which has addressed the economic realities of the country.
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