Union Budget 2020: The Big Push?
Budget 2020 offers bits and pieces for the optimist, nothing to the pessimist and less than something to the realist. And the big question remains: will the economy turnaround anytime soon
Photo Credit : Himanshu Kumar
Union Budget 2020: The Big Push?
The government says that its Union Budget for FY21 reflects its firm commitment to substantially boost investment in agriculture, infrastructure, social sector, education and health. Although critics and economist say otherwise. Some experts termed it a missed opportunity, others termed it a ‘Muddle for the Middle Class’. All efforts to woe the middle-class taxpayers by offering an alternate system has left many still scrambling for the calculators.
Of course, there is an increase in expenditure of Rs 3,43,678 crore over Revised Estimates for 2019-20. Or the fiscal deficit has been proposed to be kept at 3.8 per cent of the GDP but the longest read Budget speech by FM Nirmala Sitharaman failed to enthuse the markets on February 1 and the critics.
The government also moderated its expectations for tax collections after two straight years of missing the set target. The estimate for gross tax revenue for FY20 has revised downwards to Rs 21.6 lakh crore from Rs 24.6 lakh crore. For 2020-21, the Centre expects a 12 per cent increase in gross tax revenue collections at Rs 24.2 lakh crore. The net tax revenue for FY21 is estimated at Rs 16.35 lakh crore compared with the revised estimate of Rs 15.04 lakh crore for FY20, clocking a growth of 8.7 per cent. The government reiteration of doubling the farmer’s income by 2022 was received with usual suspicion by those opposing the government both inside and outside Parliament. But allocation to the tune of Rs 2.83 lakh crore towards agriculture and allied activities did turn some heads.
Hits & Misses
Here is the broad break-up of some of the major allocations. Of the Rs 2.83 lakh crore, the government has earmarked Rs 1.6 lakh crore for agriculture, irrigation and allied activities and Rs 1.23 lakh crore for rural development and Panchayati Raj. The healthcare sector got Rs 69,000 crore with a rider that Rs 64,000 crore would go for PM Jan Arogya Yojana. The Jal Jeevan Mission that augments local water sources, recharging existing sources and promoting water harvesting and desalination got Rs 3.6 lakh crore, while the pet project of PM Modi from his first full tenure — Swachh Bharat Mission—got Rs 12,300 crore for FY21. Education got a meaty chunk of Rs 99,300 crore, while only Rs 3,000 crore have been allocated to skill development.
The FM wants the development and promotion of industry and commerce with Rs 27,300 crore allocations. Allocations toward infrastructure development was again a head-turner after the FM once again announced Rs 100 lakh crore to be invested over the next 5 years. The FM said: “Today the National Infrastructure Pipeline comprised of Rs 103 lakh crore worth projects launched on 31 December 2019 and more than 6,500 projects across sectors will now be classified as per their size and stage of development.” A National Logistics Policy will also be released soon, FM said, something that the industry at large has welcomed. The proposed NLP will clarify the roles of the Centre, States and key regulators. It will also help in creating a single-window e-logistics market. The FM said NLP will focus on the generation of employment, skills and making MSMEs competitive.
On Firm Ground
Transportation remains a big focus area again as the FM allocated Rs 1.7 lakh crore to improve the overall transport infrastructure in FY21. The transport ministry will need to accelerate the development of highways, including 2,500 km access control highways, 9,000 km of economic corridors, 2,000 km of coastal and land port roads and 2,000 km of strategic highways with these allocations. Delhi-Mumbai Expressway and two other packages will be completed by 2023 and the work on the Chennai-Bengaluru Expressway will be started this fiscal, the FM said. The FM has also proposed 100 more airports, developed by 2024 to support UDAN.
Indian Railways were allocated Rs 70,000 crore, an increase of around 3 per cent over last year’s allocation, with an outlay for capex amounting to Rs 1.61 lakh crore. But the railways will have to buckle up and earn more in FY21 because the FM has kept a 9.5 per cent increase in its earnings target that comprises passenger earnings, goods, sundry, and other heads. For modernisation, funds of Rs 12,000 crore will go towards the construction of new lines, Rs 2,250 crore will be used for gauge conversion, and Rs 700 crore will go towards doubling of line. The FM has allocated Rs 5,787 crore for rolling stock and Rs 1,650 crore for signalling and telecom. The funds for rail passenger comfort stood at a mere Rs 2,725.6 crore. The targets for freight loading too got upwardly revised at 1,265 MT, which is 42 MT (3.4 per cent) incremental over RE 2019-20.
For Aam Aadmi
Benefits from the Union Budget included the possible marginal consumption boost from the reduction in the personal income tax rate and the abolishment of dividend distribution tax, which is a positive for MNCs. Extension of additional interest deduction of Rs 1.5 lakh on affordable housing loans also came in as a positive move for the consumers. This deduction is over and above the prevailing limit of Rs 2 lakh. The deadline of affordable housing project approval, on which a tax holiday was provided to the developer, has been extended by one year to 31 March 2021. The Budget has been negative for the life insurance industry as the Centre announced the removal of all major exemptions proposed in the new tax regime, which takes away one of the key incentives that boost sale of life insurance products. Moreover, the removal of DDT and making dividends taxable in the hands of the recipients will result in higher tax rates for life insurers, particularly for those who are ULIP heavy, experts pointed out.
What’s in the bag? FM Nirmala Sitharaman poses in front of Parliament as she arrives to present the Union Budget