UNION BUDGET – THODA HAI, THODE KI ZAROORAT HAI!

The Budget speech just refused to end – it was almost like a Karan Johar or Sanjay Leela Bhansali movie, never ending and so long.  No wonder she asked for more water and was even asked to sit down and read the rest, after which she said she will lay the papers – she had two more pages to go.

The Budget had three themes which sounded so good – Aspirational India, Economic development and A caring society. But that’s what it was – it sounded Utopian like always. The intent is great but like always, we do not know how all this will be achieved.

A poetic verse in Kashmiri, the often used quotes from Tamil poetess Avvaiyar Aatichudi,  words from Saraswati Sindu civilisation hierographic scripts,  some French, Thiruvalluvar verses read in Tamil, a verse from Kalidasa in Sanskrit, it looked like Sitharaman was on a roll! This was her moment of glory and she left no stone, err, poet, untouched.

If the poetic overdose was not enough, the FM left all mouths open, a sense of complete disbelief when she said that the Govt has estimated the nominal GDP growth at 10% for 2020-21. Thankfully, the fiscal deficit targets were more realistic - 3.5% for FY21 and 3.8% for FY20. The high growth trajectory has been assumed on the basis of the give away as proposed by the CEA yesterday – sacrifice all at the altar of growth.

But then came another googly – the divestment target for FY21 has been set higher at Rs.2.1 lakh crore, this when the current fiscals target is completely askew. Maybe it is based on the divestment is expects from LIC or Air India.

One major booster which the market ignored - Dividend Distribution Tax (DDT) will now be borne only by the recipient of the dividend and the companies will no longer have to pay the DDT.

Then came the great cheer- reduction in personal income tax but the rates come down with a  rider – it is all without exemptions. So we really do not know if this is going to work and put more money in the hands of the people. By not getting 80CC exemptions, do we really end up saving more? Those are the fine prints which we need to look at. On the face of it, we see that there is a cut in taxes but are we really getting it? And she talked about simplying the process, on the contrary we will now have two sets of IT and so many slabs. So one will first work out the outgo with exemptions at the old rate and then at the new rate without exemptions. Yes, the CAs will most certainly be earning much more.

Here are the new  rates:

• Income upto Rs.5 lakh will pay no tax
• Income earned from Rs.5 to 7.5 lakh pays 20% now and will have to pay 10%
• Income earned Rs.7.5 to 10 lakh income earners will pay 15% v/s 20% now
• Income between 10 to 12.5 lakh reduced from 30% to 20%
• Income 12.5 lakh to 15 lakh reduced from 30% to 25%
• Incomes above Rs.15 lakhs will continue at 30%
• New Income tax will be optional

There is so much data now to crunch it is very difficult to give a quick synopsis. The market was expecting only one thing – abolition of Long Term Capital Gains tax; that did not happen and the market slumped almost 700 points after the Budget ended. There was nothing which really unleashed the animal spirits in the market and that’s the sulking which we see. It is also because there is so much to process in this 3-hour long Budget speech, we will see the reaction later.

What were the biggest takeaway? DDT abolition, LIC IPO, reduction in Income Tax. The reduction in the income tax might put more money in the hands of the people but the Budget lacked precipitative action which would have helped the economy jump up. Will this slow heal, 3-hour long monologue help?

AGRICULTURE

• Doubling of farm income by 2022, increasing purchasing power,
• 16-action points for the agri sector,
• liberalizing farm markets,
• balanced use of all chemical fertilisers,
• farmers to use fallow for setting up solar pumps
• Krishi Udaan for farm produce, more agri warehouses to be built,
• Geo tagging of existing warehouses,
• viability gap funding to be provided for warehouses,
• 2.83 lakh crore allocation for agri and irrigation
• Agri credit target for 2021 set at Rs.15 lakh crore
• Kisan Credit card scheme proposed
• Propose raising fish production to 2 lak tons                      
• Raised milk production target to 108 million metric ton by 2025
• NABARD re-financing scheme to be expanded

ALLOCATION FOR WELFARE SCHEMES

• Allocation of Rs.12,300 crore for Swachh Bharat for FY20-21
• Rs.69,000 crore for the health sector for FY21
• Jal Jeevan Mission allocation at Rs.11,500 crore for FY21.
• AI to be used for Ayushman Bharat
• To expand Jan Aushadi Kendra
• To provide Rs.35,600 crore for nutritional programmes
• Rs.28,500 crore outlay for women related schemes
• Rs.85,000 crore for backward castes
• Rs53,700 crore for scheduled tribes
• Rs.9500 crore allocation for senior citizens and handicapped
• Rs.4400 crore allocation for clean air
• Rs.5958 crore allocated for Ladakh
• Rs.30,757 crore for J&K

EDUCATION & JOBS

• Rs.99,300 crore for education sector for FY21
• One-year internships to be provided for engineers by urban local bodies
• To set up National Police University and Forensic Science universities
• To introduce a new Education Policy
• Attach medical colleges to District hospitals in PPP mode
• Large hospitals to be encouraged for PG courses
• To allow FDI and ECB for education sector
• 5 archeological sites to be developed as iconic sites
• Institute of Heritage and Conservation to come up soon
• Maritime museums to be set up at Lothal in Gujarat
• Tribal museum to be set up in Ranchi
• Four more museums to be taken up for renovation

ECONOMIC DEVELOPMENT

• Investment cell to be set up at center and states for end-to-end facilitation
• 5 smart cities to be developed in PPP mode
• New scheme to electronics manufacturing
• Rs.3.6 lakh crore allocation for piped water projects
• Rs.3000 crore for skill development in FY21
• Proposes to encourage manufacture of mobile phones
• National Tech Textile Mission to be announced soon
• Rs.1480 crore for textile sector
• Rs.27,300  crore for promotion of industry and commerce
• Move to make every district an export hub
• Rs103 lakh drore National infrastructure pipeline
• Project Preparation facility for infra
• National Logistics Policy to be soon released
• New  ‘Nirvik’ scheme to provide higher insurance for exporters
• 2000 kms of strategic highways to be built
• Delhi-Mumbai expressway target by 2023

RAILWAY BUDGET

• To achieve 11,000 kms of track electrification
• Station redevelopment projects under PPP mode
• More Tejas type trains for tourism
• Large solar power capacity alongside railway tracks
• High-speed Mumbai – Ahmedabad train

INFRASTRUCTURE

• To energise economic activity along river banks
• Rs1.7 lakh crore allocation for transport
• 100 more airports to be developed by 2024.
• Rs.2200 crore for power and renewal sector
• To corporatize at least one sea port and get it listed on the stock exchanges
• National Gas grid to be expanded to 27,000 kms from 16,200 kms
• Policy soon for building data center parks
• To provide 20% equity and external assistance for Metro
• 1 lakh gram panchayats to be connected via ‘Bharat Net’
• Rs.6000 crore for Bharat Net
• To provide Rs.8000 crore for Quantum tech over next 5-years
• Air fleet number to go up
• Rs.3150 crore for Ministry of culture
• Rs.2500 crore for tourism development

FINANCIAL

• To set up an independent National recruitment agency
• Rs.100 crore outlay for hosting G20 in 2022
• Deposit insurance coverage from Rs.1 lakh to Rs.5 lakh for each depositor
• Amendments to Banking Regulations Act to improve working of co-operative banks
• Govt to have option to invoke Escape Clause in FY20
• To sell balance stake in IDBI Bank
• New scheme for subordinate debt for MSMEs
• Subordinated debt to be treated as quasi debt
• Indian Contracts Act to be amended
• NRIs can invest in certain Govt bonds
• Partial credit guarantee for NBFCs
• Limit for FPIs in corporate bonds hiked from 9% to 15%
• Govt to sell partial stake in LIC via IPO
• Divestment target at Rs.2.1 lakh