New Tax Regime, Lofty Growth Dream and a Tall Disinvestment Aim: FM's $5-Trillion Economy Journey Begins With Thousand Small Steps
Finance Minister Nirmala Sitharaman outside the Ministry of Finance before presenting the Union Budget on Saturday. (PTI)
New Delhi: The Narendra Modi government on Saturday unveiled the Union Budget for the financial year 2020-21, with focus on boosting income and improving the purchasing power of consumers in a bid to remedy sagging economic growth, while also announcing big spending on agriculture.
In her presentation in the Lok Sabha, replete with poetry and references to India’s ancient ingenuity, Finance Minister Nirmala Sitharaman said the three major themes of the Budget were aspirational India, a caring society, and economic development for all. She stopped after two hours and 40 minutes – the lengthiest-ever Budget speech – as the 60-year-old was reportedly feeling unwell.
“Only through higher growth can we have our youth gainfully and meaningfully employed,” said Sitharaman who was wearing a crisp yellow sari, while she restated that the government is committed to Prime Minister Narendra Modi’s goal of making India a $5-trillion economy.
The minister introduced new slabs and reduced the tax rate for different sections of individual income up to Rs 15 lakh per annum if a taxpayer chooses to give up exemptions and deductions. The new tax regime will be optional and taxpayers will be given the choice to either remain in the old regime with exemptions and deductions or opt for the new reduced tax rates without those exemptions, Sitharaman said in the Lok Sabha.
By putting more money in the hands of consumers, the government aims to address swirling concerns about the economy. The Economic Survey on Friday projected India’s Gross Domestic Product (GDP) expansion at 6% to 6.5% in the next financial year starting April 1, saying growth has bottomed out. This compares to a projected 5% expansion in 2019-20.
Weak global growth impacting India as well as investment slowdown due to financial sector issues had led to growth dropping to a decade-low in the current fiscal, it said, adding that the 5% growth projected for 2019-20 is the lowest it could fall for now.
Sitharaman said the central government’s debt reduced to 48.7% of GDP in 2019 from 52.2% and the country clocked a GDP growth of 7.4% over 2014-19 while Foreign Direct Investment (FDI) increased from $119 billion in 2009-14 to $284 billion.
“We have estimated nominal growth of GDP for year 2020-21, on the basis of trends available, at 10%,” she said, drawing gasps of incredulity from opposition MPs. “Accordingly, receipts for the year 2020-21 are estimated at Rs 22.46 lakh crore and, keeping in mind commitment of the government towards various schemes and need for improvement in quality of life, the level of expenditure has been kept at Rs 30.42 lakh crore.”
The Budget failed to enthuse the stock markets as the BSE Sensex fell 987 points to close below the 40,000-mark. The 30-share benchmark index hit an intra-day low of 39,631.24 and a high of 40,905.78. The 50-share NSE Nifty dropped 318.30 points, or 2.66 per cent, to 11,643.80.
Items including cigarettes, chewing tobacco as well as imported products, such as fans, table, footwear, edible oils, electric vehicles, tableware, kitchenware, toys and furniture are set to become costlier because of a hike in taxes proposed in the Budget. Newsprint, sports goods, microphone, etc, are set to get cheaper with a reduction in duties.
Sitharaman proposed a 16-point formula to boost agriculture and link it with allied sector better than before in a bid to double the income of farmers in the next two years. The agriculture and rural development outlay has been set at Rs 2.83 lakh crore in the Budget 2020-21.
“We aim to provide 20 lakh farmers to set up solar pumps. And an additional 15 lakh farmers to solarise their grid-connected pumps. This is a major step forward,” the minister said, adding that farmers, if they have barren land, now will be able to set up solar pumps and generate solar energy, which they can sell to the grid. This is in line with a pilot project launched in Gujarat about two years ago.
The defence budget was upped marginally to Rs 3.37 lakh crore for 2020-21 against last year’s Rs 3.18 lakh crore, going against prospects of a significantly enhanced allocation to fast-track long-pending military modernisation.
In another big move, Sitharaman announced that the government has decided to get Life Insurance Corporation of India, or LIC, listed on the markets.
“Listing of companies on stock exchanges discipline a company and provides access to financial markets and unlocks its value,” she said. “It also gives opportunity for retail investors to participate in the wealth so created. The government now proposes to sell a part of its holding in LIC by way of Initial Public Offer.”
The step is in line with the government’s aim to consider stake sale in public sector entities to bolster its finances and allow these PSUs to raise resources. The government has set the disinvestment target for financial year 2020-21 at Rs 2.11 lakh crore. It has already kicked off the process for Air India and invited bids from potential buyers for a 100% in the national carrier.
Sitharaman quoted noted Kashmiri poet Dina Nath Kaul in her speech, saying that everything the government does is aimed at benefitting the people of the country. The poem she cited refers to Shalimar Bagh and Dal Lake in Kashmir, emphasising that India belongs to all its citizens. The Valley is slowly returning towards normalcy from a security and communication clampdown placed on Jammu and Kashmir by the Centre in August 2019 when it stripped the state of its “special status” provided under the Constitution and restructured it into two Union Territories.
“The government is fully committed to supporting the all-round development of the newly formed Union Territories of J&K and Ladakh. Accordingly, an amount of Rs 30,757 crore has been provided for the Financial Year 2020-21 (for J&K). An amount of Rs 5,958 crore has been provided for the Union Territory of Ladakh,” Sitharaman said.
She also referred to the “Saraswati-Sindhu Civilisation” to hail India's millennia-old commerce and trade industry.
“The guilds of Saraswati-Sindhu Civilisation and the Harappan seals are remarkable. The civilisation is about 4000 BCE and they belong to 3300 BCE,” she said.
The Budget also proposed to further the government’s efforts towards the welfare of Scheduled Castes (SCs) and Other Backward Classes (OBCs), by announcing a provision of about Rs 85,000 crore for the next financial year. “In furthering development and welfare of Scheduled Tribes, I provide in the Budget for the year 2020-21 an amount of about Rs 53,700 crore,” Sitharaman added.
The FM announced an allocation of Rs 69,000 crore for the healthcare sector with plans to expand the government's flagship health insurance scheme Ayushman Bharat-Pradhan Mantri Jan Aarogya Yojana (PMJAY). In 2019-20, she had announced a Rs 62,659.12 crore outlay for the sector. The government will open hospitals in tier-II and tier-III cities covered under aspirational districts scheme, which still do not have an Ayushman Bharat-empanelled hospital, the minister said.
Sitharaman proposed to set aside Rs 99,300 crore for the education sector that caters to around 300 million students in 1.4 million schools and over 51,000 colleges. To draw foreign students to Indian campuses, she proposed to start an Indo-SAT exam under a ‘Study in India’ scheme, to enable evaluation and study of students from Asia and Africa who seek admission here.
(With agency inputs)