Good Morning Dear Readers and welcome to our exhaustive coverage of Budget 2019, which comes in the backdrop of falling employment, farm distress, tepid growth and a liquidity crisis in the NBFC space.
Globally, too, things are not looking that great with trade wars, rising crude oil prices, growth slump, and an overall fall in key economic indicators. But it’s not all gloom. With the Modi government winning the recently held general elections with a decisive mandate, expectations are running high that Modi 2.0 will deliver in Budget 2019.
Finance Minister Nirmala Sitharaman will present her first Union Budget shortly. The mandate for this year is steep as Sitharaman will have to kickstart India's economy by reviving consumption amid the beginnings of a global slowdown, the NBFC liquidity crisis and bolster farmers' income in a delayed monsoon.
- NPS Trust will be separated from Pension Fund Regulatory and Development Authority (PFRDA)
- PAN and Aadhaar made interchangeable, allowing those who
do not have PAN to file return
- Pre-filled tax returns to contain information from salaries, bank interest, capital gain and dividend income to be made available
- Surcharge on individuals having taxable income of Rs 2 crore to Rs 5 crore, and Rs 5 crore and more raised
- Lower 25 percent corporate tax will apply on companies with up to Rs 400 crore turnover, covering 99.3 percent of corporate India
- Simplified return form for GST registered businesses in the offing
- Basic customs duty on auto parts, optical fibres, digital camera, cashew, certain synthetic rubber, vinyl flooring hiked
- Customs duty exempted on components of specified electronic goods
- Customs duty on certain parts of electric vehicles removed
- Cess on petrol, diesel raised by Re 1 per litre; customs duty on gold raised to 12.5 percent from 10 percent
- A nominal basic excise duty imposed on tobacco- Proposes Legacy Dispute Resolution scheme to solve litigations in service tax and excise
Finance minister to do a tightrope walk in Budget 2019-20
Budget 2019 is likely to offer a mini-stimulus to take the economy out of five-year low, at the same time offering some tax relief to common man. This while balancing the needs of the economy and fiscal constraints.
So, here’s what one can reasonably expect:
1. Expect measures to boost spending at the cost of short-term slippage in fiscal deficit targets.
2. Finance Minister Nirmala Sitharaman will most likely lay down the Modi 2.0 government's road map for the economy and the nation in the next five years.
3. Offer some relief to the common man by raising personal income tax threshold for certain categories
4. Raise spending on agriculture, healthcare and social sectors.
5. The Budget may see a big push for infrastructure spending including roads and railways to drive growth
6. The FM may choose to offer stimulus via a combination of capital infusion in public sector banks, removing roadblocks that have crept into the Insolvency & Bankruptcy Code (IBC) process, providing liquidity to non-bank financial companies (NBFCs), addressing the agrarian crisis and stepping up allocations for infrastructure and social sectors
Finance Minister used a bahi khata (ledger) to carry the Budget papers instead of the traditional briefcase today. On that, news agency ANI has quoted Chief Economic Advisor (CEA) KV Subramanian as saying: “It is in Indian tradition. It symbolizes our departure from slavery of Western thought.”
The Har Ghar Jal scheme could be Modi’s ticket to 2024
The Har Ghar Jal programme is going to be a challenge like no other. When Modi proposed Swachh Bharat it seemed like a very ambitious one, and, though the government claims to have built 9.6 crore toilets and that 95 per cent of cities are open defecation free (ODF), in its true sense there is a long way to go before India can be declared ODF.
This is because infrastructure is only one part of the problem. Behavioural changes need to follow and it takes time for the wheel to turn.
Water supply is an altogether different ballgame.
Click here to read more.
Rupa Rege Nitsure, Group Chief Economist, L&T Financial Services
The Budget unveiled by the first full-time woman Finance Minister of India reminded me of a recent quote of Joseph Stiglitz from his article on progressive capitalism.
Stiglitz has said: “Reversing the malaise (of neoliberal policies) requires that we figure out what went wrong and chart a new course forward, by embracing progressive capitalism, which, while acknowledging the virtues of the market, also recognises its limitations and ensures that the economy works for the benefit of everyone.”
Nirmala Sitharaman’s Budget has been a step in this direction.
shares her thoughts on the Union Budget inA prudent and progressive Budget: FM steps up to the challenge
Read more: Budget is holistic, say tech industry leaders
Biocon managing director Kiran Mazumdar Shaw gave full marks to the finance minister for the Budget that was presented on July 5.
Read more: Ayushman Bharat gets Rs 6400 crore in 2019-20
Ayushman Bharat, launched in 2018, provides health insurance cover to almost 40 percent of India’s population, benefitting 100 million families which aims to provide a coverage of Rs 5 lakh per family annually.
Read more: ‘Study in India’ will be promoted through a mix of easier entry, better facilities
It is estimated that 45,000 international students study in higher education institutes across India. The Budget proposal is expected to give a boost to these numbers, with a likely thrust on education infrastructure and focus on research will attract more number of foreign students to India.
Chandra Shekhar Ghosh, MD and CEO, Bandhan Bank.
“The Finance Minister’s maiden Union Budget is growth focussed and builds on the foundation that the government created in the last term. The sops announced in the affordable housing segment is a welcome move not just for home seekers but also for builders, banks and HFCs. The focus on infrastructure, entrepreneurs, small businessmen and medium sized companies through the various announcements is positive news for the economy. The Finance Ministry’s move to discourage cash payments will help expand the digital payment ecosystem bringing in more consumer convenience and accountability.”
Read more: Gift tax loophole plugged for NRIs
Now,gifts of any kind – namely shares, property, vouchers, cash etc exceeding Rs 50,000 made to anyone apart from the specified relatives or blood relations would be taxed in the hands of the NRI, except if a double taxation treaty prohibits the same.
Read more: Here are how much sectors got from the Budget
Markets, however, did not receive the budget very well and most of the sectors ended lower.
Surojit Shome, CEO DBS Bank India.
“The Union Budget reiterates the Government’s intent to accelerate digitisation in the economy. Incentivising digital transactions through measures such as a 2 percent levy on cash withdrawals from bank accounts above a cumulative one crore per annum threshold and reduced merchant discount rates can structurally change adoption levels.Additionally, encouraging measures for start-ups should boost digital entrepreneurship as well as efforts to increase digital literacy particularly in rural India will strengthen the Digital India transformation process.”
Read more:
All the tax sops, including the rebate for income earned up to Rs 5 lakh, which were announced in the interim Budget in February 2019, were accepted. However, the super-rich will have to pay more, by way of an increase in surcharge.
Budget 2019 for the tax payer
Read the opinion piece here.
India now approaching the global markets to raise sovereign debt, indicates the country’s readiness to be sized amongst the best in the world. This is a huge vote of confidence in the economy and its trajectory, writes Ajay Piramal.
Read the full opinion piece here.
In one sense, driving investments seemed to be the overarching theme of the Budget. Thus, many of the big measures can be viewed through the lens of unclogging the financial services sector and increasing the flow of credit to the economy, writes Ravi Krishnan.
Read: FM Nirmala Sitharaman's maiden Budget speech rich in divine quotes, local wisdom
FM Nirmala Sitharaman’s maiden Budget speech was laced with relevant quotes and couplets, which she used to buttress her arguments.
Tune in: The Market Podcast
Moneycontrol's Jerome Anthony gets in conversation with Editor Santosh Nair to find out how the market reacted to Budget 2019.
Here’s all you need to know
By relying on natural agricultural inputs with no chemicals, ‘Zero Budget Farming’ aims for farmers to carry out their occupation without getting trapped in a vicious cycle of debt.
This was mentioned by FM Nirmala Sitharaman, in her Budget speech.
Read: Healthcare gets 15.4% higher allocation despite only passing mention in Budget 2019 speech
Healthcare may have got only a passing mention in the Budget presentation, but allocation to the sector has jumped 15.4 percent compared to previous year's revised budget.
Read: Why the markets will adjust to government not giving a fiscal push
This Budget is unlikely to occupy the mind space of the markets for long. In a range-bound market that clearly has more downside than upside, and with valuations not cheap, the hunt for quality is important.
Read the full opinion piece here
If the focus on Swachh Bharat Abhiyan helped the BJP in 2019, expect the ‘Har Ghar Jal’ scheme to do the same for the party in 2024, writes Viju Cherian.
Listen in: How Budget 2019 will impact the common man
In this podcast, Moneycontrol's Personal Finance Editor Kayezad Adajania talks about Nirmala Sitharaman's maiden budget and its impact on the common man.
Read: Opinion | Why BJP is back to the basics
Read more: New Space India will complement Antrix, another commercial arm of ISRO
ISRO spokesperson has told Moneycontrol that the space agency is expanding, its research and commercialisation capabilities, an organisation like NSIL needed to meet the growing demand.
Read more: Fury, sarcasm on social media after Budget offers little benefits to commoners
While a host of reforms were announced by FM Nirmala Sitharaman in her maiden Budget speech, the common man didn't have much to rejoice.
Twitterati had a field day after the budget presentation, with memes and tweets flooding social media.
FM Nirmala Sitharaman to CNBC-TV18 on the government’s disinvestment plan:
> The respective ministries will have to consult their stakeholders and decide on divestments
> Sectoral limitations are always kept in mind when divestment takes place
> CCEA’s list of companies for divestment will come soon; divestment target realistic
> Air India not a part of CCEA’s cleared list
FM Nirmala Sitharaman to CNBC-TV18 on PSB recapitalisation:
> Wanted to send a clear message on PSB recapitalisation, did not want a half-hearted measure
> Rs 70,000 crore sends a clear message on PSB recapitalisation
> Wanted to ensure that banks use funds generously for growth and other activities
> Banks will have to be leaner and meaner by use of technology, giving better service quality
FM Nirmala Sitharaman to CNBC-TV18 on NBFC crisis:
> Decisions aimed to help NBFCs taken after consultation with experts
> For NBFCs who have a problem of liquidity, we have made liquidity available
> Have taken steps to address NBFCs with problems pf governance, regulation
> Have given RBI powers to resolve crisis for NBFCs if they cannot do it themselves
> Glad RBI is also working at tandem with government on solving the NBFC crisis
> NBFC problem may have reached the peak, things will have to improve
FM Nirmala Sitharaman to CNBC-TV18:
> This Budget should kick-start the virtuous cycle of investment
> Public investments in infrastructure will continue, scope will go beyond roads and airports
> People in the nooks and crannies of India need the benefit of Direct Benefit Transfer
Speaking to CNBC-TV18, Finance Minister Nirmala Sitharaman has said that it was her family’s suggestion to drop the briefcase.
Breaking the age-old tradition of carrying Budget papers in a briefcase, the finance minister today posed outside Parliament with a ‘bahi khata’ (traditional Indian ledger) instead.
Read the full story: Temporary cut in GST will reverse downcycle in auto demand, says M&M’s Pawan Goenka
Though the Budget was silent on GST on automobiles, the only way to get out of the vicious downcycle of slowing sales would be to have a temporary rate cut, said Pawan Goenka, Managing Director, Mahindra & Mahindra (M&M).
Revenue foregone to corporates estimated at Rs 1,08,785 crore
The government's revenue foregone in the form of incentives and tax exemptions to corporates in 2018-19 grew 16 percent to over Rs 1,08,785 crore. The revenue foregone stood at Rs 93,642.50 crore in the 2017-18.
Revenue foregone on deduction of profits of undertakings engaged in generation, transmission and distribution of power was to tune of Rs 15,284.58 crore in 2018-19, compared to Rs 13,156.97 crore in 2017-18. Similarly, revenue foregone on deductions of profit of industrial undertakings derived from production of mineral oil and natural gas stood at Rs 1,275 crore in 2018-19.
Read the full story: Clean mobility gets a big push, ball is in automakers’ court now
FM Nirmala Sitharaman’s proposed tax sops for buyers of electric vehicles, customs exemptions for car makers, investments for infrastructure development will force the industry to bite the bullet.
Read the full story: FM Nirmala Sitharaman pegs FY20 GDP growth at 12% over FY19
FM Nirmala Sitharaman today pegged India’s nominal GDP growth rate at 12 percent for FY20 over the estimated GDP for FY19, as she announced a raft of policies to boost people’s spending and buoy demand.
Revenue foregone to corporates estimated at Rs 1.08 lakh crore
The government's revenue foregone in the form of incentives and tax exemptions to corporates in 2018-19 grew 16 percent to over Rs 1.08 lakh crore. The revenue foregone stood at around Rs 93,642 crore in the 2017-18.
Read more: Traditional industries set for facelift under SFURTI scheme
FM Nirmala Sitharaman, in her maiden Budget speech today, said that to boost the agro-rural industrial sector, the government is considering a cluster-based development under the SFURTI scheme, with focus on bamboo, khadi and honey.
Centre's key expenditures for 2019-20
> Defence: Rs 3.05 lakh crore
> Home Affairs: Rs 1.03 lakh crore
> Education: Rs 94,854 crore
> Health: Rs 64,999 crore
> Transport: Rs 1.57 lakh crore
> Major subsidies: Rs 3.01 lakh crore
> Rural development: Rs 1.40 lakh crore
> Urban development: Rs 48,042 crore
> Pension: Rs 1.74 lakh crore
> Agriculture and allied activities: Rs 1.51 lakh crore
> North East development: Rs 3,000 crore
> IT and telecom: Rs 21,783 crore
> Transfer to state: Rs 1.55 lakh crore
Read the full story: Govt to spend Rs 100 lakh crore on infra, measures to ease funding crunch
The government placed a big thrust on infrastructure sector in Budget 2019, proposing to spend about Rs 100 lakh crore in the next five years. It has announced the formation of an expert committee to suggest ways to address the challenges of infrastructure financing.
Quick look in pictures: Key takeaways from the 'Bahi Khata'
NITI Aayog Vice-Chairman Rajiv Kumar to news agency ANI:
We have strongly welcomed it. Not only because some of our ideas and suggestions have been incorporated by Finance Minister, but also because it is a Budget that focuses on sharpening growth, promoting private investments in the country.
The Central Board of Direct Taxes (CBDT) said that it expects a revenue gain of Rs 12,000 crore through a hike in surcharge on income above Rs 2 crore. It also said that the mandatory filing of IT returns is an anti-abuse provision, and that they are not inconveniencing any taxpayer, according to a CNBC-TV 18 report.
Read: Opinion | Water gets a priority tag but solving the problem requires policies and action plans
“Given thishype about water issues, the Budget speech delivered by Finance Minister Nirmala Sitharaman was conspicuously skimpy on agriculture and water,” Tushaar Shah writes.
It is clear that while the economists are advocating structural reforms, those in government do not believe in it. I think Mr Modi is willing to do incremental reforms, and not bite the bullet to do radical reforms, said P Chidambaram.
As to taxing the rich, it is unclear whether the effective tax rate has been increased from three percent to seven percent, or by seven percent, said P Chidambaram.
Read: Opinion | A sound Budget despite the absence of fireworks
“FM has tried to correct key problems of debt overhang and stressed balance sheets that are at the heart of the current investment slowdown. However, the massive political mandate called for bolder reforms,” Avinash M Tripathi writes.
We are registering our protest here, but what else can people do? As a political party, we are articulating the disgruntlement of the common people on their exploitation through taxation, said P Chidamabaram.
There is nothing in the Budget that explains how you are going to reverse the slide in agriculture: Former Finance Minister and Congress leader P Chidambaram
The Finance Minister should have been transparent about how much revenue the government expects to raise with the raise in taxes, said Congress leader and former Finance Minister P Chidambaram in a press conference after the Budget speech.
Surendra Hiranandani, Founder & Director, House of Hiranandani.
The need of the hour is to lower interest rates which will help resolve the existing liquidity crisis and boost housing demand. Also, there is certainly a need to relook at the tax structure. Going forward, we expect continued momentum for Indian realty to attract new investments into the [real estate] sector, said
WATCH: Decoding Budget 2019
Moneycontrol Editor Santosh Nair chats with CNBC-TV18 Consulting Editor Udayan Mukherjee to understand the market's reaction to various proposals tabled in Budget 2019.
Union Minister Piyush Goyal to news agency ANI: Finance Minister has been very benign to the Railways. She has laid out a vision of investment of nearly Rs 50 lakh crore over the next 10 years. I would really like to thank Finance Minister for strengthening the resolve of the Railways.
Finance Secretary Subhash Chandra Garg to CNBC-TV18:
> On the corporate tax side, we are higher than the global benchmark
> Corporate tax collections are better than last year
Finance Secretary Subhash Chandra Garg to CNBC-TV18:
> Total tax revenues are about Rs 60,000 crore less
> Lot of people believe it is good to have more public shareholding in listed companies
> Time to raise some of our borrowings from sovereign bonds
> First issuance of foreign sovereign bond will take some time
> Expenditure estimates in the Budget are realistic
>Most of the Rs 70,000 crore for PSBs will be for growth capital
