Budget 2019-20:  A Blueprint for New India

Dr. S.P. Sharma

The Union Budget 2019-20 is a blueprint for India's long term growth story, a vision which is envisaged to build a New India of the aspirations of crores of people with an economic size of US $ 5 trillion in the next five years.  The announcements on various socio-economic fronts indicate hopes of fulfilment of the aspirations of the people and promises of progress. The focus on MSMEs, start-ups, development of infrastructure, rural development, affordable housing and women empowerment are the focused areas to promote all-inclusive development in the country. The bottoms-up approach of the budget is ultimately ensuring that a road to a New India has become clear to walk the talk.

Union Budget 2019-2020 (Key takeaways)

Source: PHD Research Bureau, compiled from Union Budget 2019-20 Speech, Government of India

The 10 points vision including achieving minimum government maximum governance; pollution-free India; digitization in every sector; state of art physical and social infrastructure; self-sufficiency and export of food-grains, pulses, oilseeds, fruits and vegetables; a healthy society with well-nourished women & children, safety of citizens; and emphasis on MSMEs, Start-ups, defence manufacturing, automobiles, among others, under Make in India would strengthen the growth story of the Indian economy and increase its presence in the international economic arena as the country has potential to become a growth engine of   World economy. 

Continuous focus on infrastructure development such as Railway modernization, infrastructure connectivity through the projects such as industrial corridors, Bharatmala, etc., the target of building 1.95 crore houses in the second phase of PMAY-Gramin, additional tax benefits for first time home buyer, a further tax deduction of Rs. 1.5 lakhs for interest paid on housing loans sanctioned in the current fiscal year upto 31st March, 2020 are the steps toward revitalising the growth in the short term and strengthening in the medium to long term to establish a strong and sustainable growth trajectory. 

Further, the proposal to invest Rs 100 lakh crore in infrastructure over the next 5 years is highly encouraging; it will put India's economic growth on a high road. The multiplier effect of infrastructure investments would give a big push to the potential growth areas of the economy with millions of new employment opportunities for the growing young workforce.

The government has shown its priority of strategic disinvestment of select central public sector enterprises (CPSEs), other than Air India, in view of the current macroeconomic parameters. The disinvestment target of the government has been increased to a little over one lakh crore for FY2010 from Rs 90,000 announced in the interim budget. This will help government to boost its revenue and use it in development of infrastructure, public goods and socio-economic development of overall economy.

In continuation of the phased reduction in the corporate taxes by the government, the announcement of lowering of tax rates to 25% for companies with annual turnover of less than Rs 400 crores would enhance the sentiments of the businesses and strengthen the growth of MSMEs with new possibilities for expansion and deployment of more workforces in their respective factories. This reduction was proposed by the industry since the last many years. It will cover and benefit 99.3 percent of the companies and will enhance business sentiments and production possibility frontiers in the economy.

The labour laws in India have been relatively stringent and one of the biggest hurdles for entrepreneurs. The industry had been propounding for flexibility in labour laws since the last many years. The proposal to streamline multiple labour laws into a set of four labour codes is inspiring as simplification of labour laws would reduce the compliances for the industry particularly for the MSMEs and provide more room for deployment of workforce in the factories. This would result in making business environment more conducive and promote ease of doing business.

The Budget has focused on attracting foreign investors to increase capital flows with the easing of local sourcing norms for FDI in Single Brand Retail and 100% Foreign Direct Investment (FDI) permitted for insurance intermediaries. The announcement to merge NRI portfolio route with foreign portfolio investment is appreciable as it would make NRI investments in India easier. Further, the decision to organise global investor's meet in the country is investment growth provoking as it would expand the global players' investments in India.

MSMEs are the potential growth engine of the Indian economy. The government has very rightly diagnosed the importance of MSMEs in the economy; the announcement of 2% interest subvention for all GST registered MSMEs on fresh or incremental loans and creation of payment platform for MSMEs would facilitate them in getting better access to credit and expansion in business activities.

The allocation of Rs. 70,000 crore for the PSU bank recapitalization will enhance the health of the PSU bank and push up the pace of lending in the economy, by increasing the sentiments for credit availability. Various praise-worthy announcements such as solving the issue of 'Angel Tax' by introducing e-verification, speedy assessments of start-ups and redressal of their grievances and relaxing some of the conditions for carry forward and set-off of losses for start-ups would strengthen the start-up campaign in the economy.

The focus on encouraging PPP in unleashing faster development and completion of tracks, rolling stock manufacturing and delivery of passenger freight services in railways would not only promote industrial growth but also provide better service delivery to masses.

The prime focus to affordable housing in this budget as alignment of the definition of affordable housing in the Income-tax Act with the GST Acts and providing the limit on cost of the house at Rs. 45 lakh in line with the definition in the GST Acts would create demand in the housing and construction sector activity.

In addition, the usage of land parcels held by Central Ministries and Central Public Sector Enterprises all across the country for public infrastructure and affordable housing is encouraging and growth provoking. The additional income tax deduction of Rs. 1.5 lakh on interest paid on loans taken to buy electric vehicles and additional deduction of up to Rs 1,50,000/- for interest paid on loans borrowed up to 31st March, 2020 for purchase of an affordable house valued up to Rs 45 lakh are highly beneficial for middle class buyers.

The Budget has a strong synergy for the new education policy and made comprehensive allocation of Rs. 400 crore for FY2019-20 to transform education system with the focus on learning outcomes which will play a big role in revising the current education level. Further, the Study in India campaign of the government would help make India move towards being a global hub of education for the foreign students, as the students would get premium education at affordable rates. This would also benefit in the development of infrastructure, education level, facilities available in the top institutions of India.

The Budget announced to expand the Women SHG interest subvention programme to all districts and made provisions for overdraft of Rs. 5,000 to be given to verified women SHG member. These measures would strengthen women's role in the society, going forward.

Continuing with the thrust to government has very rightly focused on agriculture sector and increased the allocation of agriculture sector with a whopping 75% hike to Rs 1.5 thousand crores. Further, the government's decision to promote and encourage 'zero budget farming', also called 'going back to the roots', is highly inspiring. Zero budget farming means natural farming without using any credit and without the monetary purchase of inputs. Zero budget farming helps in reducing the cost of cultivation, enhance soil fertility, prevent environmental damage and all this without the use of money. Zero budget farming has already been implemented and tested in a few states and according to the government, this model is needed to be replicated in other states also, followed by whole country. This will, at a great extent, help reduce the problem of agriculture distress, as the farmers does not have to take expensive credit to buy the inputs and other raw material from the market. Zero budget farming would also create the scenario of self-reliance among the farmers, going forward.

Going ahead, there are certain things which needs to be addressed in the coming times to give a major thrust to spur economic growth trajectory of the country to the next level, such as introduction of agricultural marketing reforms, provision of adequate and efficient warehousing support within easy reach of villages, particularly for marginal farmers; educating farmers to adopt mechanized farming; minimising the wastages to less than 10% from the current level of 30 to 35%; increasing public investments in agriculture sector, modernizing agriculture along with technological reforms; and promoting food processing exports.

In a nutshell, the government aspires to make India a USD 5 trillion dollar economy, thorough focussed reforms and strategic investments in the most critical areas, such as infrastructure, digital economy, job creation, ease of doing business and kick-starting the virtuous cycle of investments. Overall, the Union Budget 2019-2020 is a balanced, pragmatic, welfare inducing budget and would rejuvenate the economic growth trajectory of the nation to build a New India.

New India where the economy will be in double digit growth trajectory, the manufacturing sector will be globally competitive, the agriculture sector will be sufficient to sustain the rising population and millions of jobs will be created for socio- economic development of the nation, income levels of the people will be growing exponentially, farmers' income will be doubled, taxation system will be simple, ease of doing business will become a reality and standards of living will improve.

The New India will be the dream India which will provide housing for all, education for all, easy access to medical and health facilities as well as better standards of living to the people. The New India will promise every citizen to realize his or her potential and contribute towards self, family and the country. New India will have numerous success stories to tell, demonstrate and sell to the world.

(The author is Chief Economist with PH.D Chamber of Commerce & Industry, New Delhi) E-mail: spsharma@phdcci.in

Views expressed are personal.