INTERIM UNION BUDGET 2019 - OVERVIEW OF - BY INTEREL CONSULTING INDIA PVT. LTD - Interel Group

OVERVIEW OF

INTERIM UNION BUDGET 2019

              BY
              INTEREL CONSULTING INDIA PVT. LTD.

Interim Union Budget 2019 : An Overview
The Interim Union Budget 2019 for the country was presented today. It is an interim Budget as
the country will go for general elections in April-May this year. This Budget was incidentally also
presented by the Interim Finance Minister of the country Piyush Goyal as the incumbent
Minister Arun Jaitley is in the US for medical treatment.

Expectedly, despite being interim the budget was populist, with a former Finance Minister even
calling it an “account on votes” rather than a “vote on account” budget. Irrespective, the Budget
has taken strong steps to spur consumption through income tax rebates for the middle class
and populist schemes for the farmers and marginalized communities in the country - sections
which are influential vote banks for political parties in the forthcoming elections. Besides
increasing consumption, the measures are also likely to improve the feel-good factor in the
economy.

SPURRING CONSUMPTION
Tax sops for the middle class: The Finance Minister has exempted all individual taxpayers with
a taxable annual income of up to Rs 500,000 (USD 7,010) from paying any income tax. In all, a
tax benefit of Rs 185 billion (USD 2.6 million) is proposed to be provided to an estimated 30
million middle class and small taxpayers comprising of self-employed, small businesses,
traders, salary earners, pensioners and senior citizens.

Schemes for farmers: The Finance Minister introduced a new scheme for farmers — Pradhan
Mantri Kisan Samman Nidhi— to extend direct income support at the rate of Rs 6,000 (US$
84.14) per year to farmer families, having cultivable land of up to 2 hectares. The program has
an outlay of Rs 750 billion (US$ 10.51 billion) for the FY 2019-20 and Rs 200 billion (US$ 2.8
billion) in the Revised Estimates (RE) of FY 2018-19. The program would be retrospectively
effective from December 1, 2018. This means that Rs 2,000 (USD 28.05) will be deposited in the
bank accounts of the farmers within the next two months.

The budget also approved doubling the interest subsidy on crop loans, and also raised the
interest subvention when farm loans are restructured in times of natural calamity.

The Minister also announced 2 per cent interest subvention to the farmers pursuing the
activities of animal husbandry and fishery, who avail loan through the Kisan Credit Card. Further,
in case of timely repayment of loan, they will also get an additional 3 per cent interest
subvention.
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Giving impetus to the housing sector: The Finance Minister has tried to propel the housing
sector by raising capital gains exemption under Section 54 of the Income Tax Act and by doing
away with tax on the notional rent taxpayers have to pay for a self-occupied second house.

SUPPORTING THE UNORGANIZED SECTOR
In the interim budget, the government has introduced a mega pension initiative for the 100
million workers in India’s unorganized sector. Known as the Pradhan Mantri Shram-Yogi
Maandhan, the Finance Minister underlined that within the next five years it would be one of the
largest pension schemes in the world.

A sum of Rs 5 billion (USD 70.13 million) has been allocated for this scheme, which will also be
implemented from the current year. It will provide assured pension of Rs 3,000 (USD 42.07) to
the 100 million people working in the largely fragmented informal sector The pension will be
paid once they reach the age of 60. Domestic workers, small shop workers, factory workers,
among others may benefit from this announcement, though the details of this scheme are not
known yet.

RATIONALIZING GST
The average monthly collection of Goods and Services Tax (GST), which was rolled out in July
2017, has increased to Rs 971 billion (USD 13.61 billion) in the current fiscal from Rs 897 billion
(USD 12.58 billion) last year.

The Minister highlighted that in spite of major rate reductions and relaxations, revenue trends
are encouraging. He said that GST has resulted in increased tax base, higher collections and
ease of trade. He underlined that the government wants the GST burden on home buyers to be
reduced and accordingly the GST Council has been moved to appoint a Group of Ministers to
examine and make recommendations in this regard at the earliest.

Moreover, businesses — that constitute 90 per cent of GST payers — will be allowed to file
quarterly returns.

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DIGITALIZING INDIA, IMPROVING GOVERNANCE
Recognizing the urgent need to catch up with the Fourth Industrial Revolution, the Budget
announced the development of a National Artificial Intelligence Portal as part of the National
Program on 'Artificial Intelligence’.

The Finance Minister stated that the Government e-Marketplace (GeM), created two years ago,
has resulted in average savings of 25-28 per cent and the platform will now be extended to all
central public sector enterprises. Transactions of over Rs 175 billion (USD 2.45 billion) have
taken place so far on the GeM.

The Minister announced several steps that would improve governance. For instance, income
tax refunds of taxpayers will come into their bank accounts within 24 hours in the next two
years. Moreover, income tax returns chosen for scrutiny will also be done digitally, with
anonymity. The taxpayer will not meet the income-tax officer, thereby reducing tax terrorism and
other corrupt malpractices.

INFRASTRUCTURE CREATION
The Minister spelt out the government’s feats in the area of infrastructure development. India
now has over 100 airports. Airports have been developed in the North Eastern states of Sikkim,
Arunachal Pradesh, Meghalaya, Tripura and Mizoram. Over the last five years, domestic air traffic
passengers have doubled, leading to the creation of a large number of jobs in the aviation
sector.

India has become the fastest highway developer in the world — it is building 27 kilometers of
highway network each day.

The government is building roads in rural areas under the Pradhan Mantri Gram Sadak Yojana
(PMGSY), which is being allocated Rs 190 billion (USD 2.66 billion) in Budget Estimates (BE)
2019-20 as against Rs 155 billion (USD 2.17 billion) in RE 2018-19.

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FOCUS ON BACKWARD REGIONS, POOR
COMMUNITIES

Besides the new airports that have been set up in North Eastern states, the government has
also announced record allocation of funds — at Rs 581.66 billion (USD 8.16 billion) for the
North-Eastern region.

Several schemes were announced for the welfare of the weaker sections including Scheduled
Castes and Scheduled Tribes.

The Finance Minister said the SC/ST Welfare Development Board will frame special strategies
for the benefit of the ‘hard-to-reach’, de-notified, nomadic and semi-nomadic communities. A
Committee under the government’s policy think tank NITI Aayog will also be set up to complete
the task of identifying de-notified, nomadic and semi-nomadic communities not yet formally
classified.

TEN YEAR VISION FOR INDIA
The Budget underlined a 10-year vision for India, setting goals in the areas of building physical
and social infrastructure (roads, airports, ports, housing, water supply, power etc), education,
digitalization, environment, manufacturing, cleaning rivers, space programs, healthcare, growing
food organically and on improving governance.

Overall, the vision seeks to improve the ease of living for all Indians by 2030. The Budget has a
thrust on electric vehicles, energy-storage devices, energy security, adopting micro-irrigation
techniques, making India pollution-free, creating millions of jobs through digitalization, placing
an Indian astronaut in space by 2022 and developing a comprehensive wellness system in the
country.

The Minister announced that India is poised to become a USD 5 trillion economy in five years
and further aspires to become a USD 10 trillion economy in the next eight years.

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CONCLUSION
Overall the interim Budget, right before the general elections, has sought to set the pace for the
intense political campaigns that will kick off soon across the country. The huge welfare
schemes announced by the government have been met with a certain amount of skepticism by
the economists. The funding of these schemes is partially expected to come from the Reserve
Bank of India’s interim dividend payout of Rs 400 billion (USD 5.6 billion) and disinvestment
proceeds of Rs 900 billion (USD 12.62 billion). There is also an expectation that the sops and
new schemes could create a fiscal deficit of 3.4 percent. While experts don’t expect that to be
a problem, the economy definitely needs to grow at a fast pace to increase the government’s
revenue collection.

The Budget was crafted with the right socio-economic focus, a vision for the future, and tax
sops that could spur consumption. Its political impact however will finally be measured when
the results of the general elections are announced in a few months from now.

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