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Editorial Articles


volume-45,08-14 February 2020

Union budget 2020-21 far-reaching reforms to energise economy

Presenting the first Union Budget of the third decade of 21st century, Finance Minister Smt. Nirmala Sitharaman, unveiled a series of far-reaching reforms, aimed at energizing the Indian economy through a combination of short-term, medium-term, and long-term measures.

The Key Highlights of Union Budget 2020-21 are as follows:

Three prominent themes of the Budget

  • Aspirational India - better standards of living with access to health, education and better jobs for all sections of the society
  • Economic Development for all - “Sabka Saath , Sabka Vikas , Sabka Vishwas”.
  • Caring Society - both humane and compassionate; Antyodaya as an article of faith.
  • Three broad themes are held together by:
  • Corruption free, policy-driven Good Governance.
  • Clean and sound financial sector.
  • Ease of Living underlined by the three themes of Union Budget 2020-21.

Three components of Aspirational India

  • Agriculture, Irrigation, and Rural Development
  • Wellness, Water, and Sanitation
  • Education and Skills

Sixteen Action Points for Agriculture, Irrigation and Rural Development

  • 2.83 lakh crore to be allocated for the following 16 Action Points:
  • 1.60 lakh crore for Agriculture, Irrigation & allied activities.
  • 1.23 lakh crore for Rural development & Panchayati Raj. –
  • Agriculture credit:
  • 15 lakh crore target set for the year 2020-21.
  • PM-KISAN beneficiaries to be covered under the KCC scheme.
  • NABARD Re-finance Scheme to be further expanded.
  • Comprehensive measures for 100 water-stressed districts proposed.
  • Blue Economy:
  • 1 lakh crore fisheries¡¦ exports to be achieved by 2024-25.
  • 200 lakh tonnes fish production targeted by 2022-23.
  • Kisan Rail to be setup by Indian Railways through PPP:
  • To build a seamless national cold supply chain for perishables (milk, meat, fish, etc.
  • Express and Freight trains to have refrigerated coaches.
  • Krishi Udaan to be launched by the Ministry of Civil Aviation:
  • Both international and national routes to be covered.
  • North-East and tribal districts to realize Improved value of agri-products.
  • One-Product One-District for better marketing and export in the Horticulture sector.
  • Balanced use of all kinds of fertilizers - traditional organic and innovative fertilizers.
  • Measures for organic, natural, and integrated farming:
  • Jaivik Kheti Portal- online national organic products market to be strengthened.
  • Zero-Budget Natural Farming (mentioned in July 2019 Budget) to be included.
  • Integrated Farming Systems in rain-fed areas to be expanded.
  • Multi-tier cropping, bee-keeping, solar pumps, solar energy production in non-cropping season to be added.
  • PM-KUSUM to be expanded:
  • 20 lakh farmers to be provided for setting up stand-alone solar pumps.
  • Village Storage Scheme:
  • To be run by the SHGs to provide farmers a good holding capacity and reduce their logistics cost.
  • Women, SHGs to regain their position as Dhaanya Lakshmi.
  • Livestock:
  • Doubling of milk processing capacity to 108 million MT from 53.5 million MT by 2025.
  • Artificial insemination to be increased to 70% from the present 30%.
  • MNREGS to be dovetailed to develop fodder farms.
  • Foot and Mouth Disease, Brucellosis in cattle and Peste Des Petits ruminants (PPR) in sheep and goat to be eliminated by 2025.
  • Deen Dayal Antyodaya Yojana- 0.5 crore households mobilized with 58 lakh SHGs for poverty alleviation.

Wellness, Water and Sanitation

  • 69,000 crore allocated for overall Healthcare sector.
  • 6400 crore (out of Rs. 69,000 crore) for PM Jan Arogya Yojana (PMJAY):
  • More than 20,000 hospitals already empanelled under PM Jan Arogya Yojana (PMJAY).
  • Viability Gap Funding window proposed for setting up hospitals in the PPP mode.
  • Aspirational Districts with no Ayushman empanelled hospitals to be covered in the first phase.
  • Cities with million-plus population to be encouraged to achieve the objective during the current year itself.
  • 12, 300 crore allocation for Swachh Bharat Mission in 2020-21:
  • Committment to ODF-Plus in order to sustain ODF behaviour.
  • Emphasis on liquid and grey water management.
  • Focus also on Solid-waste collection, source segregation, and processing.

Economic Development

Industry, Commerce and Investment

  • 27,300 crore allocated for 2020-21 for development and promotion of Industry and Commerce.
  • Investment Clearance Cell proposed to be set up:
  • To provide “end to end” facilitation and support.
  • To work through a portal.
  • Five new smart cities proposed to be developed.
  • Scheme to encourage manufacture of mobile phones, electronic equipment and semi-conductor packaging proposed.
  • National Technical Textiles Mission to be set up:
  • With four-year implementation period from 2020-21 to 2023-24.
  • At an estimated outlay of Rs 1480 crore.
  • To position India as a global leader in Technical Textiles.
  • New scheme NIRVIK to be launched to achieve higher export credit disbursement, which provides for:
  • Higher insurance coverage
  • Reduction in premium for small exporters
  • Simplified procedure for claim settlements.
  • Turnover of Government e-Marketplace (GeM) proposed to be taken to Rs 3 lakh crore.
  • Scheme for Revision of duties and taxes on exported products to be launched.
  • Exporters to be digitally refunded duties and taxes levied at the Central, State and local levels, which are otherwise not exempted or refunded.
  • All Ministries to issue quality standard orders as per PM’s vision of “Zero Defect-Zero Effect” manufacturing.

Infrastructure

  • 100 lakh crore to be invested on infrastructure over the next 5 years.
  • National Infrastructure Pipeline:
  • 103 lakh crore worth projects; launched on 31st December 2019.
  • More than 6500 projects across sectors, to be classified as per their size and stage of development.
  • A National Logistics Policy to be released soon:
  • To clarify roles of the Union Government, State Governments and key regulators.
  • A single window e-logistics market to be created

Highways:

  • Accelerated development of highways to be undertaken, including:
  • 2500 Km access control highways.
  • 9000 Km of economic corridors.
  • 2000 Km of coastal and land port roads.
  • 2000 Km of strategic highways.
  • Delhi-Mumbai Expressway and two other packages to be completed by 2023.
  • Chennai-Bengaluru Expressway to be started.
  • Proposed to monetise at least 12 lots of highway bundles of over 6000 Km before 2024.

Indian Railways:

  • Five measures:
  • Large solar power capacity to be set up alongside rail tracks, on land owned by railways.
  • Four station re-development projects and operation of 150 passenger trains through PPP.
  • More Tejas type trains to connect iconic tourist destinations.
  • High speed train between Mumbai and Ahmedabad to be actively pursued.
  • 148 km long Bengaluru Suburban transport project at a cost of Rs 18600 crore, to have fares on metro model. Central Government to provide 20% of equity and facilitate external assistance up to 60% of the project cost.
  • Indian Railways’ achievements:
  • 550 Wi-fi facilities commissioned in as many stations.
  • Zero unmanned crossings.
  • 27000 Km of tracks to be electrified.

Ports & Water-ways:

  • Corporatizing at least one major port and its listing on stock exchanges to be considered.
  • Governance framework keeping with global benchmarks needed for more efficient sea-ports.
  • Economic activity along river banks to be energised as per Prime Minister’s Arth Ganga concept.

Airports:

  • 100 more airports to be developed by 2024 to support Udaan scheme.
  • Air fleet number expected to go up from present 600 to 1200 during this time.

Electricity:

  • “Smart” metering to be promoted.
  • More measures to reform DISCOMs to be taken.

Power:

  • 22, 000 crore proposed for power and renewable energy sector in 2020-21.
  • Expansion of national gas grid from the present 16200 km to 27000 km proposed.
  • Further reforms to facilitate transparent price discovery and ease of transactions.

New Economy

  • To take advantage of new technologies:
  • Policy to enable private sector to build Data Centre parks throughout the country to be brought out soon.
  • Fibre to the Home (FTTH) connections through Bharatnet to link 100,000 gram panchayats this year.
  • 6000 crore proposed for Bharatnet programme in 2020-21.
  • Measures proposed to benefit Start-ups:
  • A digital platform to be promoted to facilitate seamless application and capture of IPRs.
  • Knowledge Translation Clusters to be set up across different technology sectors including new and emerging areas.
  • For designing, fabrication and validation of proof of concept, and further scaling up Technology Clusters, harbouring test beds and small scale manufacturing facilities to be established.
  • Mapping of India¡¦s genetic landscape- Two new national level Science Schemes to be initiated to create a comprehensive database.
  • Early life funding proposed, including a seed fund to support ideation and development of early stage Start-ups.
  • 8000 crore proposed over five years for National Mission on Quantum Technologies and Applications.

Caring Society

  • Focus on:
  • Women & child,
  • Social Welfare;
  • Culture and Tourism
  • Allocation of Rs. 35,600 crore for nutrition-related programmes proposed for the FY2020-21.
  • 28, 600 crore proposed for women specific programs.
  • Issue about age of a girl entering motherhood - proposed to appoint a task force to present its recommendations in six months¡¦ time.
  • Financial support for wider acceptance of technologies, identified by Ministry of Housing and Urban Affairs to ensure no manual cleaning of sewer systems or septic tanks, to be provided.
  • 85, 000 crore proposed for 2020-21 for welfare of Scheduled Castes and Other Backward Classes.
  • 53, 700 crore provided to further development and welfare of Scheduled Tribes.
  • Enhanced allocation of Rs. 9,500 crore provided for 2020-21 for senior citizens and Divyang.

Culture & Tourism

  • Allocation of Rs. 2500 crore for 2020-21 for tourism promotion.
  • 3150 crore proposed for Ministry of Culture for 2020-21.
  • An Indian Institute of Heritage and Conservation under Ministry of Culture proposed; with the status of a deemed University.
  • 5 archaeological sites to be developed as iconic sites with on-site Museums:
  • Rakhigarhi (Haryana)
  • Hastinapur (Uttar Pradesh)
  • Shivsagar (Assam)
  • Dholavira (Gujarat)
  • Adichanallur (Tamil Nadu)
  • Re-curation of the Indian Museum in Kolkata, announced by Prime Minister in January 2020.
  • Museum on Numismatics and Trade to be located in the historic Old Mint building in Kolkata.
  • 4 more museums from across the country to be taken up for renovation and re-curation.
  • Support for setting up of a Tribal Museum in Ranchi (Jharkhand).
  • Maritime museum to be set up at Lothal- the Harrapan age maritime site near Ahmedabad, by Ministry of Shipping.
  • State governments expected to develop a roadmap for certain identified destinations and formulate financial plans during 2021 against which specified grants to be made available to the States in 2020-21.

Environment & Climate Change

  • Allocation for this purpose to be Rs.4400 crore for 2020-21.
  • Proposed to advise the utilities to close the running old thermal power plants with carbon emission above the pre-set norms.
  • States that are formulating and implementing plans for ensuring cleaner air in cities above one million to be encouraged.
  • PM launched Coalition for Disaster Resilient Infrastructure (CDRI) with Secretariat in Delhi. Second such international initiative after International Solar Alliance.

Governance

  • Clean, corruption-free, policy driven, good in intent and most importantly trusting in faith.
  • Taxpayer Charter to be enshrined in the Statute will bring fairness and efficiency in tax administration.
  • Companies Act to be amended to build into statues, criminal liability for certain acts that are civil in nature.
  • Other laws with such provisions are to be corrected after examination.
  • Major reforms in recruitment to Non-Gazetted posts in Government and Public sector banks:
  • An independent, professional and specialist National Recruitment Agency (NRA) for conducting a computer-based online Common Eligibility Test for recruitment.
  • A test-centre in every district, particularly in the Aspirational Districts.
  • A robust mechanism to be evolved for appointment including direct recruitment to various Tribunals and specialised bodies to attract best talents and professional experts.
  • Contract Act to be strengthened.
  • New National Policy on Official Statistics to:
  • Promote use of latest technologies including AI.
  • Lay down a road-map towards modernised data collection, integrated information portal and timely dissemination of information.
  • A sum of Rs. 100 crore allocated to begin the preparations for G20 presidency to be hosted in India in the year 2022.
  • Development of North East region:
  • Improved flow of funds using online portal by the Government.
  • Greater access to financial assistance of Multilateral and Bilateral funding agencies.
  • Development of Union Territories of J&K and Ladakh:
  • An amount of Rs. 30,757 crore provided for the financial year 2020-21.
  • The Union Territory of Ladakh has been provided with Rs. 5,958.

Financial Sector

  • Reforms accomplished in PSBs :
  • 10 banks consolidated into 4.
  • 3,50,000 crore capital infused.
  • Governance reforms to be carried out to bring in transparency and greater professionalism in PSBs.
  • Few PSBs to be encouraged to approach the capital market to raise additional capital
  • Deposit Insurance and Credit Guarantee Corporation (DICGC) permitted to increase Deposit Insurance Coverage to Rs. 5 lakh from Rs.1 lakh per depositor.
  • Scheduled Commercial Bank’s health under monitoring through a robust mechanism, keeping depositors’ money safe.
  • Cooperative Banks to be strengthen by amending Banking Regulation Act for:
  • Increasing professionalism.
  • Enabling access to capital.
  • Improving governance and oversight for sound banking through the RBI.
  • NBFCs eligibility limit for debt recovery reduced from:
  • Export promotion of MSMEs:
  • For selected sector such as pharmaceuticals, auto components and others.
  • An Rs. 1000 crore scheme anchored by EXIM Bank together with SIDBI.
  • Hand holding support for technology upgradations, R&D, business strategy etc.

Financial Market

  • Deepening Bond Market.
  • Certain specified categories of Government securities to be opened fully for non -resident investors also.
  • FPI limit in corporate bonds increased to 15% from 9% of its outstanding stock.
  • New legislation to be formulated for laying down a mechanism for netting of financial contracts.
  • Scope of credit default swaps to expand.
  • Debt Based Exchange Traded Fund expanded by a new Debt-ETF consisting primarily of Government Securities.
  • To give attractive access to retail investors, pension funds and long-term investors.
  • A Partial Credit Guarantee scheme for the NBFCs formulated post the Union budget 2019-20 to address their liquidity constraints.
  • New mechanism to be devised to further this.
  • Government support to securities so floated.

Infrastructure Financing

  • 103 lakh crore National Infrastructure Pipeline projects earlier announced.
  • 22,000 crore to cater to the equity support to Infrastructure Finance Companies such as IIFCL and a subsidiary of NIIF.
  • IFSC, GIFT city: full of potential to become a centre of international finance as well as a centre for high end data processing:
  • An International Bullion exchange(s) to be set up as an additional option for trade by global market participants with the approval of regulator.

Disinvestment

  • Government to sell a part of its holding in LIC by way of Initial Public Offer (IPO).

Fiscal Management

  • XV Finance Commission (FC):
  • XV Finance Commission has given its first report for FY2020-21
  • Recommendations accepted in substantial measure
  • Its final report for five years beginning 2021-22 to be submitted during the latter part of the year.
  • GST Compensation Fund:
  • Balances due out of collection of the years 2016-17 and 2017-18 to be transferred to the Fund, in two instalments.
  • Hereinafter, transfers to the fund to be limited only to collection by way of GST compensation cess.
  • Overhaul of Centrally Sponsored Schemes and Central Sector Schemes necessary:
  • To align them with emerging social and economic needs of tomorrow
  • To ensure that scarce public resources are spent optimally
  • On the recent debate over transparency and credibility of projected fiscal numbers, it is assured that procedure adopted is compliant with the FRBM Act.
  • For the FY 2019-20:
  • Revised Estimates of Expenditure: at Rs.26.99 lakh crore
  • Revised Estimates of Receipts: estimated at Rs.19.32 lakh crore.
  • For year 2020-21:
  • Nominal growth of GDP estimated at 10%.
  • Receipts: estimated at Rs.22.46 lakh cr
  • Expenditure: at Rs.30.42 lakh cr.
  • Significant tax reforms for boosting investments recently undertaken. However, expected tax buoyancy expected to take time.
  • Fiscal deficit of 3.8% estimated in RE 2019-20 and 3.5% for BE 2020-21. It comprises two ingredients;
  • 3% for year 2019-20 and 3% for the 2020-21 budget estimate.
  • Deviation of 0.5%, consistent with Section 4(3) of FRBM Act, both for RE 2019-20 and BE 2020-21. (Section 4 (2) of the FRBM Act provides for a trigger mechanism for a deviation from the estimated fiscal deficit on account of structural reforms in the economy with unanticipated fiscal implications.)
  • Return path, committing to fiscal consolidation without compromising needs of investment out of public funds, is laid in Medium Term Fiscal Policy cum Strategy Statement.
  • Market borrowings: Net market borrowings: Rs.4.99 lakh crore for 2019-20 and Rs.5.36 lakh crore for 2020-21.
  • A good part of the borrowings for the financial year 2020-21 to go towards Capital expenditure that has been scaled up by more than 21%.

Direct Tax

Direct Tax Proposals - To stimulate growth, simplify tax structure, bring ease of compliance, and reduce litigations.

  • Personal Income Tax:
  • Significant relief to middle class taxpayers.
  • New and simplified personal income tax regime proposed:

Taxable Income Slab (Rs.)

Existing tax rates

New tax rates

0-2.5 Lakh

Exempt

Exempt

2.5-5 Lakh

5%

5%

5-7.5 Lakh

20%

10%

7.5-10 Lakh

20%

15%

10-12.5 Lakh

30%

20%

12.5-15 Lakh

30%

25%

Above 15 Lakh

30%

30%

 

  • Around 70 of the existing exemptions and deductions (more than 100) to be removed in the new simplified regime.
  • Remaining exemptions and deductions to be reviewed and rationalised in coming years.
  • New tax regime to be optional - an individual may continue to pay tax as per the old regime and avail deductions and exemptions.
  • Measures to pre-fill the income tax return initiated so that an individual who opts for the new regime gets pre-filled income tax returns and would need no assistance from an expert to pay income tax.
  • New regime to entail estimated revenue forgone of Rs. 40,000 crore per year.
  • Corporate Tax:
  • Tax rate of 15% extended to new electricity generation companies.
  • Indian corporate tax rates now amongst the lowest in the world.
  • Dividend Distribution Tax (DDT):
  • DDT removed making India a more attractive investment destination.
  • 25,000 crore estimated annual revenue forgone.
  • Start-ups:
  • Start-ups with turnover up to Rs. 100 crore to enjoy 100% deduction for 3 consecutive assessment years out of 10 years.
  • Tax payment on ESOPs deferred.
  • MSMEs to boost less-cash economy:
  • Turnover threshold for audit increased to Rs. 5 crore from Rs. 1 crore for businesses carrying out less than 5% business transactions in cash.
  • Cooperatives:
  • Parity brought between cooperatives and corporate sector.
  • Affordable housing:
  • Additional deduction up to Rs. 1.5 lakhs for interest paid on loans taken for an affordable house extended till 31st March, 2021.

Tax Facilitation Measures

  • Instant PAN to be allotted online through Aadhaar.
  • “Vivad Se Vishwas” scheme, with a deadline of 30th June, 2020, to reduce litigations in direct taxes:

Indirect Tax

  • GST:
  • Cash reward system envisaged to incentivise customers to seek invoice.
  • Simplified return with features like SMS based filing for nil return and improved input tax credit flow to be implemented from 1st April, 2020 as a pilot run.
  • Dynamic QR-code capturing GST parameters proposed for consumer invoices.
  • Customs Duties:
  • Customs duty raised on footwear to 35% from 25% and on furniture goods to 25% from 20%.
  • Basic customs duty on imports of news print and light-weight coated paper reduced from 10% to 5%.
  • Trade Policy Measures
  • Customs Act being amended to enable proper checks of imports under FTAs.
  • Rules of Origin requirements to be reviewed for certain sensitive items.
  • Provisions relating to safeguard duties to be strengthened to enable regulating such surge in imports in a systematic way.

Unprecedented Milestones and Achievements of Indian Economy

  • India now the fifth largest economy of the world.
  • 4% average growth clocked during 2014-19 with inflation averaging around 4.5%.
  • 271 million people raised out of poverty during 2006-16.
  • India’s Foreign Direct Investment elevated to US$ 284 billion during 2014-19 from US$ 190 billion during 2009-14.

            (PIB)