Finance Minister Nirmala Sitharaman on Friday, February 1 delivered the Union Budget for the year 2020-21. A lot was expected from Sitharaman's budget, especially on creation of Jobs and better Economy. A better fiscal management was also expected from the Finance Ministry. Did she touch on all of those? And how beneficial are those proposals? More on that towards the end of the article. But, here are key take-aways from the Union Budget 2020.
Is your Salary getting better?
The direct answer to this question is a straight No. Indeed, a new tax regime has been brought about. But it does not bring about a major change. The new system is optional and is expected to co-exist with the old regime
According to the finance minister an optional system has been brought in to avoid the confusing tax structure. Under the new personal income tax regime, individual tax payers will pay tax at reduced rate of 10% for income between 5 lakh and 7.5 lakh rupees. For income between 7.5 lakh rupees and 10 lakh rupees, tax rate will now be 15% against the current 20%.
Here's a brief summary of what the new tax rates look like:
The new tax system is estimated to fetch Rs 400 crores to the government. To understand the exemptions and how the system works, read this story.
For the sector comprising agriculture, allied activities, irrigation and rural development the total allocation has been fixed at Rs 2.83 lakh crores for 2021.
The Finance Minister also spoke of a 16 point plan as part of India Aspirational plan. The Central government has also set to disburse Rs 15 lakh crore among farmers as credit during the year 2020-21. PM Kusum scheme to cover 20 lakh farmers to stand-alone solar pumps and further 15 lakh for grid connected pumps.
Finance Minister Nirmala Sitharaman on Saturday announced an outlay of Rs 2.83 lakh crore for agriculture and allied sector for the financial year 2020-21
Presenting the Union Budget 2020-21 in the Lok Sabha, she said that Rs 2.83 lakh crore will be allocated for agriculture and allied sector, while Rs 1.23 lakh crore for rural development and Panchayati Raj The Central government has also set to disburse Rs 15 lakh crore among farmers as credit during the year 2020-21.
Finance Minister Nirmala Sitharaman said the refinancing scheme of the National Bank for Agriculture and Rural Development (NABARD) will be further expanded. "Agriculture credit target for the year 2020-21 has been set at Rs 15 lakh crore," she said.' Finance Minister Sitharaman also presented a 16-point plan to revive the farm and agriculture sector.
These include encouraging states to take up model agricultural laws, comprehensive measures for 100 water-stressed districts, PM Kusum Scheme, which removes dependence on kerosene and encourages the use of solar power, balanced use of fertilisers, an important step because currently the use of chemical fertilisers is incentivised.
"NABARD will take up an exercise of mapping and geotagging agricultural warehouses, cold storage and other inventory storages," she said. She also announced that the Krishi UDAAN scheme will be launched by the Aviation Ministry. "Horticulture sector with its current produce exceeds the production of food grains. We will now take it to 'one product, one district." She said that financing of negotiable warehousing receipts will be integrating other e-services.
"Our government aims to eliminate the foot and mouth disease in sheep and goat by 2025," she said. The minister announced the doubling of milk production of 53.5 million metric tonnes of milk to 103 metric million tonnes by 2025. "Our government will involve youths in the fishery sector. We hope the rural youth will work as Sagar Mitras and also form Fish Farmer Organisation," she said.
The Finance Minister also announced that financing on negotiable warehousing receipts will be integrated with e-National Agricultural Market. She also said that the village storage scheme run by SHGs will provide holding capacity for farmers, and women in villages can regain their status as Dhanya Lakshmi. "We will encourage balanced use of all fertilisers, a necessary step to change the incentive regime which encourages excessive use of chemical fertilisers," added the minister.
A major announcement for the industry and businesses has been the proposal on an outlay of Rs 27,300 crores during 2020-21.
The Finance Minister said that the government intends to make every district an export house. "We wish to turn every district into an export house," said Sitharaman. Given the role of technologies and their applications in industrial growth, the Finance Minister also announced Rs 8,000 crore over five years for quantum technologies and applications. She also said that accelerated development of highways will be undertaken. The Finance Minister announced that Delhi-Mumbai expressway and two other projects would be completed by 2023. She also said that monetization of 12 lots of highway bundles of over 6,000km will be ensured before 2024. (ANI)
Subsequent to the last corporate tax rate cut, there has been no major policy change.
Budget for 2019-20 there was a proposal on a capital of Rs 70,000 crore for Public Sector Banks to boost credit for a strong impetus to the economy. This year, there is no such proposal.
The NBFC sector received some focus from the Finance Minister. "Limits for eligibility under SARFAESI act have been proposed to be reduced from Rs 500 crores to Rs 100 crores. Or loan size of existing Rs 1 crore brought down to Rs 50 lakhs. NBFCs will find accessing debt recovery tribunals more approachable," added the Finance Minister.
"India imports technical textile worth 6 million dollar. A new scheme for setting up manufacturing units of technical textiles is being proposed. All ministries during the course of this year will launching quality orders," said Finance Minister Nirmala Sitharaman.
IPO of Life Insurance Corporation of India:
A major announcement in the Budget was divestment of IPO via market listing on stock exchanges. There was also talk on unlocking value in IDBI bank. How this will pan up and the debate on selling family jewel is still being discussed.
The government is yet to confirm on what percentage of LIC it was looking to divest. Here's what the Finance Minister said, "Listing of companies on stock exchanges discipline a company and provides access to financial markets and unlocks its value. 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 (IPO)."
Jobs featured not many times during the budget speech of Nirmala Sitharaman. However, she did explain a rub-on impact on jobs owing to focus on education and entrepreneurship.
On education, she said that Over 2 lakh suggestions were received and a New Education Policy would be announced soon.
The major talking point when it comes to Education is a revised outlay with Rs 99,300 crores to be spent during 2020-21 and another Rs 3,000 crores towards skill development. The new outlay is 5.80 percent over what the interim budget of 2019 had proposed - an outlay of Rs 93,847.64 crores which in itself was a 10 percent growth from the previous year.
For better entrepreneurship, there is a proposal to set up an Investment Clearance Cell that could provide "end to end" facilitation and support including pre-investment advisory, information related to land banks and facilitate clearances at Centre and State level. It will work through a portal, said the Finance Minister. For Micro-SMEs there is something to cheer with the proposal on a scheme that will offer subordinate debt for entrepreneurs of MSMEs. "This subordinate debt to be provided by banks would count as quasi-equity and would be fully guaranteed through the Credit Guarantee Trust for Medium and Small Entrepreneurs (CGTMSE). The corpus of the CGTMSE would accordingly be augmented by the government," added the FM.
Besides the above major important pointers, there is also the element of a widening fiscal deficit.
A day prior to the budget announcement, it was widely believed that the budget could settle at a fiscal deficit target in range of 3.7-3.8 percent. In fact, several market observers predicted the fiscal deficit at 3.8 percent. The fiscal deficit according to the Finance Minister for the current fiscal year has been fixed at 3.8 percent.
GDP Growth for 2020-21 is fixed at 6.0 - 6.5%.
Snapshot on Railway: