Piyush Goyal, the Finance Minister, had the unenviable task of framing his proposals in a difficult environment, both nationally and globally. The entire world economic order is facing the threat of lower growth, rising unemployment and unstable financial markets. India has also its share of worries despite the higher projected growth rate of 7.2% during the current financial year.
The last budget of the present Government lays down the road map for transforming the Indian economy by ushering an era of digitization, the fruits of which will be reaped in the coming years. The main thrust of his budget proposals is to continue fiscal consolidation and restrict the fiscal deficit of 2018-19 to the level of 3.4% of the GDP, with a promise that in the next fiscal 2019-20, he would attempt to retain it at 3.4%, despite disbursement of Rs.75,000 crore on direct benefit transfers to marginal farmers.
The vision of the Government to make India the manufacturing hub of the world finds its imprint on the budget proposals by encouraging the spirit of entrepreneurship among millions of Indians by providing credit facilities and training programmes to hone the skills of young entrepreneurs. A road map has been chalked out for enhancing investments in key sectors and passing on the benefit of the growth process to the common man.
For the first time, the Indian Government has made a serious attempt for providing social security coverage for workers in the unorganized sector. While these systems are in existence in all developed countries of the world, they were conspicuous by their absence in India. A pension scheme has been formulated whereby workers would be provided with pensionary benefits of Rs. 3,000 per month after reaching the age of 60.
The subsidy burden has been streamlined by overhauling the delivery system through direct transfer of cash benefits. This has been accomplished by using the banking system which has been made more inclusive as a result of Jan Dhan bank accounts being opened by almost 34 crore Indians who never had a bank account earlier. As a result, most of the international agencies had upgraded India’s economic growth potential and investor confidence has grown substantially in the last four years.
Initial steps are being taken to move towards the provision of basic universal income being guaranteed to the lowest level of Indian society. Small and marginal farmers who own cultivable land upto two hectares will be provided income support of Rs.6,000 per annum. The amount will be directly transferred into the bank accounts of beneficiary farmers. The total outlay on this programme is estimated at Rs.75,000 crore in a whole year. The Kisan Credit Card scheme is being extended to cover those who are involved in animal husbandry and in fisheries. They will also be given 2% interest subsidy on the loan availed through the scheme.
The Finance Minister has highlighted the fact that the banking sector has now been put on a stronger ground as a result of reforms being initiated, including the implementation of the Insolvency & Bankruptcy Code. An amount close to Rs.3 lakh crore has already been recovered by banks and creditors. The strategy of recognition, resolution, recapitalization and reforms has been successful. Public sector banks have been recapitalized to the extent of Rs.2.6 lakh crore.
Amalgamation of banks have brought the benefits of economies of scale and improved access to capital which would reduce dependence on budgetary funding. To sustain the basic needs of the common man, Rs.1,70,000 crore was spent in the current financial year to provide food grains at affordable prices. About 2.5 crore families have now been provided free electricity connections. The universal healthcare programme, Ayushman Bharat, will provide medical treatment to as many as 50 crore citizens.
To empower youth and promote self-employment opportunities, 15.56 crore loan applications have been sanctioned and Rs.7,23,000 crore have been disbursed. With job seekers becoming job creators, India has become the world’s second largest start-up hub. To help the small scale sector, loans are being sanctioned upto Rs.1 crore in the shortest possible time, and those units which are registered for the Goods & Services Tax will get a 2% interest rebate.
India is now leading the world in the consumption of mobile data which has increased by over fifty times in the last five years. The number of companies manufacturing mobiles and components has increased from 2 to 268. About 3 lakh common service centres employing around 12 lakh people are digitally delivering different types of services to citizens who are not computer literate. There is a proposal to make one lakh villages into digital villages over the next five years.
On the direct tax front, the Finance Minister has announced that persons having taxable income upto Rs.5 lakhs per annum will not have to pay tax because they will get a tax rebate under section 87-A of the Income-tax Act, 1961 upto a maximum of Rs.12,500. However, this benefit will not be available to those tax payers whose taxable income exceeds Rs.5 lakhs per annum.
Standard deduction for salaried employees has been increased by 25% from Rs.40,000 to Rs.50,000. The notional income in respect of self-occupied property is proposed to be exempted from the financial year 2019-20 to the extent of two self-occupied houses, instead of one at present.
For those who make taxable capital gains upto Rs.2 crore in a financial year, they will now be permitted to roll over these capital gains in two residential properties, if they so wish, to avail of the exemption under section 54. Upto the current financial year ending on 31 st March, 2019, it was mandatory to invest the taxable capital gains only in one residential house. The new provision will help families who may want to have two houses by selling one, giving a boost to the real estate sector which currently has a large stock of unsold residential units.
Developers will also not have to pay tax for two years, instead of one year at present, if they hold on to unsold properties. Those builders who are undertaking affordable housing schemes will now get the benefit of tax exemption under section 80-IBA if their project is approved by 31 st March, 2020.
For the fixed income earners, interest on bank deposits is currently exempt under section 80-TTA upto Rs.10,000. This is proposed to be increased to Rs.40,000 with effect from the financial year 2019-20. Where a person has rented out his property, he will not have to suffer deduction of tax at source so long as his rental income does not exceed Rs.2,40,000 per annum from the financial year 2019-20; currently, the exemption from withholding tax is given where the rental income is Rs.1,80,000 per annum or less.
Within the next two years, the Income tax Department will be totally digitized and all functions will become online. All returns will be processed in 24 hours from the time of filing and refunds will be issued simultaneously. All verification and assessment of returns selected for scrutiny will be done electronically in back offices without any personal interface between tax payers and tax officers. The number of tax returns filed during 2018-19 has gone up from 3.79 crore to 6.85 crore, resulting in substantial increase in tax collections. Almost 99.5% of income tax returns have been accepted by the tax department under the summary assessment scheme.
Some critics have called this an election budget. However, the voter is not going to be swayed by the sops which have been announced in the interim budget. What may weigh with the voters is the track record of this Government. Inflation has been down from 10.1% to 4.6% which is a creditable achievement. More than 15 lakh rural houses have been connected by all-weather roads.
Subsidized housing has been provided to 1.5 crore families. New electricity connections have been given to 2.5 crore families, and 6 crore LPG connections have been provided in rural homes. Around 19 crore families are eligible for subsidized life and accident insurance cover.
The Finance Minister has, at the end of his speech, set out the Vision of the Government for the decade ending 2030. The first dimension of this Vision is to complete the construction of the physical and social infrastructure of roads, railways, ports, inland waterways, urban transportation, hospitals and schools. The second Vision is to digitize the entire economy and create millions of jobs in the emerging ecosystem. The third limb is to make the Nation pollution free by ensuring use of electric vehicles, energy storage devices and solar energy.
Rural industrialization which would generate massive employment in smaller cities and towns is the fourth pillar of the Vision, whereby global manufacturing hubs will be set up in various sectors, including automobiles and electronics. The fifth and sixth limbs of the Vision are to provide safe drinking water to all Indians and clean up the rivers. Developing inland waterways will enhance the income potential of millions of citizens residing along the river banks as it is in advanced countries like Germany.
The seventh dimension of the Vision is to develop space programmes and to become the launch-pad for satellites which would be used by many countries of the world. The next Vision is to enhance farm productivity through modern agricultural practices and value addition and formulate an integrated approach for agro and food processing, packaging and maintenance of cold chains.
The ninth dimension is to create and support a robust health infrastructure and provide insurance coverage to all citizens. The ultimate goal of the Vision is to transform India into a minimum government, maximum governance Nation having a bureaucracy which is proactive, reform oriented and accountable to citizens.
If the broad parameters of this Vision are fulfilled by 2030, the full potential of the Indian economy will be realized, laying the foundation for India’s next phase of growth and development. While the Indian economy will grow from a 2.7 trillion dollar economy at present to a 5 trillion dollar economy by 2023, some international institutions have projected that by 2030 the Indian economy will be the second largest in the world after China, based on the purchasing power parity method of calculating the comparable size of economies.
The budget has been structured to meet the aspirations of most sections of society. Marginal farmers, unorganized sector workers and middle class families have been given benefits and incentives which were long overdue. Despite this being an interim budget, it lays the foundation for a full fledged programme to be implemented after the elections.
Most of the infrastructure projects will come to fruition and see the light of the day by 2023. This will lay the foundation for exponential growth which only China had achieved during the past decade. There is no doubt that India’s time has come to be in the league of the most advanced economies of the world, having surpassed even today both England and France.