Interim Union Budget FY20 - Election speech to wrong audience
The interim Union Finance Minister of India presented an interim
Union Budget for FY20 today in the parliament.
Breaking the convention, the acting finance minister decided to
launch couple of major schemes having material fiscal implications for the
prospective governments.
He also announced some changes in income tax rates arguing that
these are urgent and cannot wait for four months!
The acting finance minister took the opportunity to make an
emphatic election speech, and virtually presented the party's manifesto for
forthcoming general election.
The focus of the speech was clearly to lure voters from farming,
urban poor and middle class groups, but was presented to wrong audience.
Key Budget announcements
Beta version of Universal Basic Income
The minister announced annual grant of Rs6000 to all farmers
owning less than 2 hectare land in the country. Under the “Pradhan Mantri Kisan
Samman Nidhi (PM-KISAN)”, every year 3 installments of Rs2000 each would be
transferred to bank accounts of farmers owning less than 2hectare (appx 5acre)
of land. The government expects around 12crore small and marginal farmer
families (appx 50% of the country's population) to benefit from the scheme. It
is not clear whether this scheme would be applicable to landless famers also.
The scheme comes into effect from December 2018, and Rs20000cr
have been provided in FY19 revised estimates for the scheme.
Rs75,000cr have been provided for the scheme in the FY20 budget.
This is a welcome step and should help the farmers to some
extent. However, the negative aspect is that the government has cut allocation
to 16 out of 19 Green Revolution Schemes (crop productivity improvement
efforts) to allocate money for this scheme. This is pure short sightedness and
populism.
Pension Scheme for Urban Poor
The minister announced a mega pension yojana namely 'Pradhan
Mantri Shram-Yogi Maandhan' for the unorganized sector workers with monthly
income upto Rs15,000. This scheme shall provide them an assured monthly pension
of Rs3,000 from the age of 60 years. An eligible worker joining the scheme at
the age of 29 years will have to contribute only Rs100 per month till the age
of 60 years. Similarly, a worker joining the scheme at 18 years, will have to
contribute as little as Rs55 per month only. The Government will deposit equal
matching share in the pension account of the worker every month. The government
expects at least 100mn workers to avail the benefit of this scheme.
This again is a welcome step.
However, the moot point is that what would be the relevance of
Rs3000/month after 30years!
Railways' improvement
The acting finance minister, who happens to be the Railways
Minister also, expects the operational efficiency (expenditure to income ratio)
of Railways to improve materially from 98.4% in FY18 to 95% in FY20. The
Railways’ overall capital expenditure programme is of Rs1,58,658cr, that sounds
pretty disappointing considering the mega plans already announced for
upgradation, improvement and expansion of railways network in India.
Tax proposals
1. The tax rebate under section 87A
increased from Rs2500 to Rs12500. With this the effective tax liability of tax
payers with a total taxable income less than Rs5,00,000 would be NIL.
2. Standard deduction for salaried tax
payers increased to Rs50,000 from Rs.40,000 earlier.
3. Second self occupied house exempted
from payment of tax on notional rent.
4. TDS threshold for interest on saving
accounts raised from Rs10,000 to Rs40,000.
5. TDS threshold for rent on commercial
properties raised from Rs1,80,000 to Rs2,40,000.
6. For taxpayers having a long term
capital gain of upto Rs2cr, the exemption under section 54 could be availed for
two house properties, instead of one earlier.
7. For affordable housing developers
benefits under section 80-IBA extended for one more year, i.e., for the project
approved till 31 March 2020.
8. Period of exemption on tax on notional
rent on unsold inventory for real estate developers increased to 2yrs from one
year earlier.
10 point development program for next decade
1. To build physical as well as social
infrastructure for a $10trn economy and to provide ease of living through next
generation infrastructure of roads, railways, ports, urban transport, gas &
electric transmission, inland waterways, quality educational system.
2. To create a Digital India reaching
every sector of the economy, every corner of the country and impacting the life
of all Indians.
3. To make India a pollution free nation
with green Mother Earth and blue skies. India to drive on Electric Vehicles,
and Renewable becoming a major source of energy supply.
4. To expand rural industrialization using
modern digital technologies to generate massive employment. This will be built
upon the Make in India approach to develop grass-roots level clusters,
structures and mechanisms encompassing the MSMEs, village industries and
start-ups spread in every nook and corner of the country.
5. To clean rivers, with safe drinking
water to all Indians, sustaining and nourishing life and efficient use of water
in irrigation using micro-irrigation techniques.
6. Besides, Sagarmala, to develop inland
waterways faster.
7. To become the launch-pad of satellites
for the World and placing an Indian astronaut into space by 2022.
8. To make India self-sufficient in food,
exporting to the world to meet their food needs and producing food in the most
organic way.
9. To make India healthy, by providing a
distress free health care and a functional and comprehensive wellness system
for all.
10. To
make India Minimum Government Maximum Governance nation.
Some key budget statistics
Fiscal improvement paused
Reliance on small savings increased to lessen market borrowing
Some key targets missed
Public sector balance sheet stretching
