The BJP-led NDA government on Friday, February 1, presented its last Union Budget of the term, an interim one tailor-made to please farmers, informal workers salaried taxpayers in the run-up to the Lok Sabha polls. Other beneficiaries noted in the Interim Budget 2019 include the armed forces, transport and film industries cows.
Topping the populist announcements made by Union Finance Minister Piyush Goyal in his maiden Budget speech at the Lok Sabha, were an income support scheme worth Rs 6000 a year for farmers, a mega pension scheme for informal sector workers, and tax exemptions for middle-class taxpayers earning less than Rs 5 lakh per annum.
The allocation for notably crossed Rs 3 lakh crore for the first time (although it formed a smaller component of the budget than last time) while the Law Ministry is slated to receive an additional Rs 666.66 crore for conducting the upcoming Lok Sabha elections. The interim budget also proposed setting up the “Rashtriya Kamdhenu Aayog” scheme for cows to oversee the implementation of laws and welfare schemes for cows.
Education, industry, commerce and social welfare some of the sectors which have been relegated to the bottom of the outlay in this years interim.
Overview
An interim budget, as opposed to a full-fledged one, seeks funds for the existing government to spend in the months before the election after which the final Budget for the next fiscal is presented by the newly elected government.
As is customary for interim budget presentations, Goyal noted its limited scope while adding that the government would miss its fiscal deficit target of 3.3% for the year by 0.1%.
He also declared that India has attracted massive Foreign Direct Investment (FDI) worth $239 billion in the last 5 years, owing to the government’s relaxation of trade regulations in retail, , airlines food processing sectors.
The outlay for FY 2019-20 stood at ?27.8 lakh crore, 13% higher than the Revised Estimates of the previous budget.
As is the norm, interest payments on debt accounted for the largest part (24%) of the budget, while defence spending accounted for the second highest expenditure, followed by subsidies (food, fuel and fertiliser subsidies) which accounted for about 10-11% each.
Agriculture, which formed 3.52% of the budget last time, cornered 5.39% of the total budget this time. Health too captured a larger piece of the outlay.
Goyal also laid out the government’s 10-point vision for 2030 which includes, among its agenda, environmental sustainability, self-sufficiency, making India a 10-trillion-dollar economy, scaling up electronic governance and digitisation of private transactions.
Here are the budget highlights that the government expects will influence key segments of the vote bank in the coming elections.
Pradhan Mantri Kisan Samman Nidhi Scheme
Goyal, in his budget speech, announced the creation of a government-funded programme, under which vulnerable landholding farmer families, having cultivable land up to 2 hectares, will be provided direct income support at the rate of Rs 6,000 a year. The direct transfer of funds follows the model for Telenganas Rythu Bandhu scheme and has been on the table for a while.
This income support will be transferred directly into the bank accounts of beneficiary farmers, in three equal installments of Rs 2,000 each,” entailing an annual expenditure of Rs 75,000 crore,” he added.
Under the extended Kisan Credit Card scheme, the budget now apportions 2% interest subvention for farmers pursuing animal husbandry or affected by severe natural calamities like in Kerala, Assam Andhra Pradesh. Besides, an additional 3% interest subvention upon timely repayment has also been proposed.
An important decision has also been taken to increase the support price (MSP) by 1.5 times the production cost for all 22 crops, a longstanding demand of the countrys agitating farmers.
Pradhan Mantri Shramyogi Maandhan Scheme
Designed to ensure a fixed monthly pension of Rs 3,000/month for all and sector workers above the age of 60 with a monthly income below ?15,000, the scheme would involve a monthly contribution contingent upon age. Those enrolling for the scheme at the age of 29 will have to pay Rs 100 while the amount is just Rs 55 for those registering at 18.
It will benefit 10 crore workers in [the] unorganized sector, may become the world’s biggest pension scheme for unorganized sector in five years, tweeted the Press Information Bureau.
Income tax exemption raised
According to the new budget proposal, salaried employees earning up to Rs 5 lakh a year would be exempted from income tax, and those earning Rs 6.5 lakh per annum would also be exempted if they availed the Rs 1.5 lakh exemption available under Section 80C of the Income Tax Act. The tax rates have been. however, been retained.
The new standard deduction limit which stands at Rs 40,000 as per last year’s Budget, has been raised to Rs 50,000. This will provide an additional tax benefit of Rs 4,700 crore to more than three crore salary earners and pensioners, Goyal said.
The Tax Deduction at Source (TDS) threshold on interest earned on bank/post office deposits would also be raised from Rs 10,000 to Rs 40,000. Further, the TDS threshold for deduction of tax on rent has also been proposed to be increased from Rs 1.8 lakh to Rs 2.4 lakh.
Going forward, processing of tax returns is to be done within 24 hours and all verification to be conducted electronically by 2021.
Which ministries won the biggest?
Compared to the previous budget, agriculture and health spending saw the highest increase in percentage terms.
For the Ministry of Agriculture & Farmers Welfare, the Budget increased the allocation for Rashtriya Gokul Mission, aimed at the conservation and development of indigenous breeds of cattle, to Rs 750 crore. Additionally, the newly announced Rashtriya Kamdhenu Aayog has been tasked with improving sustainable genetic upgrading, production, and productivity of bovine resources.
The health budget was expectedly increased due to the requirements of the National Rural Health Mission and the flagship health scheme Pradhan Mantri Jan Arogya Yojana. Goyal claimed that 10 lakh patients have been treated so far under Ayushman Bharat scheme, the world’s largest healthcare programme. Further highlighting the role the Modi government’s played in making public health care more accessible to the poor, he also announced the 22nd All India Institute of Medical Sciences (AIIMS) which will come up soon in Haryana.
The budget has also been increased due to higher requirements pertaining to salaries, allowances and operational expenditure of services. “For securing our borders and to maintain preparedness of the highest order, if necessary additional funds will also be provided, Goyal announced in the Parliament, also taking credit for implementing the long-overdue One Rank One Pension (OROP) for military personnel.
Fund allocation to the Northeast region increased to ? 58,166 crore, a 21% rise over last year for infrastructure development, accounting for 0.11% of the total outlay, same as last time. It comes at a time when the entire region is up in arms against the for the controversial and polarising Citizenship Bill.
Rural development, Home Affairs Transport also fared better than preceding years. Railways, which is run by Goyal in fact, got Rs 1.58 lakh crore, the highest ever allocation for the national transporter. No railway fare hike was announced in the Railway Budget for 2019.
Others
- The budget proposes the introduction of stronger regulations in the Indian Cinematograph Act to prevent piracy and contact theft of Bollywood films. It also assures single window clearance for Indian filmmakers.
- The much-awaited indigenously-developed high-speed Vande Bharat Express was formally announced.
- One lakh digital villages have been planned the next five years.
- A ational Artificial Intelligence portal to be developed soon
- Government projects will 25% of its resources from the MSME sector, of which 3% will be from women entrepreneurs
Reactions from politicians and economists
Former Finance Minister and Congress leader P Chidambaram has memorably called the Interim Budget “not a Vote on Account, but an Account for Votes.” But economists are not sure if BJP’s eleventh-hour amends will reap the electoral fruits, especially in return for the subsidies and income support scheme for farmers, calling these half-hearted measures “too little, too late.”
At ?500 per month, it will amount to less than 1/15th of an average households income. Per annum, its peanuts, said agricultural economist
Ashok Gulati, further suggesting that if the government really wanted to make a difference through an income support scheme, it should double the amount given by reducing some food and fertiliser subsidies.
Leftist parties have called the budget an exercise in rhetoric as BSP’s Mayawati returned to the opposition’s descriptor. “Jumlebazi cannot change the destiny of the country and end longstanding problems like poverty, unemployment inflation, she said. It needs a firm resolve to solve them, which has been absent in the governments at the helm so far at the Centre, she said, urging voters to evaluate the policies by their grain.
Using the hashtag AakhriJumlaBudget, Congress chief Rahul Gandhi tweeted, Dear NoMo, 5 years of your incompetence and arrogance has destroyed the lives of our farmers. Giving them ?17 a day is an insult to everything they stand and work for.”
Prime Minister Narendra Modi hailed Budget 2019 as a budget for new India, calling it an all- document that touches all corners of the society. Claiming that poverty in the country is reducing rapidly, Modi asserted that it was merely a trailer of what would guide India towards prosperity after the Lok Sabha polls.
Industry experts share their praise and concerns with Qrius
Stakeholders in the automobile industry had mixed reactions to the Budget. Sunil Gupta, MD CEO of car rental service Avis India noted the government’s intent to improve road transportation by building new highways. “Building 27 kms of highways per day will make India the fastest highway developer in the world. The growth in the network of highways will lead to the creation of direct jobs and contribute to tourism,” he said exemplifying his point with the Sagar Mala project which is expected to improve port linkages and drive the export of cars, critical for Make in India.
“We are supportive of Vision 2030 mentioned by Mr.Goyal in the context of electric vehicles,” he said but noted that the Budget was largely silent on concrete incentives for EVs. “We hope that in the next FAME policy, the Government will spell out incentives for all stakeholders in the EV ecosystem manufacturers, charging infrastructure providers and operators,” Gupta said, stressing that the manufacture and use of electric vehicles can help reduce carbon footprint of transportation, air pollution and crude imports.
Surajit Das, co-founder and CEO of employee transportation solution provider Routematic expressed disappointment with the lack of focus on start-ups this year although he acknowledges that the 2% subvention will help in accessing more capital. “Areas where more allocation was desirable were higher education to improve talent pool and the reduction of capital gains tax which could make India a favourable investment destination for Venture Capital firms.”
Sunil Gupta of B2B marketplace ExportersIndia also hailed the interest subvention for SMEs, for loans up to Rs 1 crore, as a positive move. According to him, quarterly return for businesses, the promise of further exemptions in GST, the GEM (Govt E-Marketplace) platform where MSMEs can showcase and sell their products are all steps that seek to empower the MSME sector. “The path set to tackling unemployment by becoming the manufacturing hub of the world is another promising note,” he said describing the Budget 2019 as aimed at “building the social and physical infra to ease living.”
Divya Jain, CEO and founder of Safeducate, a logistical training specialist, said, The government’s push to the sector is a welcome step for the logistics vertical, which is characterized by a large number of unorganized players; and the pension scheme for the 4.2 crore workers will help streamline the workforce and empower them to afford a decent life after retirement.”
“Modernising villages will make rural youth more self-reliant and find progressive careers for themselves while contributing to the household incomes as well. In most of the villages, women are still not allowed to go out of their homes. Digital villages can help reach and teach those women who have escaped the purview of PM Mudra Yojana.”
Prarthana Mitra is a staff writer at Qrius