EXPERT ANALYSES UNION BUDGET 2020-21: A MIXED BAG
News behind the News|NbN 03 February 2020
Finance Minister Nirmala Sitharaman’s second Budget presented three themes -- aspiring India, economic development, caring society. And it seeks to cater to the demand side of the economy by trying to put more money in the hands of individuals.

SALIENT FEATURES

Nominal Growth: For 2020-21, Sitharaman has pegged the nominal GDP growth rate at 10 per cent, lower than the 12 per cent envisaged for the current fiscal.

Fiscal deficit: The Budget relaxed the target for the fiscal deficit to 3.8 per cent from 3.3 per cent.

With the fiscal deficit hitting 132 per cent of full-year target by December, this was expected. But, writes BusinessLine Research Bureau “despite the sharp slip on the fiscal deficit target, the numbers do not add up. In fact, if the still ambitious target on disinvestment, income tax collections, and spectrum are brought down to more realistic figures, then the fiscal deficit of 3.8 per cent too looks difficult to achieve, unless expenditure is cut back sharply in the fourth quarter. For now, the Centre has only lowered expenditure marginally by 3 per cent from the budgeted figure.”

Receipts and expenditures: Sitharaman said receipts for 202021 are pegged at Rs 22.46 lakh crore while expenditure at Rs 30.42 lakh crore. The revised estimated expenditure for FY20 has been pegged at Rs 26.99 lakh crore and receipts at Rs 19.32 lakh crore, she said. The net market borrowings would be at Rs 4.99 lakh crore in FY 2019-20 and are estimated at Rs 5.36 lakh crore in the next fiscal. She, however, said the government expected tax buoyancy to take time and the recent cut in corporate tax to cause loss of substantial revenue in short-run, economy to reap huge returns in due course.

Benefit for corporates: The government proposed to remove dividend distribution tax on companies, but the tax will be shifted to recipients at the applicable rate. The proposal would make India more attractive market for investment. This will cost the Government Rs 25,000 crore in revenues. The corporate sector was earlier handed out a major corporate tax rate cut in September last year.

Changes to the personal income tax: Sitharaman has also brought changes to the personal income tax regime. There will be no income tax for those with taxable income below Rs 5 lakh. A new income tax rate of 30 per cent is proposed for those earning income above Rs 15 lakh. For those with income between Rs 5-7.5 lakh, the tax rate has been pegged at 10 per cent. For those with an income between Rs 7.5-10 lakh, the tax rate is 15 per cent. The tax rate will be 20 per cent for incomes between Rs 10-12.5 lakh, and 25 per cent for taxable incomes between Rs 12.5-15 lakh. But to enjoy the new tax regime, the individual will have to forego the existing exemptions. That is the catch.

Insurance game-changer: What is seen as a game-changer is her announcement on LIC (government-owned Life Insurance Corporation) going public through an Initial Public Offering (IPO). This is to meet the ambitious disinvestment target.

Power, renewable energy sector, discom reforms: An allocation of Rs 22,000 crore has been made for the power and renewable energy sector in the Union Budget 2020-2021. The Minister promised reforms in Discoms (Power Distribution Company) aimed at ensuring 24x7 supply.

For the oil and gas sector, it is proposed to expand the national gas grid from the present 16,200 kilometers to 27,000 kilometers. “To deepen the gas markets in India, further reforms will be undertaken to facilitate transparent price discovery and also ease of transactions,” the Minister added.

There is also a proposal under consideration for setting up a large solar power capacity, alongside the rail tracks on the land owned by railways.

National Mission on Quantum technology: The plan is to invest Rs 8,000 crore over the next five years in the National Misssion on Quantum technology and its applications. This comes at a time when the world is making bets on the emerging field that has potential impact in areas such as cybersecurity in the future.

The department of science has a national mission on Quantum Technologies and Applications, which is collaborating with institutions and companies to build homegrown capablity in quantum technologies.

Boost to agriculture and the rural economy: The Minister outlined a 16 point action plan to push agriculture and the rural economy and set aside a provision of Rs 2.83 lakh crore for this. These include providing solutions to farmers affected by water crisis and plans to improve marine fishery resources. Sitharaman said the government was “committed to doubling farm income by 2022”.

There are plans for Indian Railways to run a “Kisan Rail” (farmer’s train) that will provide refrigerated coaches in trains, thereby helping farmers access faraway markets quickly, cheaply and efficiently.

Continuing to focus on issues of storage and warehousing, she said NABARD (National Bank for Rural and Agricultural Development) would map and geotag cold storage and warehousing facilities to help farmers locate them quickly.

Urging farmers to think of alternative use for barren lands, such as setting up solar farms, she also said the government would provide 20 lakh farmers with facilities for standalone solar pumps and 15 lakh with solar-powered, grid-connected pump sets.

Integrated farming systems in rainfed areas will be expanded, she added.

Outlining her plans for the agriculture sector Nirmala Sitharaman also spoke about a “blue economy”, saying the government had plans to improve returns from marine fishery resources. She said that by 2022/23 fish production would be raised to 200 lakh tonnes.

Sitharaman, who also said more women-oriented self-help groups would be set up, noted that horticulture had exceeded production of food grains and the government proposed to support states on a “1 product, 1 district” platform.

Agri lending target raised: The Budget has set the agriculture lending target at Rs 15 lakh crore for FY21, up from Rs 13.5 lakh crore last year. This implies a 12 per cent annual growth in Agri lending target over the past five years. But, according to Radhika Merwin of BusinessLine, upping the lending target alone is not enough to meet the farmers’ needs. This is because, accessibility to credit of small and marginal farmers still remains weak.

Doubling milk processing capacity: The Government looks to facilitate doubling of milk processing capacities from 53.5 million metric tonnes (MT) to 108 MT by 2025. This would help to increase the country’s per capita milk availability from the current about 394 grams per day. India’s milk production has grown by more than 10 times since 1950. The announcement bears significance in the backdrop of India’s growing middle-class and urban consumption of dairy products.

Fishery exports: The government aims to raise India’s fishery exports to Rs. 1 lakh crore by 2024-25. By 2022-23, the government also proposes to raise fish production to 200 lakh tonnes. The government also proposes to put in place a framework for development, management, and conservation of marine fishery resources.

Identifying 100 water-stressed districts: The Government will identify 100 districts, which are “water-stressed. the plan is for augmenting existing water resources, recharging of lakes, water desalination, rainwater harvesting as well as sewage water treatment.

SOME MEASURES TO LIFT ECONOMY

More money for roads & highways: Economists had suggested an enlarged capital expenditure as one of the ways to boost the core sector as it has a multiplier effect on the economy. The finance minister didn’t disappoint. For FY21, the capital expenditure for the entire fiscal has been increased to more than Rs 4 lakh crore. A good part of the borrowings for the financial year 2020-21 would go towards Capital expenditure of the government that has been scaled up by more than 21%.

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