Economy

All The Boxes That Budget 2019 Ticked

Sanju Verma

Feb 05, 2019, 05:58 PM | Updated 05:58 PM IST


Interim Finance Minister Piyush Goyal along with his full Budget team as they give final touches to the Union Budget 2019-20 at North Block on 31 January 2019 in New Delhi, India. (Vipin Kumar/Hindustan Times)
Interim Finance Minister Piyush Goyal along with his full Budget team as they give final touches to the Union Budget 2019-20 at North Block on 31 January 2019 in New Delhi, India. (Vipin Kumar/Hindustan Times)
  • There are several reasons why Budget 2019 is path-breaking and reflective of inclusivity and a welfare-oriented approach.
  • Budget 2019 will go down in history as the budget that laid the building blocks to double income of farmers by 2022. Today, India ranks first in cattle and buffalo population and is the second largest milk producer in the world. At the same time, a coastline of more than 7,500 kilometres, is conducive to the fisheries business and hence creation of a separate fisheries department was a welcome step.

    An additional outlay of Rs 750 crore for the Rashtriya Gokul Mission, which is to be utilised within 2018-19 itself, is a major step that will conserve and develop indigenous breeds, giving a whole new meaning to “cownomics”. The decision to set up the Rashtriya Kamdhenu Aayog, which will look at effective implementation of laws and welfare schemes for cows, will ensure sustainable genetic upgradation of cow resources and continuous growth in the productivity of the Indian bovine.

    Introduction of 2 per cent interest subvention to those engaged in animal husbandry and fisheries and avail loans through the Kisan Credit Card (KCC), is a positive step since it will ensure better cash flows and credit availability to allied sectors within the agricultural space.

    Given that over 50 per cent of the Indian workforce is engaged in agriculture, directly or indirectly, the focus on the rural economy has rightfully been the highlight of this Budget, with the huge game-changer being the Narendra Modi government’s decision to provide assured income support of Rs 6,000 per year to roughly 12 crore families with land holdings of up to two hectares, under the Pradhan Mantri Kisan Samman Nidhi, at an estimated cost of Rs 75,000 crore to the central exchequer in 2019-20 and Rs 20,000 crore in 2018-19.

    Steering clear of loan waivers and rescheduling of loans, the government made a provision of 2 per cent interest subvention to farmers affected by natural calamities and an additional 3 per cent for those making timely payments. Timely payments assume significance as commercial bank credit disbursement has already reached Rs 11.4 lakh crore by December 2018 and is expected to rise to a record level of Rs 13 lakh crore in 2018-19. The allocation to MNREGA too has been hiked to Rs 60,000 crore for 2019-20. In effect, giving a massive push to rural consumption through a targeted approach, has been the hallmark of this Budget.

    Also, the vision of creating 1 lakh digital villages over the next five years resonates well with the government’s overall efforts at bridging the rural urban divide. Already, over 3 lakh common service centres (CSCs) employing over 12 lakh people deliver a slew of digital services to the rural population.

    Apart from farmers, this Budget recognised the sweat and toil of 42 crore workers in the unorganised sector, drawing a monthly income of Rs 15,000 and less, by unveiling the mega Pradhan Mantri Shram-Yogi Maandhan Yojana (PMSYMY), with Rs 500 crore earmarked for 2018-19 itself. Unorganised sector workers such as rickshaw pullers, rag pickers, construction workers, street vendors, handloom artisans, daily wage labourers and those from other similar occupations, will receive a monthly pension of Rs 3,000, once they turn 60, by making a small monthly contribution during their working age.

    For instance, a worker joining the scheme at 29 years of age will have to contribute a monthly sum of Rs 100 and someone joining the scheme at 18, will have to only contribute Rs 55 per month. Out of 42 crore unorganised sector workers, 10 crore workers are expected to benefit from this massive pension initiative of the Modi government in the next five years, making this one of the biggest pension schemes in the world.

    While the upper age limit for Atal Pension Yojana (APY) is 40 years, under this scheme, the upper age limit is 60. Unlike APY, which only covers the unorganised sector, PMSYMY is also expected to cover marginal wage earners in the organised sector and is therefore a pension plan which is one of its kind.

    An area that has always been top priority for the BJP-led National Democratic Alliance government is infrastructure and this Budget carried forward that trend, with an overall allocation of Rs 1.58 lakh crore for the Railways versus the Rs 1.48 lakh crore that was allocated last year.

    Budgetary allocation for Railways too saw a jump from Rs 55,088 crore in the previous fiscal to Rs 64,587 for 2019-20. The high point however, was the announcement by Piyush Goyal that all unmanned crossings on broad gauge lines had been eliminated.

    Another key highlight was the announcement of the launch of the “Vande Bharat” Express, India’s first ever indigenously developed semi-high speed rail, that will be able to run at 180 km per hour. Developed at the Integral Coach Factory in Chennai, the Vande Bharat Express, is a sterling testimony to Narendra Modi’s “Make in India” initiative.

    The beauty of Modinomics has always been its modern outlook, inclusivity and, of course, its welfare oriented approach, well evident from the Rs 19,000 crore allocated to the Pradhan Mantri Gram Sadak Yojana and another Rs 25,853 crore allocated to affordable housing schemes under the Pradhan Mantri Awas Yojana. In an important development, allocation for northeastern states has been increased by 21 per cent to Rs 58,166 crore in 2019-20, over the previous fiscal.

    Speaking of welfare economics, it was evident in the decision to increase budgetary allocation by 35.6 per cent for the welfare of Scheduled Castes (SCs), from Rs 56,619 crore in 2018-19 to Rs 76,801 crore in 2019-20. For Scheduled Tribes (STs), the budgetary allocation was raised by 28 per cent from Rs 39,135 crore to Rs 50,086 crore in the said period.

    Coming to gender allocation, that saw an increase by 20 per cent or Rs 4,856 crore, with the total outlay for the Women and Child Development (WCD) Ministry going up from Rs 24,309 crore, to Rs 29,165 crore.

    Apart from all of the aforesaid, if there is one aspect for which Budget 2019 will always be remembered as path-breaking, it will have to be for the holistic tax proposals that will completely alter the lives of more than 3 crore middle class taxpayers, comprising small traders, the salaried, the self employed, pensioners and senior citizens.

    While Piyush Goyal did not tinker with the tax slabs or the tax rates, he has given full rebate for taxpayers having taxable income up to Rs 5 lakh, which will give a tax benefit of close to Rs 18500 crore, to these estimated 3 crore taxpayers. If one adds the Rs 4.75 lakh tax exemptions that one can use, then practically speaking, for a salaried individual, up to Rs 9.75 lakh of taxable income will attract no tax whatsoever if all the exemptions are availed. The figure of Rs 4.75 lakh has been arrived at thus - Rs 1.5 lakh available as tax benefit under Section 80-C, Rs 50,000 under NPS, Rs 25,000 under Mediclaim, Rs 50,000 as standard deduction and Rs 2 lakh as interest tax exemption on housing loan for self occupied property.

    For the non salaried, since they do not get the benefit of standard deduction of Rs 50,000, they need not pay any tax up to taxable income of Rs 9.25 lakh if all the available rebates, concessions and tax breaks are utilised under various sections like Section 80-C, 80-D, 80-CCD, deduction of interest on housing loan, etc.

    While it is true that practically speaking, it is rare for anyone to use all the tax breaks available in a given financial year for various reasons, simply by investing only Rs 1.5 lakh in tax saving instruments under Section 80-C, one can still afford to pay zero tax, for taxable income up to Rs 6.5 lakh per annum.

    In short, Budget 2019 has been an unbridled bonanza for the great Indian middle class that can now afford to splurge even more as this Budget will tremendously boost disposable incomes and purchasing power. Consumption demand, which has been growing in the range of 6-7 per cent, will get a massive impetus and this has the ability to catapult India into a much higher orbit in terms of both GDP and per capita incomes, too.

    Other benefits like increasing the tax deducted at source (TDS) threshold on interest earned on post office and bank deposits from Rs 10,000 to Rs 40,000, will significantly benefit small depositors and non working spouses who will no longer need to deposit form 15G for claiming tax benefits, which was the case earlier for those who earned interest in excess of Rs 10,000 per annum.

    A big benefit for the upper middle class, clearly, is the decision to do away with the tax on notional rent for a second self occupied home and allowing tax benefit on capital gains from house property. For instance, currently, under Section 54(b) of the Income Tax Act of 1961, a consumer is allowed to save tax on the capital gains made from selling a residential property by buying one more home property.

    However, once the new budgetary proposal comes into effect, a home buyer can save tax on capital gains of up to Rs 2 crore by investing in buying two homes, but this benefit can be availed only once during one’s life-time.

    The benefits of Section 80-IBA have been extended by a year for housing projects approved till 31 March 2020. Also, the Budget has increased the exemption limit on TDS on rental income from Rs 1.8 lakh per annum to Rs 2.4 lakh per annum. This will directly benefit those who own two houses and give one on rent.

    The unfounded allegation by a moribund opposition and certain sections of the media that this budget is high on populism and indulges in fiscal profligacy, is hogwash. As Economic Affairs Secretary, Subhash Chandra Garg pointed out, against a targeted fiscal deficit of 3.34 per cent in 2018-19, post the incentives announced, the fiscal deficit will be still reined in at 3.36 per cent of GDP in the current financial year and the slippage of 0.02 per cent, in absolute terms, works out to roughly Rs 3,000 crore only.

    In fact, the Modi government has reduced its borrowings for 2018-19, in comparison to the Budget Estimate (BE) by as much as Rs 1.60 lakh crore, by not doing the buyback and instead, shifting some of the borrowings, to be met from the National Small Savings Fund, NSSF.

    The gross borrowing programme for 2018-19, stands at a little over Rs 5 lakh crore, which is very reasonable for an economy growing at well over 7 per cent, with retail inflation at well below 3 per cent. Do note that retail inflation for December 2018, stood at just 2.19 per cent.

    One aspect of the Budget that is set to uproot corruption in a big way and remove any form of tax terrorism whatsoever going forward is the complete elimination of manual interface between the taxman and the taxpayer in the next two years. As Piyush Goyal said, going forward, almost all verification and assessment of returns selected for scrutiny will be done electronically through an “anonymised” back office, manned by tax experts. In the new system, the taxpayer will not come to know who is the tax official handling his or her case and the taxman will have no idea about the identity of the tax payer. In fact, in 2017-18, 99.54 per cent of the income tax returns were filed online and accepted, just as they were filed, with no modifications sought.

    To that extent, the Modi government deserves kudos for not only bridging the governance deficit left behind by an inept Congress-led United Progressive Alliance but also for removing the trust deficit if any between the two most important stakeholders in a democracy - the duly elected government and the citizenry that it is accountable to.

    Speaking of numbers, from a little over Rs 6.3 lakh crore in 2013-14, to being oncourse to collecting well over Rs 11.5 lakh crore in 2018-19, Modinomics shows how better tax compliance and digitisation of the tax filing mechanism, has led to a stupendous 83 per cent surge in direct tax collections.

    Mechanisation of the tax system will not only bring in greater transparency but making officers accountable for resolving disputed cases within an automated time-bound frame, is easily one of the best examples of ‘minimum government, maximum governance’, something that the Narendra Modi government has always duly lived by, upholding the integrity of democratic institutions, in its truest sense.

    Sanju Verma is an Economist & Chief Spokesperson, BJP, Mumbai.


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