Union Budget 2020

Dr. Anirban Sengupta and Dr. Tamali Chakraborty

 Key Features…

• Nominal GDP growth for FY 20-21 estimated at 10%

• Fiscal Deficit for FY20 revised to 3.8% from 3.3%
earlier
• Govt. committed to doubling farmers' income by 2022
by allocating INR 2.83 lakh crore for the agriculture
sector
• Increased allocations to various schemes & sectors ^
related to infrastructure to boost economic growth
• New personal income tax rules* - excluding reliefs,
exemptions. DDT to be abolished. To be taxed in the
hands of investor as per the individual tax slabs
 Aspirational India

• In the Union budget 2020, Union finance minister Nirmala

Sitharaman announced three main themes in her speech:

– I. Aspirational India
– II. Economic Development
– III. Caring Society
 I. Aspirational India

• Under the theme of ‘Aspirational India’, Union finance

minister Nirmala Sitharaman announced three sub-categories:

– A. Agriculture, Irrigation and Rural Development

– B. Wellness, Water and Sanitation
– C. Education and Skill
 A. Agriculture, Irrigation and Rural Development

• The government allocated INR 2.83 lakh crore for

agriculture and allied activities, irrigation and rural
development.

• Farm markets need to be liberalized and farming needs to

be made more competitive. The farming will include
sustainable cropping patterns and necessary technology.

Pradhan Mantri Kisan Urja Suraksha Utthan Mahabhiyan

(PM KUSUM) to be expanded to provide 20 lakh farmers
in setting up standalone solar pumps.
 A. Agriculture, Irrigation and Rural Development

• NABARD Refinancing Scheme to be further expanded,

agricultural credit target for the year 2020-21 has been set at
INR 15 lakh crores.

• Indian railways will set up Kisan rail through PPP

arrangement, for transportation of perishable goods and
warehouses will be set up.

• Further, Krishi UDAN will be launched by Ministry of Civil

Aviation on international and national routes.
 B. Wellness, Water and Sanitation

• Mission Indra Dhanush covers 12 diseases. The scheme was

intensified by the GoI including 5 new vaccines.

• Fit India Movement fights against non-communicable

diseases that arises due to lifestyle issues.

• The Health sector of the GoI is also supported by the Jal

Jeevan Mission and Swachh Bharat Mission.

• Ayushman Bharat Under PMJAY, there are more than

20,000 empaneled hospitals in the country. More such
hospitals are to be empaneled in Tier II and Tier III cities.
 B. Wellness, Water and Sanitation

• Under the scheme, the budget allocates viability gap funding

in PPP mode.

• Machine Learning and Artificial Intelligence are to be

implemented in the Ayushman Bharat Scheme.

• TB Harega Desh Jeetega The campaign was launched to fight

Tuberculosis and eliminate the disease from the country by
2025.

• Jan Aushadi Jendra Scheme The scheme is to be expanded to

all districts. The aim is to make 2000 medicine and 300
surgical equipment available in all districts. This is to be
realized by 2024.
 B. Wellness, Water and Sanitation

• Fund Allocation For Health The Health Sector has been

allocated 69,000 crores. This includes the INR 6,400 crores
allocated for PMJAY.

• The GoI is committed to Open Defecation Free India

(ODF). It is currently implementing ODF+ that aims to
sustain ODF. The GoI now under the Budget aims to work
towards Liquid and Grey water management.

• It will also focus towards solid waste collection, source

segregation and processing. The Budget has allocated INR
12,300 crores of rupees for the Swachh Bharat Mission.
 B. Wellness, Water and Sanitation
• Jal Jeevan Mission-Fund Allocation The mission aims to
provide clean piped drinking water to all households.

• The GoI has already approved INR 3.6 lakh crore rupees
for the mission. The mission also aims at augmenting
local water resources, recharging existing sources and
promotes desalination and water harvesting.

• The budget aims to encourage cities to implement the

mission in the current year by allocating fund of INR
11,500 crores.
 B. Wellness, Water and Sanitation

• Finance Minister Nirmala Sitharaman on Saturday

said that water and sanitation was a key focus area for
the Government and was a pillar of Budget
2020 under 'Aspirational India' theme.

• A total allocation of INR 12,300 crore in Swachh

Bharat mission for 2020-21 has been done.
 C. Education and Skills

• The budget earmarked INR 99,300 crore for

education sector in 2020-21 and about INR 3,000
crore for skill development.

• The budget also suggested under the 'Study in India'

programme, to be held in Asian and African countries
to benchmark foreign candidates who receive
scholarships for studying in Indian higher education
centres.
 III. Caring Society
• Women, Child and Social Welfare
• INR 35,600 crores were allotted for nutrition related and INR 28,600
crores for programmes of women development.

• More than 6 lakh anganwadi workers equipped with smart phones to

upload status of nutrition.

• Culture and Tourism

• Proposal to establish Indian Institute of Heritage and conservation and
5 new archaeological sites will be developed.

• INR 3,150 crores are allotted to culture and INR 2,500 to tourism.

• Environment and Climate Change

• Coalition for disaster resilient Infrastructure launched in September
2019 and INR 4,400 crores are allotted for environment and climate
change.
 GDP = C + I + G + NX

Consumption Personal Income Tax Rate Cuts + Rural Thrust

Investment Off the budget measures like corporate tax cuts, low interest rates, surplus liquidity etc in
the recent past

Government Thrust on Infrastructure spending

Spending

Net Exports Mention of manufacturing of electronic equipments, semiconductors, etc may have dual
impact of boosting exports as well as minimising imports
 Tax Slabs

Income (INR) Tax liabilities

Less than 5 lakhs No tax
5-2.5 Lakhs 5%
7.5-5 10%
10-7.5 15%
12.5-10 20%
15-12.5 25%
Above 15 30%
 I = Private Investments

• Reduction in corporate tax rate from 30% to

22% with reduction in effective tax rate from
34.9% to 25.2% (including surcharge and cess)

• Corporate income tax rate slashed to 17%

including surcharge for new manufacturing
companies set up on or after Oct 1, 2019
 Financial Steps…
• Concessional corporate tax rate of 15 per cent to new
domestic companies in manufacturing and power sector.
• Tax concession for sovereign wealth fund of foreign
governments and other foreign investments.
• Tax benefits to Start-ups by way of deduction of 100 per
cent of their profits are enhanced by increasing turnover
limit and period of eligibility. Concessional tax rate for
cooperatives proposed.
• Turnover threshold for audit of MSMEs increased.
Extension of time limits pertaining to the tax benefits for
affordable housing.
• Issuance of Unique Registration Number to all charity
institutions for easy tax compliance.
• Health cess to be imposed on imports of medical
equipment given these are made significantly in India.
 Financial Steps…
• IDBI stake disinvestment…
• Deposit Insurance Coverage to increase from
`1 lakh to `5 Lakh per depositor.
• Eligibility limit for NBFCs for debt recovery
under SARFAESI Act proposed to be reduced
to asset size of `100 crore or loan size of `50
Lakh.
• FPI Limit for corporate bonds to be increased
to 15 per cent.
 Financial Steps…
• LIC Disinvestment….really a good or, bad…???
• Specified categories of government securities would
be opened for non resident investors
• Dividend Distribution Tax removed and classical
system of dividend taxation adopted.
• Simplified GST return shall be implemented from 1st
April 2020. Refund process to be fully automated.
 Industry, Commerce and Investment
• Scheme to encourage manufacturing of mobile
phones, electronic equipment and semi
conductor packaging.
• National Technical Textiles Mission for a
period of 4 years.
• Scheme anchored by EXIM Bank and SIDBI
to handhold MSMEs in exports markets.
 Infrastructure
• National Logistics Policy to be launched soon
National Logistics Policy to be launched soon.
• Roads: Accelerated development of Highways. •
Railways: Four station redevelopment projects
• 150 passenger trains through PPP mode. •
• More Tejas type trains for tourist destinations.
• Port: Corp g jp oratizing at least one major port.
• Air: 100 more airports to be developed under
UDAAN.
 Infrastructure

• Power: Efforts to replace conventional energy Efforts

to replace conventional energy meters by prepaid
smart meters.

• Gas Grid: Expand National Gas Grid to 27,000 km

• Infrastructure Financing: `103 lakh crore National

infrastructure Pipeline projects announced.

• An international bullion exchange to be set up at GIFT

City.
 G = Government Spending

1.Roads: +11% you growth in budgetary

allocation – NHAI allocation +16% higher yoy
2. Railways: +3% yoy growth in allocation
3. Urban development: +18% increase in
allocation
4. Shipping: +18% higher allocation
5. Jal Shakti: The newly formed department saw a
+19% yoy increase in allocations
6. PMAY: +9% higher allocation
 Impact on Sectors
Sectors Impact
Consumption People are more likely to spend given the option of a new tax
regime
Power 15% tax rate for power companies in line with manufacturing
companies boosts sentiments
Oil & Natural Gas Plans to expand national gas grid to 27,000 km from 16,200km

Infrastructure Increased allocations towards infrastructure positive for cyclical

sectors and economic growth
BFSI No major impetus for NBFC & HFCS. The new tax regime
without exemptions/deductions could adversely impact the pull
of ULIPs/health insurance, housing finance, etc.

Financial Markets Measures like increase in FPI Limit in corporate bonds,

proposed IPO of LIC highlight govt. intent of increasing investor
confidence
 Other Key Sectoral benefits….
Sector Budget Measures Impact
Key
Auto Handholding support for exports of auto parts through a scheme of Rs 1000 cr
will be anchored by EXIM Bank together with SIDBI.

Both these institutions would contribute Rs 50 cr each. This Rs 100 cr would be

achieved towards equity and technical assistance.

Debt funding of Rs 900 cr from banks would be made available.

Higher customs duty on auto-parts from 10% to 20% Rs 1.70 lakh cr for transport
infrastructure in 2020-21.

Real Estate Currently, while taxing income from capital gains, business profits and other
sources in respect of transactions in real estate, if the consideration value is less
than circle rate by more than 5%, the difference is counted as income both in the
hands of the purchaser and seller, It is proposed to increase the limit of 5% to
10%.
 Key Sectoral Impact
Sector Key Budget Measures

FMCG Allocation of Rs. 2.83 lakh cr for rural development, agri, horticulture, raising agri credit,
PM KISAN Reduction in Income Tax Slabs (without exemptions/deductions) to spur
consumption

Doubling milk processing capacity from 53.5MT to 108MT

Withdrawal of Customs Duty on Skimmed Milk & certain milk products

Allocation to nutrition related program enhanced to Rs. 35,600 cr

Customs Duty:

Peanut Butter (Withdrawn )

Crude Palm Oil (Raised)

 Key Sectoral Impact
Sector Key Budget Measures
Tobacco & Hike in Basic Excise Duty on cigarettes (filtered/non-filtered) of varying
Cigarettes length leads to increased tax of ~6-8% per cigarette stick

65mm from Rs. 5/1,000 sticks to Rs. 200/1,000 sticks

Banks Deposit Insurance Coverage to increase from Rs 1 lakh to Rs 5 Lakh per

depositor

Proposal to sell balance holding (47%)of government in IDBI Bank in stock

exchanges

No further capital infusion announced for PSU Banks, after infusion of Rs 3.5
lac cr over last few years

Asked RBI to extend debt restructuring window for MSME by a year to

March 31, 2021.
NBFCs Partial credit guarantee scheme will be launched by the government

FPI Limit for corporate bonds to be increased to 15% per cent.

 Key Sectoral Impact
Sector Key Budget Measures
Power Concessional tax rate for electricity generation companies:

In order to attract investment in the power sector, it is proposed to extend the concessional corporate tax
rate of 15% provided by the Taxation Laws (Amendment) Act, 2019 to new domestic companies that are
engaged in the generation of electricity subject to the condition that they start generating electricity by
31st March, 2023

Advise to shut thermal plants if they don't meet emission norms

Railways 150 new train to be introduced on PPP basis; Four stations will be also be redevelopment with the help
& Metro of PPP

Rs 18,600 cr worth Bengaluru suburban transport project launched

More Tejas type trains for tourist destinations Actively pursue High Speed Train between Mumbai and
Ahmedabad

Transport Rs 1.7 lakh cr allocated to transportation

ation 100 more airports to be set up by 2024 to support UDAN scheme
Accelerated development of highways will be undertaken; Delhi-Mumbai expressway and two other
projects to be completed by 2023. Chennai-Bengaluru Expressway to be started
 Key Sectoral Impact
Sector Key Budget Measures
Consumer Increase of Customs Duty on : Compressor of Refrigerator and Air conditioner
Durables Proposed scheme for encouraging manufacture of mobile phones, electronic equipment
and semi-conductor packaging
Allocation of Rs 4,400 cr for ensuring cleaner air in cities above one mn

Gas To expand the national gas grid from the present 16200 km to 27000 km
distribution

Tourism Allocated Rs. 2,500cr to promote Tourism

Allocated Rs. 3,150cr for Ministry of Culture
Developing 5 Archaeological sites with onsite museum
Ministry Expenditure of Major Items
(INR)
Ministry of Housing and Urban Affairs 50,040

Ministry of Health and Family Welfare 67,112

Ministry of Railways 72,216

Ministry of Road Transport and Highways 91,823

Ministry of Human Resource and Development 99,312

Ministry of Rural Development 1,22,398

Ministry of Consumer Affairs, Food and Public 1,24,535

Ministry of Agriculture and Farmers Welfare 1,42,762

Ministry of Home Affairs 1,67,250

Ministry of Defence 4,71,378
Source: Union Budget 2020
 How Budget felt short of expectations….

• LTCG tax no addressed..

• Usefulness of abolition of DDT..
• New Tax structure a goof up!!!!!!
• Spends on MNREGA and other rural infrastructure
creation vehicles decrease…
• The government has already declared the National
Infrastructure Pipeline worth Rs 103 lakh cr. but the
focused annual target and the roadmap was awaited in
the budget which was missing
 How Budget felt short of expectations….
• Markets were banking on concessions for Real Estate as
industry supports large scale employment but there was
only a tax holiday extension of one year which would not be
sufficient to revive the industry.
• As far as fund raising is concerned, the Government has
taken few good measures that would deepen the debt market
viz.,
– The FPI limits has been increased to 15% (from 9% earlier),
– certain specified categories of government securities would be
opened fully for NRIs
– Divestment target for FY21 has been increased to Rs 2.1 lakh cr.
largely to be funded through IPO of LIC and IDBI stake sale.
– The government has resorted to fiscal deficit of 3.8% for FY20
taking help of the escape clause of FRBM act and set target of
3.5% for FY21;
 Closing notes….
• Overall, the budget was lacking in immediate measures
to revive the economic health of the country. Now other
triggers viz., the consumption drive post the Rabi
harvest, marriage season and arrival of monsoon will
have to be eyed.

• On positive side there have been qualitative efforts of

instituting new taxpayer charter to end tax harassment,
amend Companies Act to bring criminal liability in
certain areas, make faceless appeals along with new
direct tax dispute settlement scheme etc.

• Since lot can be done outside budget, all eyes would be

on Govt./ GST Council to take sector specific measures
(if any) to revive economy.
 Thank You

07-02-2020 34