Budget 2019-20 offers sustainable income support

Union Minister for Finance, Corporate Affairs, Railways and Coal, Shri Piyush Goyal, presented India’s Interim Budget for financial year 2019-20 in the Parliament on February 1st, 2019. The visionary budget aims to boost annual income for a cross-section of people, while offering improved incentives for trade and investment activity. Besides a new deal that provide direct income support to over 120 million small and marginal farmers, the Budget includes a path-breaking pension initiative for more than 100 million unorganized sector workers. Budget 2019-20 also allocates a record-high sum of over US$42 billion to defence and security, apart from more than US$8.2 billion for India’s northeastern region. In his budget speech, Minister Goyal said that the Government has brought down average inflation to 4.6 per cent, a record low. Budget 2019-20 also raised allocations for education, healthcare, and infrastructure, along with the backward sections. Mr Goyal said that India, which is poised to become a US$5 trillion economy in the next five years, aspires to become a US$10 trillion economy in the eight years thereafter. Below mentioned are some of the leading features of the 2019-20 budget.

Welfare Schemes

• A new scheme, namely “Pradhan Mantri Kisan Samman Nidhi (PM-KISAN)”, with an outlay of over US$10.5 billion for FY 2019-20 and US$2.8 billion for FY 2018-19 will extend direct income support of Rs 6,000 per year to farmer families, having cultivable land of up to 2 hectares.
• In place of rescheduling of crop loans, all farmers affected by severe natural calamities will get 2 per cent interest subvention and additional 3 per cent interest subvention upon timely repayment of loans. The Government is committed towards doubling farmers’ income by 2022.
• Pensionary benefits to at least 100 million labourers and workers in the unorganised sector under “Pradhan Mantri Shram-Yogi Maandhan”. The plan, with outlay of at least US$70 million, is expected to become one of the largest pension schemes of the world. within next five years.
• Individuals with taxable annual income of up to Rs.500,000 will not be required to pay income tax. Those having income of up to Rs. 650,000 are not required to pay any income tax if they make required investments. Over 30 million to receive tax benefit worth over US$2.6 billion.
• Average inflation has been brought down to 4.6 per cent over last five years, which is a record low. In fact, inflation during December 2018 was down to 2.2 per cent. Hence, Indian families spend around 35-40% less today on necessities such as food, consumer durables and housing.
• At least US$8.4 billion allocated for rural job creation during FY 2019-20, while US$2.7 billion has been given for rural connectivity. By March 2019, all households will have electricity connection. Meanwhile, Ayushman Bharat has provided healthcare coverage for nearly 500 million people.

Economic Growth

• The Budget read that fiscal deficit has been brought down to 3.4 per cent in FY 2018-19 RE from the high of almost 6 per cent seven years ago. Mr Goyal said that the current account deficit, against a high of 5.6 per cent six years ago, is likely to be only 2.5 per cent of GDP this year.
• Regulatory and tax reforms such as the Goods and Services Tax (GST) has set the stage for high-paced growth. From being the 11th largest economy in 2013-14, today India has emerged as the 6th largest in the world. FDI inflow in the period has been estimated at US$239 billion.
• An 18 per cent growth was reported in direct tax collections during FY 2017-18 along with an expansion in tax base by more than 10 million people who filed income tax returns for the first time in FY 2017-18, mainly on account of demonetization. This has further grown in FY 2018-19.
• Total expenditure is to increase by 13 per cent from US$344.9 billion in 2018-19 RE to US$389.9 billion in 2019-20 BE. Fiscal deficit for FY 2019-20 is estimated at 3.4 per cent. On completion of the fiscal deficit consolidation programme, Government to now focus on Debt consolidation.
• Government is targeting fiscal deficit of 3 per cent of GDP by 2020-21. India’s Debt to GDP ratio was 46.5 per cent in 2017-18. The Fiscal Responsibility and Budget Management Act prescribes that the Debt to GDP ratio of the Government to be brought down to 40 per cent by 2024-25.
• Indian is expected to grow by 7.6 per cent in 2019, according to UN World Economic Situation and Prospects 2019 report. The report pegs India’s growth in 2020 at 7.4 per cent with benefits from robust private consumption, more expansionary fiscal stance as well as regulatory reforms.

India is poised to be a US$5 trillion economy in five years, and aspires to reach US$10 trillion by 2032

New Opportunities

• Budget 2019-20 allocates a record-high sum of over US$42 billion to defence and security. India is also pursuing initiatives to achieve higher level of indigenization and self-reliance in defence. Currently, India spends around 30 per cent of its annual defence budget on capital acquisitions
• Meanwhile, the overall capital outlay for Indian Railways has been estimated at US$22.4 billion for FY 2019-20. Capital support from the budget for Indian Railways has been proposed at US$9 billion in 2019-20. India has increasingly been opening up to foreign players in rail infrastructure.
• A National Artificial Intelligence Portal will be developed as part of the National Programme on ‘Artificial Intelligence’. To expand coverage, the Department of Industrial Policy and Promotion will be renamed as the Department for Promotion of Industries and Internal Trade.
• A separate Department of Fisheries to promote further growth of over 7 per cent to promote livelihood of about 14.5 million people dependent on the sector. A 2 per cent interest subvention to farmers pursuing animal husbandry and fisheries on loan via Kisan Credit Card.
• An all-time high allocation of around US$980 million has been made in the Budget of 2019-20 for micro, small and medium enterprises (MSME). Indian MSMEs, with increasing presence in sectors spanning defence to food processing, has also been alloted an Export Promotion Cell.
• Considering the contribution of the entertainment industry in employment generation, the provision of single window clearance system for ease of shooting films, hitherto available only to foreigners, have been extended to Indian filmmakers. This will create further opportunities.

Leading Achievements

• Mobile data usage in India increased 50 times over the last five years, while average cost of data and voice calls in India is now possibly the lowest in the world. Alongside, the number of mobile and mobile part manufacturers in India have increased from 2 to 268, driving further growth.
• Installed solar power capacity in India increased 10 times over the last five years. The nation has also set up the International Solar Alliance that brings together over 120 nations to invest US$1 trillion to instal more than 1,000 GW of new solar generation capacity worldwide by 2030.
• India is now the fastest highway developer in the world. Projects such as the Eastern Peripheral Expressway and the Bogibeel bridge that were stuck for years were completed by the current government. Bharatmala programme aims to set up 84,000 km of new highways by 2022.
• A National Report on the States’ Startup Ranking 2018 has been released for the first time, creating healthy competition among Indian states in setting up of incubation hubs, seeding and scaling innovations, regulatory amendments, skill development and drawing investments.
• India has jumped 65 spots over last four years to reach the 77th ranking on World Bank’s Ease of Doing Business metrics, aided by policy and regulatory initiatives undertaken by Government of India since 2014. India has launched Ease of Doing Business ranking for its 36 states and UTs.
• India emerged as the top recipient of greenfield foreign investment among the commonwealth block of 53 countries over the period of 2003–2016. India also moved into the top five providers of services trade in the bloc, surpassing Canada, along with Australia, Singapore and the UK.

The transformative budget is guided by a mission to strengthen agriculture and unorganised industries, rural development, health, education, employment and infrastructure sectors, along with aiding micro, small and medium enterprises. The Government is confident that a series of structural reforms, many of which have already been employed, will propel India among the fastest growing economies of the world. India is currently on the way to become the fifth largest global economy, overtaking the UK.

Further Reading: Union Budget 2019-20