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ECONOMIC SURVEY – Key Highlights

 The survey has outlined a framework of policies to enable wealth creation in the country which is seen as critical
to India’s aspirations of becoming a $5 trillion economy by 2025. The Survey also touches upon the accuracy of
India GDP estimates and provides an outlook for the domestic economy for the coming financial year.
 India’s economic growth has slowed down to 4.8% in H1-FY20, 1.4% lower than H2-FY19 amidst weak
environment for global manufacturing and trade. The deceleration has been attributed to sharp decline in real
fixed investment coupled with subdued growth in real consumption. The financial sector has also acted as a drag
on the real sector. However, higher government expenditure has provided cushion.
 There is an expectation that the economy will show green shoots in H2-FY20 and FY21. India’s GDP growth is
expected to grow in the range of 6%- 6.5% in FY21. This will be critical in Budget formulation as the deficit and
debt numbers are juxtaposed with the nominal GDP growth which would be assume to be in the 10-10.5% range.
Also all tax revenue collections will be premised on this growth number.
 India’s foreign exchange reserves are comfortably placed at $461.2 bn as on 10 January, 2020. Narrowing of
current account deficit from 2.1% in FY19 to 1.5% in H1-FY20. This narrowing down can be chiefly attributed to
easing crude oil prices. Exports continues to remain subdued on the back of weak global demand. External debt
as at September-end 2019 has been low at 20.1% of GDP.
 The industrial sector has registered a growth of 0.6% for FY20 (April-November) compared with 5% growth in
corresponding period a year ago.
 Total investment in the roads and highways sector has gone up more than 3 times in the last 5 years i.e. FY15-19.

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Budget at a glance
Figures In INR Crores FY19(A) FY20 (BE) FY20 (RE) Growth (YoY) FY21 (BE) Growth (YoY)
1 Revenue Receipts 1552916 1962761 1850101 19.14% 2020926 9.23%
2 Tax Revenue (net to centre) 8.73%
1317211 1649582 1504587 14.23% 1635909
3 Non-Tax Revenue 235705 313179 345514 46.59% 385017 11.43%
4 Capital Receipts 762197 823588 848451 11.32% 1021304 20.37%
5 Total Receipts (1+4) 2315113 2786349 2698552 16.56% 3042230 12.74%
6 On Revenue Account- of which 2007399 2447780 2349645 17.05% 2630145 11.94%
7 Interest Payments 13.29%
582648 660471 625105 7.29% 708203
8 Grants in Aids 191781 207333 191737 -0.02% 206500 7.70%
9 On Capital Account 307714 338569 348907 13.39% 412085 18.11%
10 Total Expenditure (6+9) 2315113 2786349 2698552 16.56% 3042230 12.74%
11 Revenue Deficit 454483 485019 499544 9.91% 609219 21.96%
12 As % of GDP -2.40% -2.30% -2.40% -2.70%
13 Effective Revenue Deficit 262702 277686 307807 17.17% 402719 30.83%
14 As % of GDP -1.40% -1.30% -1.50% -1.80%
15 Fiscal Deficit 649418 703760 766846 18.08% 796337 3.85%
16 As % of GDP -3.40% -3.30% -3.80% -3.50%

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Budget Estimates 2020-21

 Revenue Receipts estimated at INR 20,20,926 Crores of which Net Tax to Centre is estimated at INR 16,35,909
Crores for the fiscal year 2020-21.

 Total Non-tax Revenue is estimated at INR 3,85,017 Crores and Capital Receipts are estimated at INR
10,21,304 Crores for the fiscal year 2020-21.

 The total expenditure for FY20-21 is budgeted at INR 30.42 Lakhs Crores. Capital Expenditure for 2020-21 BE
estimated at INR 4,12,085 Crores. Market Borrowings will increase to INR 5,35,870 Crores in BE 2020-21.

 The revenue deficit for the fiscal year 2019-20 (BE) stands at 2.30%, which is increased to 2.40% in Revised
Estimates (RE). The Revenue Deficit for fiscal year 2020-21 (BE) is pegged @ 2.70%.

 The Fiscal Deficit target for FY2020-21 has been set at 3.50% against FY2019-20 (RE) deficit of 3.80%.

 Outlay to Central Sector Schemes will increase from INR 7,73,196 Crore FY2019-20 (RE) to INR 8,31,825 Crore
in FY2020-21 (BE).

 Central Government debt as a %age of GDP has declined to 48.7% of GDP from 52.2% in March 2014.

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Subsidies, 6.00 Where Money Goes to Where the Money Comes From
% Borrowings &
Interest
Payments, 18.0 Other
Finance Comm Corporation Liabilities, 20.00
0%
& Othr Tax, 18.00% %
Transfer, 7.00%
Central Sector
Defence, 8.00%
Scheme Non - Debt
, 13.00% Income
Receipts, 6.00%
Tax, 17.00%
Non Tax
States' share of Centrally
Revenue, 1.00%
taxes & duties Sponsored
, 20.00% Scheme, 9.00%
Customs, 4.00% Goods &
Union Excise Service
Other
Pensions, 6.00% Duties, 7.00% Tax, 18.00%
Exp, 8.00%

Deficit (% of GDP)
5.00%
3.90% 3.80%
4.00% 3.50% 3.50% 3.40% 3.50%
3.00% 2.50% 2.60% 2.70%
2.40% 2.40%
2.10%
2.00%
1.00%
0.00%
FY16 FY17 FY18 FY19 FY20RE FY21BE

Fiscal Deficit Revenue Deficit

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Macro Indicators – Charts

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Agri &Rural Development

 Government is committed to the goal of doubling farmers income by 2022.
 Government have provided resilience for 6.11 crores farmers insured under PM Fasal Bima Yojana.
 PM KUSUM to cover 20 lakh farmers for stand alone solar pumps and further 15 lakh for grid connected pumps.
 To build a seamless national cold supply chain for perishables, inclusive of milk, meat and fish, the Indian
Railways will set up a “Kisan Rail”– through PPP arrangements.
 Agriculture credit target for the year 2020-21 has been set at INR 15 lakh crore. All eligible beneficiaries of PM-
KISAN will be covered under the KCC scheme.
 By 2022-23, government plans to raise fish production to 200 lakh tonnes.
 Proposes to double milk processing capacity from 53.5 million MT to 108 million MT by 2025.
 For FY2020-21, government proposes to spend INR 1.60 Lakh Crore for Agriculture, Irrigation & allied activities
and INR 1.23 Lakh Crore for Rural development & Panchayati Raj.

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Wellness, Water and Sanitation

 More than 20,000 empanelled hospitals under PM Jan Arogya Yojana.
 Proposed to set up Viability Gap funding window for setting up hospitals in the PPP mode. In the
first phase, those Aspirational Districts will be covered, where presently there are no Ayushman
empanelled hospitals. Proceeds from taxes on medical devices would be used to support this vital
health infrastructure
 Government plans to expand Jan Aushadhi Kendra Scheme to all districts offering 2000 medicines
and 300 surgicals by 2024.
 Government has set aside INR 69,000 Crore for health sector.
 Total allocation for Swachh Bharat Mission is about INR 12,300 Crore in 2020-21.
 Government has approved INR 3.60 lakh Crore for Jal Jeevan Mission. This scheme also places
emphasis on augmenting local water sources, recharging existing sources and will promote water
harvesting and de-salination.

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Education and skill development

 About 150 higher educational institutions will start apprenticeship embedded
courses.
 Government proposes to start a programme whereby urban local bodies across
the country would provide internship opportunities to fresh engineers for a
period up to one year
 Special bridge courses be designed by the Ministries of Health, Skill
Development together with professional bodies to bring in equivalence.
 Government proposes to provide about INR 99,300 Crore for education sector in
2020-21 and about INR 3,000 Crores for skill development.

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Infrastructure
 Government has earmarked an Investment of INR 100 Lakh Crore in infrastructure over the next 5 Years.
 National Logistics Policy to be launched soon.
 5 new smart cities to be developed.
 INR 6,000 Crore proposed for 'Bharat Net'
 Proposed to develop five new smart cities in collaboration with States in PPP mode.
 Government is looking to boost domestic manufacturing of mobile phones, electronic equipment and semi-
conductor packaging.
 100 more airports to be developed under UDAAN.
 Accelerated development of highways will be undertaken. This will include development of 2500 Km access
control highways, 9000 Km of economic corridors, 2000 Km of coastal and land port roads and 2000 Km of
strategic highways.
 Expand National Gas Grid to 27,000 km.
 Four station re-development projects and operation of 150 passenger trains would be done through PPP mode.
 High speed train between Mumbai to Ahmedabad would be actively pursued.
 The Jal Vikas Marg on National Waterway-1 will be completed. Further, the 890 Km Dhubri-Sadiya connectivity
will be done by 2022.
 Government propose to provide about INR 1.70 lakh Crore for transport Infrastructure in 2020-21.

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Divestment & Others

 Government now proposes to sell a part of its holding in LIC by way of Initial Public Offer (IPO).
 Government plans to sell the balance holding of IDBI Bank to private, retail and institutional investors
through the stock exchange.
 The limit for FPI in corporate bonds, currently at 9% of outstanding stock, will be increased to 15% of
the outstanding stock of corporate bonds.
 Deposit Insurance and Credit Guarantee Corporation has been permitted to increase Deposit
Insurance Coverage for a depositor, which is now INR 1 lakh to INR 5 lakh per depositor.
 Investment clearance cell to be set up to facilitate investments and to provide advisory at State as well
as Centre level.
 INR 2,500 cr proposed for development of Tourism sector.
 5 Archeological sites would be developed as iconic sites with onsite museums.

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Tax Proposals
Tax Reforms
 Personal income tax - proposed to bring new income-tax regime for individual Taxpayer's. New slab rate
(without exemption)
10% - income 5 - 7.5 lakhs
15% - 7.5 - 10 lakhs
20% - 10 - 12.5 lakhs
25% - 12.5 - 15 lakhs
30% - Above 15 lakhs.
Budget gives approx. INR 10,500 benefit on total income of INR 15 Lacs due to new tax slabs for Individual
Tax, subject to optional foregoing of various deductions and exemptions.
 Propose to remove DDT and dividend would be taxable in the hands of shareholder.
 Concessional tax rate of 15% for new domestic company engaged in generation of electricity.
 100% tax exemption on new investment by foreign funds in infrastructure sector by 2024 with a minimum lock
in period of 3 years.
 Increase in turnover limit from INR 25 Crore to INR 100 Crore for startups. Deduction can be claimed by
startups upto 10 years ( existing 7 years).

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Tax Proposals
Tax Reforms
 Tax audit turnover threshold limit increased from INR 1 Crore to INR 5 Crore.
 Concessional 5% withholding tax has been extended to municipal bonds.
 Cooperatives are taxed at 30% now. Cooperatives can choose a 22% tax with 10% surcharge and 4% cess with
no exemptions.
 Health Cess at the rate of 5% is proposed to be imposed on the import of medical devices
 Currently, safe harbour of 5% is increased to 10% in respect of transaction of immovable property where the
consideration is less than the circle rate.
 TDS in case of fees for technical services (other than professional services) is reduced to 2% from 10%.
 Custom Duty on Household goods & appliances and Electrical Appliances increased from 10% to 20%.
 Custom Duty on Footware increased from 25% to 35%.
 Custom Duty on Furniture goods increased from 20% tom 25%.
 Custom Duty on Stationery items increased from 10% to 20%.
 Custom Duty on Toys increased from 20% to 60%.

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CA PRIYAM GUPTA priyam.gupta@spagroupindia.com Tel.: +91-011-45675500

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SPA CAPITAL SERVICES Union Budget 2020 - 21