Analysis of Union Budget 2020-2021

Prepared by – Research Desk

Email: research@indianmarketview.com
Phone No.: +91-120-4227181
Date: 01st February 2020

Analysis of Union Budget 2020 Page 1

 Prominent Themes of the Budget
Ease of Financial
Governance
sector
Living

Aspirational Economic
Development Caring Society
India

Agriculture, Irrig Industry, Comm Women &

ation and Rural erce and Child, Social
Development Investment Welfare

Wellness, Water Culture and

Infrastructure
and Sanitation Tourism

Education and Environment and

New Economy
Skills Climate Change

GOVERNANCE
STRUCTURAL REFORMS
IBC GST
• Honourable • 20 per cent reduction in turn around time for trucks.
exit through • Benefit to MSMEs through the enhanced threshold
IBC for and composition limits.
companies. • Savings of about 4 per cent of monthly
spending for an average household.
• In the last 2 years, 60 lakh new taxpayers added
and 105 crore e-way bills generated
1

Analysis of Union Budget 2020 Page 2

 DIGITAL REVOLUTION
Shift to DBT Next wave
• During 2018- • Digital Governance.
19, `7 lakh crore • Improve the physical quality of life through
transferred National Infrastructure Pipeline
through DBT. • Disaster Resilience.
• Social Security through Pension and
Insurance penetration.

INCLUSIVE GROWTH
• Governance guided by “Sabka Saath, Sabka Vikas,
Sabka Vishwas” with focus on:
• Preventive Healthcare: Provision of sanitation and water
• Healthcare: Ayushman Bharat
• Clean energy: Ujjawala and Solar Power
• Financial Inclusion, Credit support and Pension
• Affordable Housing
• Digital penetration

FINANCIAL SECTOR

• 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 crores or loan size of `50 lakh.
• Proposal to sell balance holding of government in IDBI Bank.
• Separation of NPS Trust for government employees from
PFRDAI.

• Specified categories of government securities would be

opened for non-resident investors
• FPI Limit for corporate bonds to be increased to 15 per cent.
• New debt ETF proposed mainly for government securities.

Analysis of Union Budget 2020 Page 3

 Macroeconomic Indicators
GDP Growth Rate (per cent) CPI and WPI (per cent)
8.5
8 6
7.5
7 4
6.5
6 2
5.5
5 0
4.5

ADecembr)e
2019-20(
2018-19
201 -154

201 -165

201 -176

201 -187

pril-
4 -2

-4

CPI-C WPI

9,000
Net FDI CAD/Forex (per cent)
8,000
35
7,000
30
6,000
US $ Million

25
5,000
20
4,000
15
3,000
10
2,000
5
1,000 0
0
Apr-17

Oct-18

Apr-19
Jul-19
Oct-19
Jul-17Oct-17Jan-18Apr-18

-1,000
Jul-18

Jan-
19
Jan-
17

)
t

53 3.5
Trends in Deficits Debt
t)n
m
G
C

D
e
n

e
n

e
b

p
e
v

c
r

r
t

t
l

52 3
ExternalD ebt

4.1
G
D
P

P
n

o
e

c
e
r

f
t

(perce

4.2 51 2.5
0.1 3.0
1.1 3.9 4.0 50
2
3.8 49
Per cent of GDP

0.9
3.8 48 1.5
0.7 0.9 3.5 3.5 3.5 3.6 47 1
3.4
0.5 0.7 46 0.5
0.7 3.4 45 0
0.3 3.2
. . 0.4 0.4

Central Government Debt as per cent of GDP

External Debt as per cent of GDP at current

PD FD (RHS) exchange rate

Analysis of Union Budget 2020 Page 4

 Tracking Progress in Numbers
Foreign Exchange Reserves (` crore) Gross Bank Credit (` Crore)
3320000 10000000
3270000 9000000
3220000 8000000
3170000 7000000
3120000 6000000
3070000 5000000
3020000 4000000
2970000
3000000
16-Aug-2019

22-Nov-2019
30-Aug-2019

06-Dec-2019
13-Sep-2019

20-Dec-2019
27-Sep-2019

08-Nov-2019
11 Oct-2019-

17 Jan-2020-
25 Oct-2019-

03 Jan-2020-
02-Aug-2019

2000000
1000000
0
Nov.24,Mar2017.30,Nov2018.23, Mar2018.29, Nov2019.22, 2019

Distribution of workers by status in National Infrastructure Pipeline

Employment (per cent) Rural Infrastructure

2011-12 2017-18 Irrigation

Renewable Power
60
50 Conventional Power
40 Railways
30 Urban and Housing
20
10 Roads

0
0 5 10 15 20
Self-employed Regular wage/ Casual labour
Salaried Rs. Lakh Crores
India is the 5th largest economy in the world in terms of GDP at current US $ Trillion.

USA GERMANY 3.9 CHINA

21.4
14.1 5.2

2.9 JAPAN

INDIA

All figures in US $
Trillion

Analysis of Union Budget 2020 Page 5

 Budget at a glance
Revenue Expenditure (in ` Capital Expenditure (in ` crore)
crore)
4,20,000
28,00,000
3,50,000
24,00,000

20,00,000 2,80,000

16,00,000 2,10,000
12,00,000
1,40,000
8,00,000
70,000
4,00,000

0 0

Capital Receipts (in Rs.

Revenue Receipts (in ` crore)

21,00,000
crore)
12,00,000

14,00,000 10,00,000

8,00,000

6,00,000
7,00,000
4,00,000

2,00,000
0 0

Analysis of Union Budget 2020 Page 6

 Budget at a Glance
Non Debt Capital
Rupee Comes From Receipts
6%
Borrowings and
Other Liabilities
20%
Income Tax
17%

Non Tax Revenue

Union Excise 10%
Duties
7%

Customs
4%
Corporation Tax
18%
GST
18%

Centrally
Rupee Goes To Sponsored
Pensions Schemes
6% 9%
Other
Expenditure Subsidies
10% 6%

Defence
8%
Central Sector
Schemes
13%

Interest
Payments
Finance 18%
Commission and
Other Transfers
10%

States' Share of
Taxes and Duties
20%

Analysis of Union Budget 2020 Page 7

 Tax proposals
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.
The concessional tax rate for cooperatives proposed.
The turnover threshold for an 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.

Dividend Distribution Tax removed and the classical

system of dividend taxation adopted.

Simplified and New Income Tax Regime as an option

to the old regime.
Income
Bracket (`
lakh) Below 5 5-7.5 7.5-10 10-12.5 12.5-15 Above 15
Tax Rate (per
cent) Exempt 10 15 20 25 30

Simplified GST return shall be implemented from 1st

April 2020. Refund process to be fully automated.
7

Analysis of Union Budget 2020 Page 8

Agriculture, Irrigation and Rural Development

PM KUSUM to cover 20 lakh farmers for stand-alone solar pumps

and further 15 lakh for grid-connected pumps.

• Viability gap funding for the

creation of efficient warehouses
on PPP mode.
• SHGs run Village storage
scheme to be launched.
• Integration of e-NWR with e-NAM.

“Kisan Rail” and “Krishi Udaan” to • The fish

be launched by Indian Railways and Production
Ministry of Civil Aviation respectively target of 200
for a seamless national cold supply lakh tonnes by
chain for perishables. 2022-23.
• Another 45000
• Elimination of FMD and brucellosis in
acres of
cattle and PPR in sheep and goat by
2025.
aquaculture to
• Increasing coverage of artificial be supported.
insemination to 70 per cent. • Fishery
• Doubling of the milk processing extension
capacity by 2025. through 3477
• Agricultural credit target of `15
lakh crore for 2020-21. and 500 fish
FPOs.
• Raise fishery
exports to `1
lakh crore by
2024-25.

Analysis of Union Budget 2020 Page 9

 Wellness, Water and Sanitation
• More than 20,000 empanelled hospitals
under PM Jan Arogya Yojana.
• FIT India movement launched to fight NCDs.

Coverage • “TB Harega Desh Jeetega” campaign

under
Akshay launched to end TB by 2025.
Poshan
Yojana (`
Lakh) • Viability gap funding proposed
35 for setting up hospitals in the
PPP model.
• Expansion of Jan Aushadhi Kendra
Scheme to all districts by 2024.

• ODF Plus to sustain ODF behaviour.

• Focus on liquid and greywater
management along with waste
management.

80
70 SBM (` crore)
60
12294
50
40 9638
30
20
10
0
NFHS-3 NFHS-4

IMR U5MR 2019-20 (RE) 2020-21 (BE)

Analysis of Union Budget 2020 Page 10

 Education and Skills
• About 150 higher educational institutions will
start apprenticeship embedded courses.
• Internship opportunities to fresh engineers by urban
local bodies.
• Special bridge courses to improve skill sets of those
seeking employment abroad.

Allocation 2020-21 (BE) Study in EQUIP (` crore)

(` crore)
India (crore) 1413
DHRUV 65

Operation Digital
Board
32
0 10 20 30

• Degree level online

2019‐20 2020‐21 2020-21 (BE)
education (RE) (BE)
programmes for
students of
deprived sections of Programme for Apprenticeship
the society. Training (` crore)
• Ind-SAT to be
conducted in Asia 2020-21 (BE)
and Africa under
2019-20 (RE)
the Study in India
programme. 166 168 170 172 174 176

New Economy
• Knowledge Translation Clusters for emerging technology sectors
• Scaling up of Technology Clusters harbouring testbeds and small
scale manufacturing facilities.
• National Mission on Quantum Technologies and applications with
an outlay of Rs.8000 crore proposed.
10

Analysis of Union Budget 2020 Page 11

 Industry, Commerce and Investment
• Scheme to encourage manufacturing of mobile
phones, electronic equipment and semiconductor
packaging.
• National Technical Textiles Mission for a period of
4 years.

• NARVIK Scheme for higher export credit

disbursement launched.
• Setting up of an Investment Clearance Cell to provide
end to end facilitation.

• Extension of invoice financing to MSMEs through trends.

• A scheme to provide subordinated debt for entrepreneurs
of MSMEs.
• Scheme anchored by EXIM Bank and SIDBI to handhold MSMEs
in exports markets.

CORPORATE TAX RATE CUT

Thailand 20

India 22

Japan 23.2

Bangladesh 25

Indonesia 25

China 25

Philippines 30

0 10 20 30

11

Analysis of Union Budget 2020 Page 12

 Infrastructure
• 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: Corporatizing at least one major port.
• Air: 100 more airports to be developed under
UDAAN.

•
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.
Bharat Net (` crore)
Accelerated road development
9000
8000
7000
6000
5000
4000
3000
2000
1000
0 4000 8000
0
2019-20 (RE) 2020-21 (BE) in km

12

Analysis of Union Budget 2020 Page 13

 Caring Society
Women & Culture and Tourism Environment
child, social • Proposal to establish and Climate
Welfare Indian Institute of Change
• More than 6 Heritage and • Coalition for
lakh conservation. Disaster
Anganwadi • 5 archaeological Resilient
workers sites to be developed Infrastructure
equipped as iconic sites. launched in
with smart • A museum on September
phones. Numismatics and 2019.
• A task force Trade to be • Encourage
to be established ent to states
appointed to • Tribal museum in implementing
recommend Ranchi. plans for
regarding • Maritime museum to cleaner air in
lowering be set up at Lothal. cities above
MMR and 1 million.
improving
nutrition
levels.

Tourism promotion
(` crore)

2500

Nutrition-related programmes
(` crore)
35600

2020-21 (BE)

2020-21 (BE)

13

Analysis of Union Budget 2020 Page 14

 Budget Allocation to Major Schemes

PM KISAN Pradhan Mantri Swasthya

Suraksha Yojana

In ` Crore
80000
70000
7000
60000
6000
50000 5000
40000 4000
30000 3000
2000
20000
1000
10000
0
0 2019-20 RE2020-21 BE
2019-20 RE 2020-21 BE

ICDS
DBT LPG 29000

28000

27000
2020-21 BE
26000

2019-20 RE 25000

24000
0 10000 20000 30000 40000
23000
2019-20 2020-21
Pradhan Mantri RE BE
Awas Yojana
28000
27500 Pradhan Mantri Gram
27000 Sadak Yojana
26500
26000
25500 2020-21 BE
25000
24500 2019-20 RE
24000
0 5000 10000 15000 20000
2019-20 RE 2020-21 BE
14

Analysis of Union Budget 2020 Page 15

 Expenditure of major items
In ` Crore

Rs. 50040 Ministry of Housing and Urban Affairs

Rs. 67112 Ministry of Health and Family Welfare

Rs. 72216 Ministry of Railways

Ministry of Road
Rs. 91823
Transport and Highways

Rs. 99312 Ministry of Human

Resource Development

Rs. 122398 Ministry of Rural Development

Ministry of Consumer
Rs. 124535
Affairs, Food and
Public Distribution

Rs. 142762 Ministry of Agriculture and

Farmers’ Welfare

Rs. 167250 Ministry of Home Affairs

Rs. 471378 Ministry of Defence

15

Analysis of Union Budget 2020 Page 16

 Conclusion on Budget 2020-21
Finance Minister lays out three prominent themes of this year’s budget:
 Aspirational India
 Caring Society
 Economic Development

Key Budget takeaways:

 Government to raise funds via the listing of LIC.

 Deposit insurance rose to Rs 5 lakh.
 FY21 fiscal deficit target pegged at 3.5% of GDP.
 FY20 fiscal deficit at 3.8% of GDP vs. an earlier target of 3.3%.
 Companies Act to be amended to decriminalize civil offences.
 FY21 nominal GDP growth pegged at 10%.
 To bring new education policy; allocates Rs 99,300 crore for the sector in FY21.
 100 more airports to be developed by 2025 to support UDAN scheme.
 To introduce a new simplified personal tax regime.
 No income tax for income up to Rs 5 lakh.
 10% income tax for those earning between Rs 5 lakh to Rs 7.5 lakh versus 20% earlier.
 15% income tax for those earning between Rs 7.5-10 lakh versus 20% earlier.
 20% income tax for those earning between Rs 10-12.5 lakh versus 30% earlier.
 25 income tax for those earning between Rs 12.5-15 lakh versus 30% earlier.
 Income above Rs 15 lakh to continue to pay tax at 30%.
 New income tax scheme is optional, without exemptions.
 Dividend Distribution Tax (DDT) abolished shifted to individuals instead of companies.
 100% tax exemption on Sovereign Wealth Funds' India investments.
 Tax holiday for affordable housing extended by one-year.
 To amend the I-T Act to allow faceless appeals.
 FY21 divestment target: Rs 2.1 lakh crore versus FY20 target of Rs 1.05 lakh crore
 To launch new direct tax dispute settlement scheme; interest, penalty waived till March
31, 2020.
 To raise India's fishery exports to Rs 1 lakh crore by 2024-25
 Excise duty hiked on tobacco, cigarettes raised.

Analysis of Union Budget 2020 Page 17

Analysis of Union Budget 2020

We may give a title to our union budget as “Union Budget - Raise spending to Revive Economic
Growth”

Union budget tabled by Narender Modi’s government looks to put money in the middle house
income group as using a key tool to revive economic growth. The government tries to gain
public trust and consumer confidence in this budget which is witnessed by rasing insurance
limit deposit with banks from 1 lacs to 5 lacs. The government seems to keep a balance
between socio and corporative responsibilities by focusing deprive segment as a farmer and
middle class and wealthier corporate segment.

Leave unrealistic expectation and let’s come one by one to every segment how the budget
impacts them. Government, first of all, keeps a realistic fiscal deficit with a good balance sheet
which is good for any economy.

For corporate maybe there has no stimulus package but they do best with the limited hand by
abolishing Dividend distribution Tax which will help corporate who has a higher dividend yield…
as INFY, TCS, Hindunilever etc.

The government imposes a higher tax by the way of import duty on Auto Ancillaries may be
effect adversely but government intention seems to promote the “Make In India” concept
which is good for country welfare in long run.

100% tax exemption on infrastructure bond indicates the intention of focusing on infrastructure
projects. We may go positive on Infra stocks. About PSU, As per our expectations government
try to keep away PSU bank to financing Infra project likely to follow a statement” Precautions is
better than Cure”. The government has a future plan to convert 10 banks in four in the near
future but no clear guidelines yet so need not we worry in the near term.

Government LIC disinvestment and Bond ETF would be a major tool for funding in the
upcoming financial year.

Now social responsibilities: The government gave focus primarily on farmers and the agriculture
sector. This is always a very deprived area. 65% of the total population still leave in a rural area
and by introducing scheme “16 Policy” tries to give aid in the area of horticulture, farming,
Irrigation, fertilizer and mainly to renewable energy.

Finance Minister has announced a balanced budget in spite of existing challenges in hand. It has
focused on the generation of employment and inclusive growth through increased expenditure
on the rural economy, infrastructure, MSME and healthcare. Abolition of DDT, tax relief to the
middle class and lower-middle-class segments along with simplification of the tax regime will
improve public sentiment and augur well for the economy. While, the listing of LIC is a good
move which will bring focus on the life insurance sector, other expectations of the sector could
have been met better. The insurance industry will be watchful of the implication of the direct
tax changes in the new tax regime.
Source: Union Budget

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Analysis of Union Budget 2020 Page 23