Union Budget 2019-20

Comment
By
Dr. Pankaj Trivedi
 Background
• Important fiscal policy statement for the
fastest growing economy in the world
• Far reaching impact on the economy and
people
• Areas of concern before the Government
– Economic conditions of farmers
– Unemployment
– Infrastructure
– Social security for masses

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 Major thrust areas
• Agriculture sector
• Indian middle class people
• Small industry and business
• Workers of unorganized sector
• Infrastructure and real estate development
• Fiscal management

dr.pt 3
 Agriculture sector
• Prime Minister Kisan Samman Nidhi (PM
KISAN)
• Direct credit of Rs.6000 p.a. in bank account
• Applicable to only small and marginal farmers
having land up to two hectors
• Benefits to 12 crores farmers

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 Agriculture sector
• Interest subsidy on loans for natural calamities
and regular repayment
• Better policy than loan waiver
• Focused decision for the benefits of small
farmers

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 Middle class people
• Most discussed and covered aspect is Income
tax exemption limit raised to Rs.5 lacs
• Standard deduction increased to Rs.50,000
• Benefits to 3 crores salary earners
• No notional rental income from second house
of a person will be added to taxable income
• Electronic verification and processing of I T
returns
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 Middle class people
• The threshold for TDS on interest on term
deposits increased to Rs.40,000
• The threshold for TDS on rental income is
raised to Rs.2,40,000
• These measures will increase the disposable
income and consumption demand

dr.pt 7
 Small industry and business
• MSME units registered under GST will get 2 %
rebate in interest on loan up to Rs. 1 Crore
• Quick sanction of loan up to Rs.1 Crore
• The requirement of sourcing from SMEs by
Government enterprises has been increased to
25%
• Businesses having an annual turnover less than
Rs 5 crore comprising over 90% of GST payers will
soon be allowed to file quarterly return
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 Small industry and business
• GST exemptions for small traders,
manufacturers and service providers doubled
from Rs 20 lakh to Rs 40 lakh
• Threshold limit for presumptive taxation of
business was raised from Rs 1 Crore to Rs 2
Crore

dr.pt 9
 Workers in unorganized sector
• First time workers in unorganized sector is
covered under pension scheme Pradhan Mantri
Shramyogi Mandhan (PMSM) covering those who
earns monthly up to Rs.15,000
• Great step as half of the India’s GDP comes from
the 42 Crore workers in unorganized sector
• Rs.60,000 Crores allotted for MGNREGA
• Separate department for fisheries and animal
husbandry
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 Infrastructure
• Highest ever capital expenditure allocation of
Rs.1.58 lakh Crore for Railway
• India building roads at 27 Kms. a day.
Spending by NHAI is estimated at 1.12 lakh
Crore in 2019-20
• Sagar Mala Project for inland water transport
• Operating ratio of Railway is constantly
reduced

dr.pt 11
 Real estate
• Period of exemption of tax on unsold flats has
been increased to two years
• Roll over of capital gain (up to Rs.2 Crore) will
now be available for two residential houses

dr.pt 12
 Impact of these measures
• Generation of employment due to
– Increase in disposable income and thereby more
demand for consumption of goods and services
– MSME, the employment generating sector will
grow fast
• Farmers income level will increase
• More discipline in loan repayment
• More infrastructure and growth

dr.pt 13
 Impact of these measures
• Increase in bank deposits due to
– Raising TDS limit on bank interest
– Transfer of funds under PM KISAN into Jandhan
accounts
• The banks credit deposit ratio will improve
• Bank deposit increased at around 10 % while
credit has expanded at around 15 %

dr.pt 14
 Fiscal Management
• Fiscal deficit is slightly higher than budgeted
• Estimated at 3.3 % of GDP but it is likely touch
3.4 % at the end of the year
• Estimation for 2019-20 is 3.4 %
• Farm loan waivers by States and taking over
the debt of bankrupt electricity board, the
combine Centre State deficit will touch 8 %
• This would create inflation when private
investment and bank lending will rise
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 Fiscal Management
• Quality of fiscal deficit is to be seen
• The Revenue Deficit to Fiscal Deficit ratio need
to be considered
• It shows how much borrowing is going to
finance current consumption, rather than
investment
• In 2019-20 it is estimated at 66 %

dr.pt 16
 Fiscal Management
• Borrowing estimation by Govt is about 7 Lakh
Crore
• Disinvestment target fixed is Rs.90,000 Crore
• Fiscal discipline is required for stability
• Fiscal discipline is always under watch of the
global investors and rating agencies

dr.pt 17
 End note
• Michal Kalecki introduced concept of Political
Business Cycle
• The stimulation of the economy just prior to an
election in order to improve prospects of the
current government getting reelected
• FM managed a fine balance between fiscal
discipline and the development needs of the
economy
• Govt has clear vision for the next decade
• The biggest challenge is implementation

dr.pt 18
Thank you

dr.pt 19