Union Budget 2019: Nirmala Sitharaman presented an inclusive, ambitious, growth-oriented budget
Naysayers accusing the Budget of taking baby steps without radical reforms have clearly missed the plot.
Giving 2% interest subvention on incremental loans for all GST registered MSMEs, providing access to the much in demand, Trade Receivables electronic Discount Scheme (TReDS) platform, to all NBFCs, decision to provide a one time, six months partial credit guarantee for the first 10% loss, to all PSBs up to an overall limit of Rs 1 lakh crore for purchasing financially sound, high rated, pooled assets of NBFCs, pension benefits to 3 crore retail traders and shopkeepers with an annual turnover not exceeding Rs 1.5 crore under the Pradhan Matri Karam Yogi Maandhan Yojana, are some of the steps announced by Finance Minister Nirmala Sitharaman in her maiden Budget speech, that caught the attention of all and sundry, as they showcased the new FMs bona fide intent in revving up the Indian economy from the USD 3 trillion mark that it is set to breach this year, into becoming a USD 5 trillion behemoth, by 2024-25, or maybe earlier!
Between 2014 and 2019, nominal GDP growth largely averaged at well over 11% per annum, barring a few stray quarters when it hit a soft patch, with that number coming in at just about 10% or thereabouts, on the back of persistently low inflation. With inflation likely to be in the region of 3.5-4% in the medium term and assuming real GDP growth averages at 8%, reaching or even outperforming the aspirational USD 5 trillion mark is very much in the realm of a realistic goal that can easily be achieved, thanks to a strong foundation laid by Modinomics in the last five years. The moot question indeed is, if achieving a real GDP growth of 8% is a tall order. That is a question that has triggered a massive row of late but sufficient to say that, fixed asset investment has grown by almost 200 basis points (bps) in the last two years to about 10% from 8.3%, which is a great sign. Investment to GDP ratio which is currently at 32% odd, could easily move to the 38-40% range, to drive real GDP growth in rupee terms, to well beyond 8%, given the massive infrastructure push entailing an investment of Rs 100 lakh crore over the next five years, alone! Of that, railways will get Rs 50 lakh crore, through Special Purpose Vehicles (SPVs), with an emphasis on Public Private Partnership (PPP) and Rapid Regional Transport (RRT) systems.
A few budgetary highlights from a fiscal and foreign investment standpoint, that are summed up below, also highlight how among other things, Modinomics is not xenophobic and inclusivity backed by financial sector reforms, remains the over-riding theme.
Net market borrowing for 2019-20 fiscal set at Rs 7.03 lakh crore, with targetted fiscal deficit revised to 3.3% from 3.4% and another Rs 1.05 lakh crore to be raised via asset sales, primarily PSU disinvestment, including the sale of Air India, which is back on the radar.
Customs duty on gold increased to 12.5% from 10%, with excise duty of Re 1 per litre each on diesel and gasoline, additionally.
Government proposes Rs 70, 000 crore of capital support to state-run banks versus via recapitalisation bonds, among other measures.
Seeks to bring Non-Banking Finance Companies (NBFCs), under RBI rules and also allow the Central bank to regulate Housing Finance Companies, (HFCs).
Credit Guarantee Enhancement Corporation to be set up in 2019-20 and an action plan to be commissioned for deepening the long term bond market, to raise resources for the ambitious infra spending by the government in the next few years.
Tax proposals: 25% tax rate for companies with revenues of up to 400 crore per year and lowering GST rate on electric vehicles from 12% to 5%.
Blueprint for Power grids, gas grids, i-ways and airports to ensure power and gas connectivity to all by 2022.
Tax on lower slabs left unchanged, but those on super-rich hiked by an additional 3-7%.
The government will allow 100% FDI in insurance intermediaries; Rules for investment in media and aviation to be eased.FPI and NRI investment routes to be merged.
Local sourcing norms for FDI in Single Brand Retail to be eased.
Limits on foreign portfolio investment to be raised from 24%, to be on par with sectoral caps as prevalent under foreign direct investment norms.
Reduce Net Owned Funds requirement from Rs 5000 crore to Rs 1000 crore in Indian Financial System Code (IFSC), to promote on-sharing of international insurance transactions by foreign reinsurers.
Separate Nation Pension System (NPS) trust from Pension Fund Regulatory and Development Authority (PFRDA), to prevent conflict of interest.
SEBI to ensure and work towards a minimum 35% public shareholding of all listed companies.
Speaking of the welfare-oriented ethos of the Budget with Har Ghar Jal by 2024 having already been put into mission mode by identifying 1592 blocks in 256 districts under the Jal Shakti Abhiyan, the Modi government has once again walked the talk when it comes to improving not only the Ease of Doing Business (EODB) but also enhancing the EOL (Ease of Living) for those who have long been excluded by erstwhile Congress-led establishments from the fruits of development and basic amenities.
Again, Gaon Gareeb Kisan reinforces the holistic, farm-centric approach of the Narendra Modi dispensation, with doubling of farm incomes by 2022, being the focus. Pradhan Mantri Matsya Sampada Yojana for establishing a fisheries management framework, setting up 10,000 Farmer Producer Organisations (FPOs) for improving overall economies of scale in the rural sector, setting 100 clusters to bring 50,000 artisans engaged in traditional crafts, especially in rural areas, into the economic value chain, setting up 80 Livelihood Business Incubators (LBIs), 20 Technology Business Incubators (TBIs), over Rs 60,000 crore allocation towards MNREGA, over Rs 27,000 crore for Integrated Child Development Services (ICDS), over Rs 12,000 crore for the Swachh Bharat mission, Rs 75,000 crore for PM Kisan Yojana, allocation of over Rs 80, 000 crore to upgrade 1.25 lakh kilometres of rural roads under the Pradhan Mantri Gram Sadak Yojana, building 1.95 crore affordable homes by 2022, with 81 lakh houses to be built in the next year itself, extending Bharat-Net to every gram panchayat and last but not the least, Zero Budget Farming, are the pivots, around which Modinomics seeks to give wings to the concept of Antyodaya, that is all about bringing development to the door step of the last person standing.
E-verification, no questions to be raised on valuation of shares, no income tax scrutiny on funds raised by Start-Ups and a body that will now quickly resolve, earlier disputes pertaining to Angel Tax, are some of the measures that will not only boost Make in India, but also make tax compliance much easier, without an increase in tax rates, which is not a mean achievement.
That Sabka Saath, Sabka Vikas, Sabka Vishwas, is not merely a platitude but something that the Narendra Modi led government religiously believes in, is amply evident from the tremendous strides that Union Budget 2019 has undertaken to empower women in every sense of the word. The decisions to extend the interest subvention scheme covering women Self Help Groups (SHGs) to all districts, allowing voluntary groups to raise capital via a Social Exchange, providing loan up to Rs 1 lakh per annum to at least one woman in an SHG, via the MUDRA scheme, extending overdraft facilities to the tune of Rs 5000 to verified women customers in SHGs, having Jan Dhan bank accounts, have made the entire concept of Naari Tu Narayani, truly meaningful, as it would help unleash the entrepreneurial spirit of our womenfolk.
What makes Budget 2019 different is the fact that it has laid down a ten-year roadmap both in terms of forward-looking intent and the modus-operandi in terms of execution. While naysayers have made misguided accusations of the Budget being thin on details about resource mobilisation, they need to be reminded that strictly speaking, a Budget document has to spell out the government’s larger vision. True, the devil is always in the details but even on that count, the Budget scores handsomely. The broad map in terms of say, giving a mega infrastructure push by working towards One Nation, One Grid, much in the nature of One Nation, One Tax, has been clearly crystallised. Also, none can doubt the execution finesse of the Modi government. If the past track record of the last five years is anything to go by, be it implementing GST in a country of 130 crore people, by subsuming seventeen odd taxes and over a dozen cesses and surcharges, or constructing over nine crore toilets under the Swachh Bharat mission, or for that matter resolving over Rs 4 lakh crore of stressed assets, via the Insolvency and Bankruptcy Code (IBC), time and again, the Modi government has more than risen to the challenge and come out trumps.
Deepening the bond market and relaxation of norms for FIIs/FPIs for debt market investments, are just some of the many options available from the array of options at the government's disposal, to give shape to its ambitious infrastructure and social sector spending initiatives. Hence, the paucity of funds is certainly not an issue, as is being wrongly suggested by vested interests.
Again, the decision to initially replace 20 and eventually 44 archaic labour laws will unlock a huge amount of capital that is today lying locked up in unproductive assets, that are hindering both, the ability to fire inefficiency and make fresh hiring to reward efficiency. Undoubtedly, the ball has been set rolling on labour market reforms and the resultant improvement in Incremental Capital Output Ratio (ICOR) to 2 from the historical levels of 4, alone can add a few percentage points to GDP, other things remaining constant.
Hence, those who falsely accuse the Budget of only taking baby steps, without being Big Bang in terms of unleashing radical reforms, have clearly missed the plot. Inclusive, well rounded, ambitious, middle-class friendly, pro women, rural centric and above all, a growth-oriented Budget that is not shy to set the bar high, with a clear roadmap to give wings to Modi's vision, is the defining undertone of Budget 2019.