{"id":54378,"date":"2020-02-03T16:58:00","date_gmt":"2020-02-03T11:28:00","guid":{"rendered":"https:\/\/blogadmin.forumias.com\/?p=54378"},"modified":"2020-02-26T16:59:41","modified_gmt":"2020-02-26T11:29:41","slug":"7-pm-a-workmanlike-account-on-budget-2020-21-3rd-february-2020","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/7-pm-a-workmanlike-account-on-budget-2020-21-3rd-february-2020\/","title":{"rendered":"7 PM |A workmanlike account: on Budget 2020-21 |3rd February 2020"},"content":{"rendered":"\n<p><strong>Context:\n<\/strong>Key\nhighlights of the Union Budget 2020-2021.<\/p>\n\n\n\n<p><strong>More\nin news: <\/strong>Finance\nMinister Smt. Nirmala Sitharaman unveiled a series of far-reaching reforms,\naimed at energizing the Indian economy through a combination of short-term,\nmedium-term, and long term measures in the first union budget of the third\ndecade of 21<sup>st<\/sup> century.<\/p>\n\n\n\n<p><strong>Status\nof Indian Economy:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Economic\nslowdown:<\/strong>\nIndia&#8217;s annual growth in gross domestic product or GDP fell to 4.5% for the\nquarter ended September 30, down from 5% in the previous three months. India\u2019s\nslowdown was largely unexpected, as is evident from the IMF\u2019s markdown of\nIndia\u2019s growth from 7 per cent in June 2019 to 4.5 per cent recently.&nbsp;<\/li><li>The situation is worse if one looks at\nnominal GDP growth, which is expected to fall to a 42-year low of just 7.5 per\ncent. Real GDP is nothing but the nominal GDP minus the rate of inflation.<\/li><li><strong>Engines\nof growth: <\/strong>Broadly, there are four engines that provide the\npower to drive GDP growth in an economy. These are: <\/li><li>Consumption\nof private individuals (C), <\/li><li>Demand\nfor goods from the government (G), <\/li><li>Investments\nfrom businesses (I) and <\/li><li>the\nnet demand from exports and imports (NX).<\/li><\/ul>\n\n\n\n<p>GDP\n= C + G + I + NX<\/p>\n\n\n\n<p><strong>The corporate investments<\/strong> (I)\nengine has been slowing sharply since 2011.&nbsp;The new businesses found that\nthe financiers to the economy, that is the banks (especially the public sector\nbanks, which accounted for 70 per cent to 80 per cent of all lending), were\nthemselves struggling with non-performing assets.<\/p>\n\n\n\n<p><strong>Private consumption<\/strong>\ndemand was first hurt in the rural areas with poor commodity prices. While this\nmeant that retail inflation was under control, the purchasing power of farmers\ndeclined. This weakness in rural demand was compounded by a collapse in urban\ndemand after credit flow from the non-banking financial sector companies\nstopped following the meltdown in IL&amp;FS.<\/p>\n\n\n\n<p><strong>Savings and Investment:<\/strong> The\ndomestic saving rate has declined from 31.4% in 2013-14 to 29.6% in 2016-17.The\ngross capital formation rate has declined from 33.8% to 30.6% during same\nperiod. For any country\u2019s growth consistent rise in savings and investment\nshould be needed.<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Stress\nin NBFC: <\/strong>Non-Banking\nFinancial Companies (NBFCs) bring in diversity and efficiency to the financial\nsector and makes it more responsive to the needs of the customers. In the\nrecent past, the NBFCs have played increasingly important role in resource\nmobilization and credit intermediation, thereby helping commercial sector to\nmake up for low bank credit growth. Stress in NBFC sector also contributed to\nthe slow down by adversely impacting consumption finance.<\/li><\/ul>\n\n\n\n<p><strong>Three\nprominent themes of the Budget:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Aspirational\nIndia&nbsp;<\/strong>&#8211; better standards of living with access to health,\neducation and better jobs for all sections of the society<\/li><li><strong>Economic\nDevelopment for all&nbsp;<\/strong>&#8211; \u201cSabka Saath , Sabka Vikas , Sabka\nVishwas\u201d.<\/li><li><strong>Caring\nSociety<\/strong>&nbsp;&#8211;\nboth humane and compassionate; Antyodaya as an article of faith.<\/li><\/ul>\n\n\n\n<p>Three broad\nthemes are held together by:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Corruption free, policy-driven&nbsp;Good\nGovernance.<\/li><li>Clean and sound&nbsp;financial sector.<\/li><\/ul>\n\n\n\n<p>Ease of\nLiving&nbsp;underlined by the three themes of Union Budget 2020-21.<\/p>\n\n\n\n<p><strong>Main\nBudget proposals:<\/strong><\/p>\n\n\n\n<p><strong>Taxation:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>To simplify the tax system and lower tax\nrates, around&nbsp;70&nbsp;of more than 100 income tax deductions\nand&nbsp;exemptions&nbsp;have been&nbsp;removed.<\/li><li><strong>Dividend\nDistribution Tax<\/strong> (DDT) abolished.<\/li><li><strong>Tax\nconcession for foreign investments:<\/strong>100% tax\nexemption on Sovereign Wealth Fund of foreign governments.<\/li><li>Concessional 5% withholding tax entended\nto municipal bonds<\/li><li><strong>Personal\nIncome Tax:<\/strong> Significant relief to middle class taxpayers. New\nand simplified personal income tax regime proposed:<\/li><\/ul>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"\"><tbody><tr><td>\n Taxable Income\n Slab (Rs.)\n <\/td><td>\n Existing tax\n rates\n <\/td><td>\n New tax rates\n <\/td><\/tr><tr><td>\n 0-2.5 Lakh\n <\/td><td>\n Exempt\n <\/td><td>\n Exempt\n <\/td><\/tr><tr><td>\n 2.5-5 Lakh\n <\/td><td>\n 5%\n <\/td><td>\n 5%\n <\/td><\/tr><tr><td>\n 5-7.5 Lakh\n <\/td><td>\n 20%\n <\/td><td>\n 10%\n <\/td><\/tr><tr><td>\n 7.5-10 Lakh\n <\/td><td>\n 20%\n <\/td><td>\n 15%\n <\/td><\/tr><tr><td>\n 10-12.5 Lakh\n <\/td><td>\n 30%\n <\/td><td>\n 20%\n <\/td><\/tr><tr><td>\n 12.5-15 Lakh\n <\/td><td>\n 30%\n <\/td><td>\n 25%\n <\/td><\/tr><tr><td>\n Above 15 Lakh\n <\/td><td>\n 30%\n <\/td><td>\n 30%\n <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>New\ntax regime to be optional &#8211; an individual may continue to pay tax as per the\nold regime and avail deductions and exemptions.<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Corporate\nTax: <\/strong>Tax\nrate of 15% extended to new electricity generation companies. Indian corporate\ntax rates now amongst the lowest in the world.<\/li><\/ul>\n\n\n\n<p><strong>Housing:\n<\/strong>Tax\nholiday for affordable housing extended by 1 year. Additional deduction up to\nRs. 1.5 lakhs for interest paid on loans taken for an affordable house extended\ntill 31st March, 2021.<br>\n<br>\n<\/p>\n\n\n\n<p><strong>Investment:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Govt plans to sell part of its holding\nin Life Insurance Corporation (LIC) by way of Initial Public Offering. <\/li><li>Certain specified categories\nof&nbsp;government securities&nbsp;will be open fully for&nbsp;NRIs, apart from\nbeing open to domestic investors<\/li><li>FPI limit&nbsp;in&nbsp;corporate\nbonds&nbsp;raised to&nbsp;15% from 9%.<\/li><li>Government doubles divestment target for\nthe next fiscal at Rs 2.1 lakh crore.<\/li><li>Expand Exchange Traded Fund by floating\na Debt ETF, consisting primarily of govt. securities.<\/li><\/ul>\n\n\n\n<p><strong>Indirect\nTax :<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Customs duty raised on footwear to 35%\nfrom 25% and on furniture goods to 25% from 20%.<\/li><li>Excise duty&nbsp;proposed to\nbe&nbsp;raised on Cigarettes&nbsp;and other tobacco products, no change made in\nthe duty rates of bidis.<\/li><li>Basic customs duty on imports of news\nprint and light-weight coated paper reduced from 10% to 5%.<\/li><li>Customs duty rates revised on electric\nvehiclesand parts of mobiles.<\/li><\/ul>\n\n\n\n<p><strong>Start-ups\nand MSMEs:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Start-ups with turnover up to Rs. 100\ncrore to enjoy 100% deduction for 3 consecutive assessment years out of 10\nyears.<\/li><li>Turnover threshold for audit of MSMEs to\nbe increased from Rs 1 crore to Rs 5 crore, to those businesses which carry out\nless than 5% of their business in cash.<\/li><\/ul>\n\n\n\n<p><strong>Fiscal\nManagement<\/strong><strong>:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>FY20&nbsp;fiscal deficit&nbsp;revised\nto&nbsp;3.8%&nbsp;from 3.3% in the current fiscal. For&nbsp;FY21, fiscal target\nseen at&nbsp;3.5%.<\/li><li>Deviation of 0.5%, consistent with\nSection 4(3) of FRBM Act.<\/li><li>Net&nbsp;market borrowing&nbsp;for FY20\nat&nbsp;Rs 4.99 lakh crore; For&nbsp;FY21&nbsp;it&#8217;s pegged at&nbsp;Rs 5.36 lakh\ncrore.<\/li><li>Nominal GDP&nbsp;growth for 2020-21\nestimated&nbsp;at 10%.<\/li><li>A good part of the borrowings for the\nfinancial year 2020-21 to go towards Capital expenditure that has been scaled\nup by&nbsp; more than 21%.<\/li><\/ul>\n\n\n\n<p><strong>Infrastructure:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Rs.100 lakh crore to be invested on\ninfrastructure over the next 5 years.<\/li><li><strong>National\nInfrastructure Pipeline:<\/strong> Rs. 103 lakh crore worth projects;\nlaunched on 31st December 2019. More than 6500 projects across sectors, to be\nclassified as per their size and stage of development.&nbsp;<\/li><li>A <strong>National\nLogistics Policy<\/strong> to be released soon:&nbsp;<\/li><li>To\nclarify roles of the Union Government, State Governments and key regulators.<\/li><li>A\nsingle window e-logistics market to be created<\/li><li>Focus\nto be on generation of employment, skills and making MSMEs competitive.<\/li><li>5 new <strong>Smart cities<\/strong>&nbsp;to be set up via PPP model.<\/li><li>Rs 1.7 lakh crore&nbsp;allocated\nto&nbsp;transportation.<\/li><li>100 <strong>more\nairports<\/strong> to be set up by 2024 to support UDAN scheme.<\/li><li>Accelerated development of <strong>highway<\/strong>s will be undertaken;\nDelhi-Mumbai expressway and two other projects to be completed by 2023.\nChennai-Bengaluru Expressway to be started.<\/li><\/ul>\n\n\n\n<p><strong>Railways:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Large&nbsp;solar power&nbsp;capacity to\nbe set up alongside rail tracks, on land owned by Railways<\/li><li>More&nbsp;Tejas-like trains&nbsp;for\ntourists.<\/li><li>150 new train&nbsp;to be introduced on\nPPP basis;&nbsp;Four stations&nbsp;will be also be redevelopment with the help\nof&nbsp;PPP.<\/li><\/ul>\n\n\n\n<p><br>\n<strong>Telecom:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Rs 6,000 crore for BharatNet programme;\nFibre to Home connections under BharatNet will be provided to 1 lakh gram\npanchayats this year itself<\/li><li>New policy for private sector to build\nData Centre Parks.<\/li><\/ul>\n\n\n\n<p><strong>Tourism:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>5 archaeology sites&nbsp;to be developed\nfor&nbsp;world-class museums:<\/li><li>Rakhigarhi (Haryana)<\/li><li>Hastinapur (Uttar Pradesh)<\/li><li>Shivsagar (Assam)<\/li><li>Dholavira (Gujarat)<\/li><li>Adichanallur (Tamil Nadu)<\/li><\/ul>\n\n\n\n<p><strong>Energy:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Expansion of&nbsp;National Gas Grid from\n16,200 km to 27,000 km&nbsp;along with reforms to deepen gas markets, enable\nease of transactions and transparent price discovery<\/li><li>Rs 22,000 crore allocated to to power\nand renewable energy.<\/li><\/ul>\n\n\n\n<p><br>\n<strong>Education and Skills:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Rs. 99,300 crore for education sector\nand Rs. 3000 crore for skill development in 2020-21.<\/li><li>New Education Policy to be announced\nsoon.<\/li><li>National Police\nUniversity&nbsp;and&nbsp;National Forensic Science\nUniversity&nbsp;proposed&nbsp;for policing science, forensic science, and\ncyber-forensics.<\/li><\/ul>\n\n\n\n<p><strong>Wellness,\nWater and Sanitation:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Rs. 69,000 crore allocated for overall\nHealthcare sector.<\/li><li>Rs. 6400 crore (out of Rs. 69,000 crore)\nfor&nbsp;PM Jan Arogya Yojana&nbsp;(PMJAY)<\/li><li>Jan Aushadhi Kendra Scheme&nbsp;to offer\n2000 medicines and 300 surgicals in all districts by 2024.<\/li><li>TB Harega Desh Jeetega&nbsp;campaign\nlaunched &#8211; commitment to end Tuberculosis by 2025.<\/li><\/ul>\n\n\n\n<p><strong>Agriculture,\nIrrigation and Rural Development:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Govt has pegged the\nagricultural credit target at&nbsp;\u20b915 lakh crore for fiscal 2020-21.<\/li><li><strong>Kisan\nRail&nbsp;<\/strong>to be setup by Indian Railways through\nPPP: <\/li><li>To\nbuild a seamless national cold supply chain for perishables (milk, meat, fish,\netc.<\/li><li>Express\nand Freight trains to have refrigerated coaches.<\/li><li><strong>Krishi\nUdaan<\/strong>&nbsp;to be launched by the Ministry of\nCivil Aviation:<\/li><li>Both\ninternational and national routes to be covered.<\/li><li>North-East\nand tribal districts to realize Improved value of agri-products.<\/li><li><strong>One-Product\nOne-District<\/strong>&nbsp;for&nbsp;better marketing and\nexport in the Horticulture sector.<\/li><li>Balanced use of all\nkinds of fertilizers &#8211; traditional organic and innovative fertilizers.<\/li><li>Measures for organic,\nnatural, and integrated farming:<\/li><li><strong>Jaivik\nKheti&nbsp;Portal<\/strong> \u2013 online national\norganic products market to be strengthened.<\/li><li>Zero-Budget\nNatural Farming&nbsp;(mentioned in July 2019 Budget) to be included.<\/li><li>Integrated\nFarming Systems&nbsp;in rain-fed areas to be expanded.<\/li><li>Multi-tier\ncropping, bee-keeping, solar pumps, solar energy production in non-cropping\nseason to be added.<\/li><li>Government is expanding\n<strong>&#8216;PM Kusum Scheme&#8217;<\/strong> to 20 lakh farmers\nto set up solar pumps.<\/li><li><strong>Village\nStorage Scheme:<\/strong><\/li><li>To\nbe run by the SHGs to provide farmers a good holding capacity and reduce their\nlogistics cost.<\/li><li>Women,\nSHGs to regain their position as&nbsp;Dhaanya Lakshmi.<\/li><li><strong>Livestock:<\/strong><\/li><li>Doubling\nof milk processing capacity to 108 million MT from 53.5 million MT by 2025.<\/li><li>Artificial\ninsemination to be increased to 70% from the present 30%.<\/li><li>Deen\nDayal Antyodaya Yojana&nbsp;\u2013 0.5 crore households mobilized with 58 lakh SHGs\nfor poverty alleviation.<\/li><\/ul>\n\n\n\n<p><strong>How\nthese proposals will help?<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Presents\nclear picture of Indian Economic condition: <\/strong>To a large\nextent, the Budget has&nbsp;presented a realistic assessment of the present\neconomic conditions and projections for future growth prospects. It gives a\nmuch clearer picture of the off-balance sheet borrowings, which add to the\ngovernment\u2019s debt and its obligations to pay. This will enhance credibility\namong the investor community while taking decisions on committing capital for\nIndia\u2019s future.<\/li><li><strong>Disinvestment:\n<\/strong>The\nmajor boost to revenues is expected from disinvestment and privatisation of\ncentral public sector enterprises, together with asset monetisation (selling of\nvarious road, rail, land, logistics and other projects which the government has\nundertaken over the years). The target is up sharply to Rs 2.25 lakh\ncrore.&nbsp;<\/li><li><strong>Capital\nExpenditure: <\/strong>Spending, which depends on revenue collection, has\nalso been optimally allocated, with capital expenditure budgeted to increase\nfaster than revenue.&nbsp;<\/li><li><strong>Federal\nApproach: <\/strong>A\nfederal approach to tackling the slowdown, in a coordinated fashion, will\nprobably be the most effective.<\/li><li><strong>Flow\nof credit: <\/strong>The proximate cause of the surprise on the extent of\nthe slowdown was a squeeze in the flow of credit from all sources, domestic and\noffshore, banks, corporate bonds, and external borrowings to companies. The\nallocated budget to all the sectors will help in ensuring the flow of credit.<\/li><\/ul>\n\n\n\n<p><strong>Conclusion:<\/strong><\/p>\n\n\n\n<p>The signature\ntheme of the Economic Survey this year was \u201cthe invisible hand of the market\nsupported by the hand of trust\u201d. Fostering trust was also repeatedly emphasised\nin the Budget speech, and is increasingly evident in the ongoing initiatives of\nthe government for increasing transparency and simplification of processes.\nImplementation will be key to achieving the $5-trillion goal.<\/p>\n\n\n\n<p><strong>Source:\n<\/strong><a href=\"https:\/\/indianexpress.com\/article\/opinion\/columns\/budget-2020-indian-economy-economic-slowdown-6247924\/\">https:\/\/indianexpress.com\/article\/opinion\/columns\/budget-2020-indian-economy-economic-slowdown-6247924\/<\/a><strong><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Context: Key highlights of the Union Budget 2020-2021. More in news: Finance Minister Smt. Nirmala Sitharaman unveiled a series of far-reaching reforms, aimed at energizing the Indian economy through a combination of short-term, medium-term, and long term measures in the first union budget of the third decade of 21st century. Status of Indian Economy: Economic&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/7-pm-a-workmanlike-account-on-budget-2020-21-3rd-february-2020\/\">Continue reading <span class=\"screen-reader-text\">7 PM |A workmanlike account: on Budget 2020-21 |3rd February 2020<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[130,955],"tags":[],"class_list":["post-54378","post","type-post","status-publish","format-standard","hentry","category-7-pm","category-7-pm-brief-infograph","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704808741},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/54378","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=54378"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/54378\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=54378"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=54378"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=54378"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}