Budget 2020: Measures to boost business confidence, says PwC India chairman

The government through this Budget laid importance on the need to build trust with its stakeholders.

The first level of trust building has been through more realistic projections on the government finances and assuming a nominal growth rate of GDP of 10 per cent. While the deficit estimates have been breached, the government has not abandoned the path to fiscal prudence and has limited the breach to 0.5 per cent that is as per FRBM provisions.

The government is committed towards addressing the apprehensions around doing business in India. Inclusion of a Charter for Tax Payers in statute and amendments to the Companies Act on clauses pertaining to criminal liability are two important announcements towards addressing the same.

Enhancement of turnover to Rs 5 crore from Rs 1 crore for micro and small medium enterprises to require an audit, will help in easing their compliance costs.

The stress in the banks and the non-banking financial companies (NBFCs) has led to undermining of confidence in the sector. The enhancement of the deposit insurance to Rs 5 lakh from Rs 1 lakh will help in restoring faith of small depositors in the banking sector.

In summary, these measures are likely to boost business confidence and address apprehensions of businesses, investors and common people. We hope that these would have a positive rub off on the economy, that is needed urgently given the global and domestic economic outlook.

Tasneem Zakaria Mehta's take on the best and worst things in Budget

1. Has Finance Minister Nirmala Sitharaman steered the economy out of the woods?

Frankly, the Budget does not provide enough stimulus to generate demand and unleash the animal spirits in the economy.

2. Is this a populist, please-all Budget?

Well, the government has been promising to reduce its footfall in areas in which it does not have much expertise, but unfortunately we didn’t see that happening. Particularly in the area of culture which has an important impact on tourism, the government should have allowed experts to guide the development of sites and museums.

3. Will it help the economy, create jobs, restart stalled projects?

I think the finance minister has said a lot on skilling in technology but those areas require a basic level of education, so developing such skill sets will take time. Conversely, there was no mention of the very important small artisan who is a farmer and craftsman at the same time. During fallow seasons many of our agricultural workers are carpenters or potters or painters etc. Our craft sector provides employment to large sections of the poor and much needs to be done to help them reach out to the market.

4. What was the best thing about the Budget? And the worst?

Museums across the country are languishing and many of our extraordinary collections are being damaged irreparably. It is very good that government is considering setting up a conservation training institute but we should have at least four such institutes for different parts of the country. I am happy to see the emphasis on girl child education, menstrual health, and review of marriage age. There should be more done to sensitise police and lower level government officials towards women’s problems. Further, we keep talking about smart cities but people need human level interactions and the government needs to facilitate this by investing in public spaces in cities.

Budget depicts a fine balance between stimulus and reforms: L&T Finance CEO

The Budget depicts a fine balance between the stimulus and reforms, as it is trying to manage growth with increasing application of analytics and digitalization.

It has appropriately focused on core sectors that have tremendous potential to create jobs and generate incomes like agriculture, dairy farming, fishery, fodder farms, MSMEs, textiles and the social sectors like health and education.

A reduction in personal income taxes for middle and lower middle classes is strongly positive for demand revival. A specific focus towards creation of warehouses along with steps to boost different allied agricultural activities would support cash flow prospects of rural people. Continued support to affordable housing in terms of extended tax holidays for developers along with continued interest deductions on housing loans, is a good remedial measure for the stressed real estate sector. Promotion of solar energy through solar pumps and linkage to power grids should help both energy sector and farmers.

Similarly, advising RBI to consider extending MSME recast window by one more year fulfills the need of the hour.

Abolition of DDT, simplification of the tax regime and enhancement of deposit insurance cover are significant moves to improve the sentiment.

This ‘expansionary orientation’ is managed without causing a disproportionate increase in the government’s market borrowings. If implemented astutely, this Budget has potential to transform India.

Budget 2020: Fiscal deficit targets based on unrealistic assumptions

The Budget was presented in the backdrop of declining growth and a demand slowdown. The quantum of deficits has been worked out on the assumption of 10 per cent nominal GDP growth in FY21 and 12.0 per cent growth in gross tax revenue. This means gross tax revenue collection buoyancy has been pegged at 1.2x. Growth in corporate tax, income tax, GST has been assumed at 11.5 per cent, 14.0 per cent and 12.8 per cent respectively.

Achieving 10 per cent nominal growth and 1.2x gross tax revenue buoyancy appears stretched. The pressure is likely to come from GST (12.8 per cent growth in FY21 over 5.8 per cent in FY20) and corporate tax (FY21: 11.5 per cent, FY20: -8.0 per cent). While the dividend distribution tax at the hand of the receiver may have some impact on income tax collection, 14 per cent growth appears difficult. The expenditure assumptions for FY21 appear realistic at 11.9 per cent (FY20, RE).

Devendra Pant, chief economist, India RatingsDevendra Pant, chief economist, India Ratings

On the whole, there could be a Rs 60,000-crore tax revenue shortfall if economic growth and tax buoyancy fall short of the assumptions. Achieving 3.3 per cent fiscal deficit will depend on the success of Rs 2.1 trillion disinvestment receipts.

The economy was looking for some sort of consumption push in rural areas; however, aggregate allocations for key rural focus programmes are budgeted to increase to Rs 1.76 trillion from Rs 1.58 trillion (11.1 per cent growth).

The expenditure on these programmes directly reaches people at the bottom of the pyramid. These people have the potential to revive consumption demand faster than income tax rate cut.

Budget: Telecom, auto sectors stay in stress zone with no direct relief

Tethering issues in real estate, automobile and telecom services remained unattended in the Budget, despite the severe stress in these sectors. Apart from peripheral measures such as lowering of income tax rates, the lack of direct help from the government left most industry players unsatisfied.

For instance, in real estate, the Economic Survey for FY20 identified that with Rs 8 trillion worth of unsold stock in eight major cities, the sector played a key role in the current deceleration in the economy. However, apart from extension in the date of availing tax incentives for investors in affordable housing, no direct steps have been proposed in the Budget to boost housing sales.

According to Shishir Baijal, chairman and managing director of Knight Frank India, with the economy in the midst of a sharp slowdown, the Union Budget for FY21 was being awaited with high expectations to provide a growth booster.

“However, the Budget fell short of industry expectations, with no major announcement for accelerating growth. Lowering of income tax rates with removal of exemptions may not lead to any meaningful boost to consumption. As far as real estate is concerned, the industry was hoping that the government would come up with measures to boost housing demand,” he said.

“Developer and investor community expectations on provisions pertaining to increased sectoral allocations and deductions remain largely unmet. Moreover, non-applicability of the deduction on housing loans under the new optional individual tax structure may act as a deterrent for those considering housing loans,” said Shubham Jain, group head and senior vice-president (corporate ratings), ICRA.

ALSO READ: Budget 2020: Fiscal deficit targets based on unrealistic assumptions

Satish Magar, president of CREDAI, said that even though the realty sector needed immediate attention, sector-specific measures like providing more liquidity and one-time restructuring of loans were not addressed.

According to industry executives, the government’s focus remained on affordable housing, where previous tax exemptions for both homebuyers and developers were extended for another year.

The Budget proposed to extend the capital gains tax relief on property valuations to 10 per cent below circle rates, against the earlier provision of 5 per cent.

The automobile sector, reeling from faltering sales since mid-2019, also had little to cheer.

“Industry was looking forward to some direct benefits that could have helped in reviving demand. We had made some specific suggestions like an incentive-based scrappage policy, which hasn’t been considered,” said Rajan Wadhera, president at industry lobby group Siam.

chartHowever, R C Bhargava, chairman of Maruti Suzuki, said carmakers were expecting very little from the Budget. “The urgent requirement for industry is to bring down the cost of production and the Budget has very little scope to do that. The GST council will take a call on rates on car, and states need to reduce the cost of electricity and other input materials to bring down cost of production,” said Bhargava.

He pointed out that the move would leave more money, primarily in the hands of buyers of entry-level cars. Sale of such cars has suffered as the cost of lending increased cost on account of new safety features and a hike in road taxes in many states has increased acquisition costs by above 20 per cent since the past one year.

“Reduction in tax rates will allow more savings for people in the income bracket of Rs 5 lakh. Therefore, the lower end of the market may get a boost if the savings are used to buy a car,” said Bhargava.

Ashish Kale, president of auto dealers association FADA, also agreed that the net positives from lower income tax are likely to act as an immediate sentiment booster. “Especially for the two-wheeler and entry-level passenger vehicle segments, this is a big booster,” Kale added.

According to an estimate, India’s auto industry accounts for 2.3 per cent of its GDP and employs over 5 million people. However, the industry has witnessed its worst-ever half-yearly performance (till December) with overall revenues plunging 10.1 per cent at Rs 1.79 trillion. This has also resulted in around 100,000 people losing jobs and an estimated investment loss of about $2 billion.

Industry body Cellular Operators Association of India (COAI) remained unimpressed with the Budget. “It is disappointing that there were no announcements made regarding the rationalisation of levies and taxes currently imposed on the severely distressed telecom sector, and telecom infrastructure is not taken into consideration that is going to build out the country,” Rajan S Mathews, Director General, said COAI.

Investors' hopes dashed: Sensex tumbles 987.96 points on Budget day

The sensex tumbled 987.96 points as the Street had little to cheer after the Budget was presented. There was no relief for Most sectors that had hoped for an impetus.

Union Budget: Looking into the history, beyond jargon and numbers

In exactly a week from now, Finance Minister Nirmala Sitharaman will rise to present her second Budget, a much-anticipated event amid a deep slowdown. Business Standard picks out some trivia from the history of the Union Budgets

Best of BS Opinion: Union Budget 2020, India's dark road, and more

Seldom has the economic situation been more challenging for the Union finance minister. Seldom has Indian society faced more challenges from within.

A new symbol of Dalit resistance casts a faint light on continuity. Uddalok Bhattacharya sums up the views.

If the Union finance minister looks hard, she should find non-tax revenue sources. T N Ninan says there should be a credible set of numbers in the Budget

The general feeling is that we are back to a 1974-like situation, says Shekhar Gupta

Chandrashekhar Azad has become a symbol of resistance among the Dalits, says Aditi Phadnis. The current agitation has raised his profile

Recognise the darkness that the country is in, Mihir Sharma warns

Govt may soon take a decision on tweaking FPI surcharge proposal

The government will soon take a decision on tweaking the foreign portfolio investor (FPI) surcharge proposal, which has spooked the markets since its announcement in the Budget last month.

According to official sources, changes could include exempting or ring-fencing FPIs structured as trusts or associations of person, a step which may require only a circular; reducing the impact of the tax by grandfathering their income for a few months; or making the transition from a trust structure to a company structure tax-neutral. “Currently, multiple options are on the table and no decision has been finalised yet. A few measures will be announced soon, now that the finance minister has met FPIs and market participants,” a government official told Business Standard.

On Friday, Finance Minister Nirmala Sitharaman, along with ministry officials, met representatives of mutual funds, investment banks, FPIs and others. Participants said after the meeting that it was mostly a one-way communication, wherein officials including Economic Affairs Secretary Atanu Chakraborty heard them out, but were non-committal on the specifics of what the government would do. Market participants discussed various issues, including the ease of investing for both domestic and foreign players. "The FM has said that these issues would be resolved in a time-bound manner," said a participant.

Besides FPI surcharge, other issues that were discussed include abolishing the long-term capital gains tax, a review of the dividend distribution tax, simpler Know-Your-Customer (KYC) norms for FPIs, need for a stable tax regime, and reducing cost of transactions.

FPIs who participated in the meeting included Goldman Sachs, Nomura, Blackrock, CLSA, Barclays, and JP Morgan.

“We are hopeful that some decisions will be taken after today’s meeting, that these discussions will lead to quick actions,” said a representative who attended the meeting.

Market players talked about the current state of the economy and the financial markets. They said there was a need for companies to raise equity and debt capital for growth to return, and for this, market sentiment had to improve. They talked about whether the LTCG tax and the surcharge hike on FPIs could be revisited, and whether LTCG was really required when investors were making losses. Industry players spoke about the difficulty in building the bond market, especially considering a large section of investors remained risk averse.

Participants spoke of easing KYC requirements and whether a uniform banking or Aadhaar-based KYC could be developed for investing across the capital market. Market players suggested EPFO money can be invested across indices, other than the Nifty and Sensex stocks.

According to sources, FPIs discussed the impact of the surcharge hike on non-corporate FPIs and the difficulty in converting from trust to corporate structures. The possibility of brain drain and the hike dissuading overseas fund managers of Indian origin managing offshore funds from shifting to India was also discussed. FPIs spoke about making section 9A more attractive and easing restrictions on FPIs in the debt market.

The equity benchmarks rose for a second straight session on Friday amid hopes that the government may take some market-friendly measures to jumpstart the sluggish economy and assuage investor concerns over taxation.

The meeting is part of the exercise being undertaken by the minister to firm up steps to increase investments and boost economy, which is showing signs of slowdown. During the meeting, it was also suggested that employees’ provident fund should be increase its exposure in the stock market, which in turn would improve liquidity, industry and official sources added.

Talking to reporters after the meeting, Vikaram Limaye, CEO and MD of the NSE, said the minister was “very receptive”. He, however, did not elaborate on the discussions. President of Association of National Exchanges Vijay Bhushan suggested that transaction cost in capital markets should be reduced and brought in line with the global rates.

Raman Aggarwal, chairman of Finance Industry Development Council, was of the view that there is a need to look beyond banks for funding of NBFCs. He was for setting up a National Housing Board (NHB)-like regulator for the NBFC sector as well.

In her Budget speech, Sitharaman had said: “Those in the highest income brackets, need to contribute more to the nation’s development. I, therefore, propose to enhance surcharge on individuals having taxable income from Rs 2 crore to Rs 5 crore, and Rs 5 crore and above so that effective tax rates for these two categories will increase by around 3 per cent and 7 per cent respectively.” She backed the decision in the discussion on the Budget in Parliament and the Finance Bill was passed without any changes on this front.

UP govt tables Rs 13,595 cr Supplementary Budget, expressways get big chunk

The Yogi Adityanath government on Tuesday tabled its first Supplementary Budget totalling more than Rs 13,595 crore for the current financial year 2019-20 in the Uttar Pradesh legislature.

The Supplementary Budget has allocated liberal doses of funds for various ongoing and new projects and schemes in varied sectors, including industrial development, energy, tourism, social welfare, public works department (PWD), vocational education, heath etc.

The industries department has been allocated more than Rs 2,000 crore in the Budget for flagship expressway projects -- Rs 1,150 crore for Bundelkhand Expressway and Rs 850 crore for Purvanchal Expressway.

Besides, Rs 15 crore has been provided for preparing the detailed project report (DPR) of Ganga Expressway, which is estimated to cost nearly Rs 36,000 crore and is touted to become the world’s longest access control expressway when completed.

The Supplementary Budget document was tabled in Vidhan Sabha by state finance minister Rajesh Agarwal this afternoon. The Budget comprises revenue and capital heads of about Rs 8,381 crore and Rs 5,214 crore respectively.

Rs 600 crore has been allocated for power utility UP Power Corporation Limited (UPPCL), functioning under the state energy department, towards losses incurred under Ujwal Discom Assurance Yojana (UDAY), the central scheme for financial restructuring of power distribution companies (discom).

The Adityanath government has also proposed to allocate Rs 6 core for organising a ‘Deeputsav’ (carnival of lights) during the next Diwali festival in the temple town of Ayodhya. Rs 5 crore has been given for the promotion of ecotourism.

Besides, Rs 175 crore has been provided for 7 cities in UP viz. Meerut, Ghaziabad, Ayodhya, Firozabad, Gorakhpur, Mathura and Shahjahanpur for development as Smart Cities.

The government has allocated Rs 20 crore for the modernisation of registered Islamic theological institutions or madarsas operating in the state.

On February 7, 2019, the Adityanath government had tabled Annual Budget 2019-20 totalling Rs 4.79 trillion. As such, together with Supplementary Budget, the size of UP Budget has already touched Rs 4.92 trillion.

Since, UP tables two Supplementary Budgets during each fiscal, the UP Budget size in 2019-20 is projected to breach the record level of Rs 5 trillion later this year. Supplementary Budget is tabled for getting legislative approval for meeting additional expenses during the course of financial year for ongoing or new projects.

In Annual Budget 2019-20, the government had tamed fiscal deficit at Rs 46,910 crore or 2.97%, within the mandated 3% of the Gross State Domestic Product (GSDP) under the Fiscal Responsibility and Budget Management (FRBM) Act.

The state has estimated revenue receipt of Rs 77,640 crore from State Goods & Services Tax (SGST) and Value Added Tax (VAT). The excise duty kitty in 2019-20 is expected at Rs 31,517 crore.

Meanwhile, the monsoon session, which started on July 18, will have about seven sittings.

Every number in Budget is authentic, says Finance Minister Sitharaman

Finance Minister Nirmala Sitharaman on Wednesday said the government was committed to the path of fiscal consolidation without compromising on public expenditure. Sitharaman also said all the data mentioned in the Budget 2019-20 was authentic, allaying the Opposition’s doubts about the numbers.

Doubts have cropped up because the Budget assumed 12 per cent economic growth at current prices, while the Economic Survey, presented a day earlier, implicitly pegged the growth at 11 per cent. All the key numbers in the Budget — be it revenues or the fiscal deficit — are based on the nominal GDP growth rate assumed for the year.

Replying to the general discussion on the Budget, Sitharaman said the assumed gross domestic product (GDP) growth rate for FY20 was on the basis of the first advance estimates for national accounts released on January 7. However, the Economic Survey projected the growth rate based on the first actual numbers released on May 31, she said. 

“Data given in the Budget is 100 per cent above board. I wish to assure the entire house that there need not be any speculation on the figures which have been given out. Every number is authentic,” Sitharman said.

She added she had given reasons why there were differences between one number in the Economic Survey as opposed to what has appeared in the Budget document. The Survey pegged the FY20 GDP growth at constant prices at 7 per cent. If inflation, as mandated by the Reserve Bank of India at 4 per cent, is taken into account, the growth at current prices comes at about 11 per cent.

The first advance estimates have pegged the GDP at current prices at Rs 190 trillion for FY19. However, it was Rs 188 trillion in the first actual numbers, also called provisional numbers.

“Both the projections are consistent with each other,” said Sitharaman. Earlier, experts also pointed out holes in the Budget numbers based on these two projections. A query has been raised about the “missing” Rs 1.7 trillion fiscal hole in India’s financial accounts. This is so because the Budget uses the revised estimates, a projection of how much the government was expected to earn, while the Economic Survey uses the first actual numbers. The RE used in the Budget show earnings of Rs 17.3 trillion in 2018-19, while the first actual numbers in the Economic Survey show that the government had earned Rs 15.6 trillion.

Union Budget 2019: Inclusivity in development, says Prathap C Reddy

In the Budget, there is an incremental thrust on infra upgradation, job creation and digital economy, clearly the key tenets for FY20. Strategic thinking and an elaborate development of the 10-point agenda announced earlier were evident. 

Prathap C Reddy Apollo Hospitals Group chairman Prathap C Reddy Apollo Hospitals Group chairman

Job creation and re-skilling created a lot of stir last year. By introducing industry-relevant skills training for 10 million youth under the Kaushal Vikas Yojana, the government is clearly addressing pressing issues.

The IT industry, for its part, is geared to partner with the government to enable skills training in Artificial Intelligence, Internet of Things, Big Data analytics, 3D printing, virtual reality and robotics — highly valued skills within and outside the country.