Context: Minister of Finance, Government of India, presented the interim budget on 1 February, 2019.
Focus of the interim budget:
- The interim Budget 2019-20 contained elements that are aimed at benefiting three major segments of the population i.e. farmers, informal sector workers, and salaried taxpayers.
- Budget made announcements of an income support scheme for farmers, an insurance scheme for informal sector workers, and tax exemptions for salaried workers.
10-point vision document for 2030:
The Interim Budget laid out the government’s 10-point vision document for 2030. The Vision 2030 points are:
- Physical and Social Infrastructure: To build physical and social infrastructure for a 10 trillion dollar economy- This to include next generation roads, railways, seaports, airports, urban transport, gas and electric transmission and inland waterways.
- Digital India: Digital infrastructure and digital economy of 2030 to be built on successes of digitisation of government processes and private transactions
- Clean and Green India: Through EVs and renewable energy
- Rural Industrialization: develop grass-roots level clusters, structures and mechanisms encompassing the MSMEs, village industries and start-ups spread across India.
- Clean rivers and efficient use of water resources: safe drinking water to all Indians, sustaining and nourishing life and efficient use of water in irrigation using micro-irrigation techniques
- Blue Economy: Coastline and ocean waters and inland waterways to power India’s development and growth
- Space Programme: Global launch-pad of satellites. Place Indian astronaut in space by 2022
- Food self-sufficiency: Making India self-sufficient in food, exporting to the world to meet their needs and producing food in the most organic way
- Health: Distress-free healthcare, a functional & comprehensive wellness system for all
- Minimum government, maximum governance: A proactive and responsible bureaucracy which will be viewed as friendly to people.
- Fiscal deficit pegged at 3.4% of GDP for 2019-20 and target of 3% of fiscal deficit to be achieved by 2020-21. Revenue deficit is pegged at 2.2% of GDP.
- Total expenditure increased by over 13% to Rs.27,84,200 crore in 2019-20.
- Capital Expenditure for 2019-20 estimated at Rs.3,36,292 crore i.e. only 12% of total expenditure.
- National Education Mission allocation increased by about 20% and allocation for Integrated Child Development Scheme (ICDS) increased by over 18% since previous year.
- Substantial increase in allocation for the Scheduled Castes and Scheduled Tribes. Allocation for SCs increased by 35.6% and allocation for the STs increased by 28% .
- Government has set a disinvestment target of 90,000 crore for 2019-29.
- Direct Tax proposals:
- Income upto Rs. 5 lakh exempted from Income Tax, which would give more than Rs. 23,000 crore tax relief to 3 crore middle class taxpayers.
- Standard Deduction to be raised to Rs. 50,000 from Rs. 40,000. (It is a fixed amount of deduction i.e. up to Rs 50000 which can be reduced by salaried taxpayers, from their gross salary. It is a deduction allowed in Income Tax irrespective of expense incurred or investment made by an individual.)
- Existing rates of income tax to continue.
New Announcements in the budget:
- 12 crore small and marginal farmers to be provided with assured yearly income of Rs. 6000 per annum under PM-KISAN with an outlay of Rs. 75,000 crore for FY 2019-20 with additional Rs. 20,000 crore in RE 2018-19.
- Outlay for Rashtriya Gokul mission increased to Rs 750 crore.
- Rashtriya Kamdhenu Ayog to be setup for sustainable genetic upgradation of the Cow resources.
- New separate Department of Fisheries for welfare of 1.5 crore fishermen.
- 2% interest subvention to farmers for Animal husbandry and Fisheries activities; additional 3% in case of timely repayment.
- Interest subvention of 2% during disaster will now be provided for the entire period of reschedulement of loan.
- The Government to make 1 lakh villages into Digital Villages over next five years.
- Pradhan Mantri Shram Yogi Maandhan scheme to ensure fixed monthly pension to 10 crore unorganized sector workers.
- Rs 3000/month after 60 years of age with an affordable contribution by workers of only Rs 100/55 per month.
- 22nd AIIMS to be setup in Haryana.
- Allocation for the scheme increased to Rs 60,000 crore in 2019-20 from Rs 55,000 crore in 2018.
Poor and Backward Classes:
- “First right on the resources of country is that of the poor”: Finance Minister.
- 25% additional seats in educational institutions to meet the 10% reservation for the poor.
- All willing households to be provided electricity connections by March 2019.
- Allocation to be increased by 21% in 2019-20 over 2018-19.
- Arunachal Pradesh came on the air map recently and Meghalaya, Tripura and Mizoram came on India’s rail map for the first time.
- Container cargo movement through improved navigation capacity of the Brahmaputra.
- A new committee under NITI Ayog to identify all the remaining De-notified nomadic and semi-Nomadic tribes.
- New Welfare development Board under Ministry of social justice and empowerment for development and welfare of De-notified nomadic and semi nomadic tribes.
- The defence budget was increased by 6.87% to Rs. 3.18 lakh crore against last year’s allocation of Rs. 2.98 lakh crore.
- Out of the total allocation, Rs. 1,08,248 crore is earmarked for capital expenditure to purchase new weapons, aircraft, warships and other military hardware.
- Capital support of Rs.64,587 crore proposed in 2019-20 (BE) from the budget.
- Overall capital expenditure programme to be of Rs. 1,58,658 crore.
MSME and Traders:
- 2% interest subvention on an incremental loan of Rs 1 crore for GST registered SMEs.
- Atleast 3% of the 25% sourcing for the Government undertakings will be from women owned SMEs. DIPP renamed to Department for Promotion of Industries and Internal trade.
- New National Artificial Intelligence portal to support National Program on Artificial Intelligence
New schemes announced by the government in the interim budget:
- “Pradhan Mantri KIsan SAmman Nidhi (PM-KISAN)”
- A direct income support at the rate of Rs. 6,000 per year would be transferred to farmer families, having cultivable land upto 2 hectares. The scheme will be applicable for landowners only and not for tenant farmers.
- Under this Rs.2,000 each will be transferred to the bank accounts of around 12 crore Small and Marginal farmer families, in three equal installments.
- This programme would be made effective from 1st December 2018 and has an outlay of Rs.75,000 crore for the FY 2019-20.
- ‘Pradhan Mantri Shram-Yogi Maandhan’ scheme:
- It is a social security pension scheme for workers with monthly income of Rs 15,000 or below in the unorganised sector. But the income data to ascertain informal workers earning less than Rs 15,000 a month is missing.
- Under the scheme, an assured monthly pension of Rs 3000 rupees per month will be provided to workers in the unorganised sector after 60 years of age.
- To avail of the scheme, workers will have to contribute Rs 100 month.
- The scheme would benefit 10 crore workers, would be implemented from this fiscal itself.
- The new pension scheme will run alongside the existing Atal Pension Yojana, which guarantees returns post-retirement.
From the budget document government’s intent in following four areas merit consideration:
- Retaining the tax base: Instead of straightaway lifting the exemption limit to ₹5 lakh from ₹2.5 lakh, government has offered a tax rebate to citizens earning up to ₹5 lakh a year.
- This implies that taxpayers earning upto 5 lakh will have to file their returns and will get a full rebate on tax.
- Had the basic exemption threshold for income tax been lifted to ₹5 lakh, the three crore citizens who will file returns to earn a rebate, may have stopped filing their returns, shrinking the tax base.
- Reduced red tape: Government is inclined to reduce the culture of complicated tax filing forms, elaborate disclosures, demand notices and scrutiny assessments. It has now promised to process tax returns within 24 hours with quick refunds and move scrutiny assessments wholly to the electronic mode.
- Boost to real estate: Until now the government has focused on moving Indian investors from real estate to financial investments. But budget proposals provide a relief to real estate investors by announcing some tax sops like allowing taxpayers relief from capital gains tax, even if they buy two residential houses (instead of one), promise to review GST on property etc.
- Return of assured pension culture: Government has been moving its employees away from assured-return pension products to the market-linked National Pension System since 2004. But a guaranteed pension of ₹3,000 a month for 10 crore unorganised workers is a step towards defined benefit pension schemes for certain sections of the population, which will have huge fiscal costs in future.