First budget of Modi 2.0 a hit

Published : Jul 11, 2019 10:24 am | By: Anjali Chhabra

First budget of Modi 2.0 a hit

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Presenting her first budget, Finance Minister Nirmala Sitharaman, set the ball rolling in tune with Prime Minister Narendra Modi’s blueprint for shaping a “New India”.


Unveiling Prime Minister Narendra Modi’s blueprint for shaping a “New India”, Finance Minister Nirmala Sitharaman, the first woman to hold the portfolio in full-time capacity, presented the first Budget of Modi 2.0 with a focus on propping up rural growth, encouraging private investment to drive growth in demand, jobs and exports, encouraging environment protection, empowering the poor and providing the youth with a better future, while laying down a coherent roadmap for sectors that will drive growth and innovation among citizens. Many called it a document framed with a 10-year vision.

While the proposed over Rs 2 a litre hike in petrol and diesel pinched the middle class a little, the masses were by and large happy with the savings offered in income tax and housing loan deduction and the reiteration of the earlier decision to not tax income of salaried workers earning up to Rs 5 lakh a year.

The FM, in a welcome, Indian touch to the budget exercise, discarded the briefcase and carried the Budget documents to Parliament in a red bag, reminiscent of the traditional “bahi-khata” (ledger). She also lavishly praised the people who joined the Modi government’s exercise of “crowd sourcing” ideas for the budget, saying that without their contribution the “exercise would never have been successful”.

There were no big-bang announcements for the salaried middle class on the personal tax front but they were not surprised as they had figured out that nothing new is coming after they were offered “no tax for income up to Rs 5 lakh” in the interim budget in February.

More than their personal gain, a section of the middle class rejoiced that the super rich earners would now be taxed more. Nirmala announced a new personal income tax rate for the uber rich according to which, those in Rs 2.5 cr to Rs 5 cr income bracket would see increase in effective tax rate by 3% and 7%, respectively. Those in the Rs 2-5 crore bracket will now pay 39% income tax while those with more than Rs 5 crore income will pay 42.47% tax. 

Nirmala made the budget special for the middle class by bringing a cheer to home buyers with an additional deduction Rs 1.5 lakh on interest paid on loans borrowed up to March 31, 2020, on purchase of a house up to Rs 45 lakh, giving a Rs-7 lakh benefit to home buyers over 15 years.

Encouraged by a growth of 35% in direct tax collections due to simplification of processes, the FM further announced that PAN and Aadhaar both can be used to file I-T returns. By making PAN and Aadhaar interchangeable, she paved the way for more and more people to joint the tax net. A proposal to provide Aadhaar cards on arrival to NRIs with Indian passports also aimed at connecting the diaspora with their motherland.

Experts said Sitharaman’s budget was a balanced act to address economic slowdown that threatens to impact tax collections. The budget also factors in the uncertainties related to oil prices after Iran sanctions. By fixing a fiscal deficit target of 3.3%, the FM showed enormous courage as there is a looming threat of below-target revenue likely from GST. She will also have to use some imagination to source funds for big schemes, farmer’s income and healthcare.

In commonman’s words, things that became costly in the budget include imported cars, petrol, diesel, tobacco products, cigarettes, gold, silver, imported books, CCTV, video cameras, ACs, optical fibres, automobile parts, vinyl flooring, PVC, fatty oils, cashew kernel. In comparison the list of things that got cheaper was smaller. The things that became cheaper include e-vehicle parts, electronic appliances, set-top box, textiles, imported wool fibre, steel, lithium ion cell and raw material for manufacturing artificial kidney.

Incentives for rural India and farmers, push for e-vehicles, sops for startups were the key areas of Sitharaman’s maiden budget as she quote in her speech Urdu poet Manzoor Hashmi to drive home the Modi government’s resolve to take the country towards a brighter future. Yaqin ho to koi rasta nikalta hai, hawa ki ot bhi le kar chirag jalta hai (You can find a way if you believe in yourself, just as an earthen lamp can also lighten up despite the air blowing around), she said.

Herself being a woman, Sitharaman showed extreme sensitivity for women empowerment and participation in development by quoted Swami Vivekananda,“There is no chance of the welfare of the world unless the condition of women is improved. It is not possible for a bird to fly on one wing.”

The Prime Minister hailed the FM’s budget proposal as futuristic, hoping that it will accelerate the pace of development and benefit the middle class. “The budget will simplify the tax process and boost infrastructure. The budget is citizen friendly, development friendly and future oriented,” he said, adding that it will empower the poor and provide the youth with a better future.

The empowerment of poor, farmers, dalits, oppressed and the underprivileged sections of the society through the budget will give the country the energy to fulfil the dream of a $5 trillion economy, the PM said.

BJP President Amit Shah said the budget highlights the "exemplary" work done in key sectors relating to the economy, housing, infrastructure and the social sectors over the last five years.

With India’s global dreams in her eyes, Nirmala sent encouraging signals to foreign investors by announcing to liberalise FDI in aviation, media, single brand retail. In the insurance sector, FDI limit was raised from 49% to 100% for insurance intermediaries which include a person or a company that helps a customer buy insurance. These include insurance agents, insurance brokers and financial advisers.

The rural focus of the budget was all too evident in Sitharaman’s proposals. “At the centre of everything we do, we keep ‘gaon, garib, aur kisan'”, she said at the outset of her 2019-20 Budget speech, implying that Bharat that represents the poor, villages and farmers is her primary concern.

Pradhan Mantri Gram Sadak scheme outlay was raised by 22% for augmenting over 1.25 lakh km roads and outlay of MNREGA was upped by 9% for offering jobs in villages. Spending in agriculture was also increased from Rs 67,800 cr to Rs 1,30,485 cr. The budget also shared a vision for promoting 10,000 new farmer-producer groups. The innovative concept of zero-budget farming, which is a form of gardening as a self-sustainable practice with minimum external intervention, was also give a special place in the budget. The FM also highlighted that India will become open-defecation free by October 2 this year.

The FM underlined the Modi government’s concern for villages by announcing that by 2022, the 75th year of Independence, each rural family will have electricity and clean cooking facility. She also highlighted the aim to build 1.95cr houses under PMAY-Gramin in 2 years with the motive of “housing for all”. The FM said that a total of 1.54 crore rural homes have been completed in the last five years. She said the new houses will have amenities such as toilets, electricity and LPG connections.

Keeping in mind the government’s decision to promote environment-friendly transport modes and to drive in the future, Sitharaman offered income-tax deduction of Rs 1.5 lakh on interest paid on loans taken to purchase electric vehicles.

She said the government has asked the GST Council to reduce tax rate on EVs from 12% to 5%. Customs duty on certain parts of EVs was also reduced. Investment-linked tax benefit were also offered on manufacturing of products like lithium batteries and solar chargers.

In a visible attempt to push job creation and encourage startups, the budget resolved the issues of tax terrorism and angel tax. Nirmala said startups and investors who file requisite declarations will not be subjected to any kind of scrutiny in respect of valuation. Funds raised by startups will not require any scrutiny by the I-T department. The government also announced the launch of a new TV channel exclusively for startups.

For improving housing unit availability in urban areas, the FM announced that a model tenancy law will soon be finalised and termed the current laws are "archaic". The National Urban Rental Housing Policy will aim to alleviate housing shortage in urban areas by encouraging renting of homes.

The Opposition got after the Modi government after the budget was presented in Parliament. Congress leader and former finance minister P. Chidambaram said the budget has been prepared without listening to the voices of either ordinary citizens or knowledgeable economists.

His party colleague Shashi Tharoor said, “There is nothing for the aam aadmi in this budget. He will now pay Rs 2 per litre more on petrol and diesel which will have a knock-off effect on everything”

BSP supremo Mayawati said though the Union government tried to make the budget alluring, it would only help the capitalists.

Trinamool Congress chief and West Bengal chief minister Mamata Banerjee said, “#Budget2019 is completely visionless. In fact, the total vision is derailed. On top of it, not only have they imposed cess but also special additional excise duty on petrol and diesel leading to price increase by nearly Rs 2.50/litre for petrol and Rs 2.30/litre for diesel. As a result, price hikes will hit from transport to market to kitchens. Commoners are suffering and suffering.”

The Modi government’s first budget after the recent electoral victory seems to have carried forward the expectations raised in the interim budget presented on February 1, just before the Lok Sabha elections. The budget, undoubtedly, appears to be a perfect balance between populism and realism related to the government’s limited resources for big expenditures in the form of cash sops and transfers.

The beginning of the five-year term of Modi 2.0 has seen the government lay down the roadmap for India’s development and the country’s eagerness to drop its “developing nation” tag as early as possible. The NDA government has deliberately focused on realism rather than populism, knowing very well that the former can wait another four years till Modi faces the next election and throws open his purse strings to woo voters and industry alike.

 

 


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