The Union Budget presented on 5th July 2019 by the Finance Minister Smt. Nirmala Sitharaman introduced many measures to foster the growth and inclusive development to make India a USD 5-trillion economy by 2025. The Budget is pragmatic and forward looking and aims to achieve a fine balance between investment-led growth and social welfare objectives, by placing a high emphasis on infrastructure development, boosting consumption and promoting the well-being of the weaker sections of the society.
CII was happy to find that many of the Budget announcements were in line with its recommendations on growth, taxation and fiscal prudence. As every year, CII brought out the report “Union Budget 2019-20: An Analysis” report on 6th July with a detailed look at the implications of the Budget for industry. Key areas are summarized below.
Sectoral Analysis
Agriculture
The agriculture sector continues to be the primary source of livelihood for Indian households. Accordingly, a slew of measures was announced for agriculture and allied sectors to step up investments and boost further growth.
The Pradhan Mantri Matsya Sampada Yojana scheme, targeted towards creating a fisheries management network, will address critical gaps in the sector including in value chain, infrastructure, modernization, productivity, post-harvest management, and quality control among others and will promote sustainable development of the sector. This is in line with CII’s recommendation of augmenting public expenditure in agri infrastructure.
The Scheme of Fund for Up-gradation and Regeneration of Traditional Industries (SFURTI) aims to make traditional industries more productive by setting up more Common Facility Centres to facilitate cluster development. This is a welcome move and will generate employment opportunities at the grassroots. Focus on skill development and product innovation will be two important areas that would significantly impact farmer incomes.
The step to create 10,000 new Farmer Producer Organizations (FPO) will improve access of small farmers to inputs and markets. However, the business model needs to be carefully crafted for sustainability. Ease of Doing Business for farmers is another welcome measure.
These need to be supplemented by state government interventions in uptake of electronic National Agricultural Markets and attracting greater private sector participation to enhance farmer incomes.
Manufacturing
Sectoral measures in manufacturing proposed in the Budget are aligned to the Government’s Make in India and Ease of Doing Business initiatives. These reiterated the Government’s vision laid out during the Interim Budget 2019-20 to specifically focus on MSMEs, start-ups, defence manufacturing, automobiles, electronics, etc.
A competitive bidding scheme to invite global majors to set up mega-manufacturing plants was announced for high technology sectors, and investment linked income tax exemptions were proposed. Increase in basic custom duties on several items will enhance domestic manufacturing and provide a further impetus to the sector.
The Government’s intent to promote sustainable and a greener India was clear as several proposals were announced to promote electric vehicles (EVs). These included an additional income tax deduction of Rs. 1.5 lakh on interest paid on loans for purchasing EVs, lowering the GST rate on EVs from 12% to 5% and custom duty exemption on certain EV parts. These initiatives will lead to reduced pollution and a step towards making India a global manufacturing hub of EVs.
Infrastructure received a strong push in this year’s Budget. Schemes and programmes such as Pradhan Mantri Gram Sadak Yojana, launch of Bharatmala Phase 2, proposed public private partnership (PPP) in railways etc. are all aimed at enhancing physical connectivity and modernization of existing infrastructure.
CII lauds the Government’s vision to restructure the National Highways programme, creation of the National Highways Grid, measures such as developing inland waterways and the usage of rivers for cargo transport to improve the logistical framework by decongesting roads and railways. These are positive steps that would significantly encourage industrial investments, promote logistics and enhance the overall competitiveness of the country.
The Government’s focus on logistics, infrastructure along with providing affordable housing for all by 2022 is expected to positively impact and have multiplier effects across sectors such as cement, steel and capital goods.
CII also welcomes the various steps that has been taken towards providing affordable power to the states. The ‘One Nation, One Grid’ model will result in improved transmission infrastructure and promote seamless connectivity across the country. Additionally, the development of the gas distribution network by developing gas grids will promote a cleaner economy.
Services
CII welcomes the Government’s move of easing local sourcing norms in the single brand retail which would significantly encourage investments in the sector.
The proposal to develop 17 iconic tourist sites into world class tourist destinations will provide an impetus to the tourism sector while healthcare will benefit from an increased allocation of 19% in the Budget.
CII appreciates the emphasis on education reforms in the country. An increased budget allocation to the sector along with measures such as introduction of a New Education Policy with a greater focus on research and innovation, creation of a National Research Fund to coordinate and promote research in the country and a Study in India programme are all positive developments that will provide a significant boost to education.
Financial Sector
Sound financial health of an economy is key for higher economic growth. Acknowledging this critical factor, several reforms were introduced in the budget to reinvigorate the financial sector.
These included measures to deepen the corporate bond market, user-friendliness of trading platforms to reduce the borrowing costs of NBFCs and making KYC norms more investor friendly to attract overseas portfolio investors.
Measures such as removal of the requirement of creating a Debenture Redemption Reserve (DRR) by NBFCs for raising funds in public issues, one time six months’ partial credit guarantee to public sector banks and the infusion of Rs. 70,000 crores for bank recapitalization will enhance credit flow and improve liquidity in the system.
Start-ups and Entrepreneurship
CII lauds the Government’s initiative to foster start-ups and entrepreneurship in the country.
The launch of a television channel for promoting startups, relaxation of angel tax related norms, an e-verification system and special arrangements for grievance redressal would ease the start-up ecosystem from a regulatory perspective and invite greater investments.
Further, the proposed setting up of 80 livelihood business incubators and 20 technology business incubators to train 75,000 skilled entrepreneurs in the agro-rural sector, and additional funds availability for investment for start ups are all welcome moves that would go a long way in promoting an entrepreneurial and innovation culture in the economy.
Skill Development & Labour Reforms
For preparing the Indian youth in industry relevant skills and facing the challenges of new age technology, the Government aims to train 10 million Indian youth under the Pradhan Mantri Kaushal Vikas Yojana.
CII also appreciates the move towards providing 3 crore retail traders and shopkeepers with pension benefits through the scheme of Pradhan Mantri Karam Yogi Yojana and the Government’s intent to streamline existing 44 labour laws into a set of 4 labour codes.
Social Sector
The Budget laid strong focus on building a strong social sector. The initiatives for promoting women empowerment including the extension of the interest subvention programme for women Self Help Groups to all districts, are commendable.
CII also welcomes the Government’s proposal to create a social stock exchange – an electronic fund-raising platform for social enterprises.
Overall, the Union Budget 2019 introduced all-round measures targeted at promoting ease of living for the citizens while also ensuring the inclusive and sustainable development of the economy. Further, the Government’s resolve to stick to a path of fiscal prudence is clear from a revised fiscal deficit target of 3.3%. All these would ensure that the Indian economy is on a stable footing and well on its way of becoming a USD 5 trillion economy by 2025.
Source: Union Budget 2019-20