Key Highlights and Analysis of the Interim Budget 2019

The Honourable Finance Minister, Mr Piyush Goyal today stood to deliver his first Budget speech in the Parliament. Given the proximity to the upcoming central elections, the Budget was an Interim one. Also, for the same reason, the budget was a populist and Social Welfare oriented one. But this was expected and the markets did not show any shock to the announcements. This budget touched the Social aspect in details without much or any tinkering of areas directly related to the industry. A very true to its name ‘Interim’ and ‘Election’ budget now but we expect some Industry and Market-oriented announcements to come in the Final Budget which will be presented by the new Government post-Central Elections.

The key takeaways from this Budget are

• SOP’s to Agriculture Sector.
• Allocations to Infra Sectors like Power, Road Construction etc.
• Increase in Personal Disposable Income of middle class and Consumption Boost thereafter.
• The impetus on Social Welfare Sectors like Education and Healthcare.

KEY HIGHLIGHTS OF THE BUDGET

• Financial Year 20 fiscal deficit target pegged at 3.4% of GDP
• Financial Year 20 fiscal gap would have been 3.1% sans farm income
• Financial Year 20 revenue deficit target pegged at 2.2% of GDP
• Financial Year 20 net market borrowing pegged at 4.73 trillion rupees
• Financial Year 20 gross market borrowing pegged at 7.1 trillion rupees
• Financial Year 20 gilts repayment pegged at 2.36 trillion rupees
• Financial Year 20 gilt buyback pegged at 500 billion rupees
• Financial Year 20 divestment target 900 billion rupees
• Financial Year 20 dividend from RBI, PSU banks pegged at 829 billion
• Financial Year 20 GST collections seen at 7.612 trillion rupees
• Financial Year 19 GST collections seen at 6.439 trillion rupees
• Financial Year 20 IGST collections seen at 500 billion rupees
• Financial Year 20 CGST collections seen at 6.100 trillion rupees
• Financial Year 20 central Government debt seen at 47.3% of GDP
• Financial Year 20 expenditure on pensions seen at 1.743 trillion rupees
• Financial Year 20 telecom, licence fee, spectrum revenue 415 billion rupees
• Financial Year 20 defence expenditure pegged at 3.05 trillion rupees
• Financial Year 20 interest payments seen at 6.65 trillion rupees
• Financial Year 20 transfer to states seen at 3.30 trillion rupees
• Financial Year 20 gold bond, gold monetisation pegged at 50 billion rupees
• Financial Year 20 net short-term borrowing pegged at 250 billion rupees
• Financial Year 20 cash drawdown pegged at 510 billion rupees
• Financial Year 20 food subsidy seen at 1.84 trillion rupees
• Financial Year 20 net securities against small savings at 1.3 trillion rupees
• Financial Year 20 fuel subsidy seen at 374.78 billion rupees
• Financial Year 20 fertiliser subsidy seen at 749.86 billion rupees
• Financial Year 20 dividend from PSUs seen at 532 billion rupees
• Financial Year 20 CAPEX 3.36 trillion rupees
• Total spend 27.84 trillion rupees in FY20, up 13.3% YoY
• Will spend 190 billion rupees FY20 on the rural road plan
• 600 billion rupees being allocated for MNREGA FY20
• Defence outlay at 3 trillion rupees in FY20
• Allocated 645.8 billion rupees for railways FY20
• Railway operating ratio is seen at 96.2% in FY19, 95% in FY20
• Financial Year 20 northeast infra allocation at 581.7 billion rupees
• Financial Year 20 integrated child support allocation 276 billion rupees
• Financial Year 20 national education mission allocation 386 billion rupees
• Financial Year 20 allocation for welfare of SC/ST 768 billion rupees
• Financial Year 19 fiscal deficit seen at 3.4% of GDP
• Financial Year 19 fiscal gap could’ve been below 3.3% but for farm income
• Financial Year 19 net market borrowing pegged at 4.227 trillion rupees
• Financial Year 19 gross market borrowing pegged at 5.71 trillion rupees
• Remaining Financial Year 19 gilt borrow 1.32 trillion rupees
• To switch 131.22 billion rupees of FY20 bonds by Mar-end
• Financial Year 19 gilt repayments seen at 1.48 trillion rupees
• Financial Year 19 revised fertiliser subsidy 700.75 billion rupees
• Financial Year 19 revised fuel subsidy 248.33 billion rupees
• Financial Year 19 revised food subsidy 1.7 trillion rupees
• Financial Year 19 disinvestment receipts seen at 800 billion rupees
• Direct tax mop-up increased to 12 trillion rupees FY19
• Financial Year 19 average GST mop-up 971 billion rupees per month so far
• Allocated 200 billion rupees for farm income scheme in FY19
• Financial Year 19 net securities against small savings at 1.25 trillion rupees
• Financial Year 21 central Government debt seen at 45.4% of GDP
• Current account deficit is seen at 2.5% of GDP
• Disbursed over 350 billion rupees for a one-rank-one-pension plan
• Income up to 500,000 rupees to get full tax exemption
• No tax on income up to 650,000 rupees with tax saving
• The standard deduction for the salaried raised to 50,000 rupees
• TDS threshold for rent raised to 240,000 rupees
• TDS threshold on bank interest raised to 40,000 rupees
• No tax on notional rent for the second self-occupied home
• Income tax benefits for affordable housing extended by a year
• Tax exemption on notional rent extended to 2 years
• Capital gain rollover benefit for the 2nd house in some cases
• A tax cut to give relief of 185 billion rupees to 30 million taxpayers
• No human interference in tax verification, scrutiny in 2 years
• All the taxation verification, scrutiny to be done electronically
• Brought 1.3-trillion-rupee undisclosed income under the tax net
• Jan GST mop up 1.03 trillion rupees
• RBI’s AQR revealed hidden NPAs in 2015
• Spent 2.6 trillion rupees so far on bank recapitalisation
• Bank mergers have done to get economies of scale
• Banks’ merger being done to improve access to capital
• IBC has institutionalised recovery of NPAs
• 3 trillion rupees already recovered by banks
• 23 trillion rupees MUDRA loans are given so far
• 175-billion-rupee orders placed on Government e-marketplace
• To create 100,000 digital villages in 5 years
• Mobile data consumption increased 5 times in the last 5 years
• Solar power generation capacity raised 10 times
• To start container cargo movement in northeast
• All unmanned level crossings on broad gauge eliminated
• India fastest highways developer in the world
• 27 km of highways being built each day
• A proposed anti-piracy provision in cinematography law
• Single window clearance for Indian filmmakers
• Renewable resources to be a major source of energy by 2030
• Electric vehicles key part of Government’s vision for 2030
• Income support for farmers holding less than 2 ha land
• Income support scheme to cost 750 billion rupees per year
• Farm income scheme to be effective from Dec 1, 2018
• Farm income scheme to be fully funded by central Government
• Kisan scheme to transfer 6,000 rupees/yr to small farmers
• Income support scheme to be given in 3 equal instalments
• 1st instalment of 2,000 rupees to be given to farmers soon
• 120 million small farmers to benefit from income support scheme
• To create PM Kisan Fund for small, medium farmers * Agriculture continues to be the main driver of the rural economy
• Interest subvention for farmers hit by natural disasters
• To start to drive to bring all farmers under Kisan credit plan
• To set up Rashtriya Kamdhenu Aayog
• Increased allocation for Gokul scheme to 7.5 billion rupees
• 2% interest subvention for animal husbandry, fisheries
• Higher farm output, productivity to be the focus in vision 2030
• Making India self-sufficient in food part of Vision 2030
• To emphasise on organic food production
• Ayushman Bharat to provide facilities to 500 million people
• Households saved 30 billion rupees from Ayushman Bharat
• Massive scale-up in healthcare in the last 5 years
• Construction of rural roads tripled under PM road plan
• Swachh Bharat world’s largest behavioural change movement
• Conducted transparent auction of natural resources
• To set up 22nd AIIMS in Haryana
• 7 trillion rupees spent on food at affordable rates for poor
• 5-billion-rupee allocation for new “mega” pension plan
• Half of GDP is from 420 million workers in the informal sector
• Aim 80 million LPG connections under Ujjwala plan by next year
• To give 3,000 rupees/month under a new PM pension plan
• A new pension plan for workers earning below 15,000 rupees/month
• Aim to provide the house to every family by 2030
• Sagar Mala project to be scaled up
• Clean rivers, safe drinking water for all under Vision 2030
• To develop more inland waterways faster.

Proposals for Individual Taxation

• Individual taxpayers having taxable annual income up to Rs 5 lakhs will get the full tax rebate. There is no change in the tax slabs. The rebate will be claimed on assessment.

• For salaried persons, Standard Deduction is being raised to Rs. 50,000 from the current Rs 40,000.

• TDS threshold limit on interest earned on bank/post office deposits is being raised from Rs 10,000 to Rs 40,000.

• TDS threshold for deduction of tax on rent is proposed to be increased from Rs 1,80,000 to Rs 2,40,000 for providing relief to small taxpayers

• A new Scheme called ‘Pradhan Mantri Shram-Yogi Maandhan’ is announced for the unorganised sector workers with monthly income up to Rs 15,000. Within the next five years, it would be one of the largest pension schemes of the world. A sum of Rs.500 crore has been allocated for the Scheme.

All the moves mentioned above will increase the personal disposable income of the individuals that belong to the lower middle and middle class. As a result, this will provide a major consumption boost. This would translate into higher demand across all sectors and is a huge positive, especially for the Consumer Durables, FMCG and Automobiles sectors.