India's Power Minister Goyal speaks during the India Economic Summit 2014 at the World Economic Forum in New Delhi
Reuters/Anindito Mukherjee
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LITMUS TEST

What students of IIT, IIM, and ISB thought of Piyush Goyal’s 2019 budget

By Ananya Bhattacharya

The Narendra Modi government’s interim budget presented yesterday (Feb. 01) was a populist dream.

Coming weeks ahead of India’s general elections, interim finance minister Piyush Goyal announced sops—from income support schemes for farmers to tax cuts for the salaried—for a variety of Indians.

In keeping with tradition, Quartz invited students from some esteemed institutes, including the Indian Institutes of Management (IIM) Shillong and Ahmedabad, the Indian Institute of Technology (IIT) Bombay, and the Indian School of Business (ISB) Hyderabad to share their thoughts on the exercise.

Their responses have been lightly edited for grammar and clarity:

State of the economy

Budget speech: Inflation is a hidden and unfair tax on the poor and the middle class. The average rate of inflation during 2009-2014 was a backbreaking 10.1%.

Rohit Garg, IIM Shillong: “If the inflation remains under control and hovers in the range of 3-4%, in the long run, we can move towards a more mature economy where the interest rates are lower and this will help in capital formation in the country. As there is under-capitalisation in the economy, business needs more funds to expand.”

Speech: The period of 2008-14 will be remembered as a period of aggressive credit growth and, as per RBI (Reserve Bank of India), the primary reason for spurt in non-performing loans and stressed assets. Outstanding loans of public sector banks ballooned from Rs18 lakh crore to Rs52 lakh crore during this period. Many projects were started that could either not be completed or had low capacity utilisation resulting in their inability to pay back their loans.

Garg: “The government should focus on creating a special-purpose vehicle (SPV) so that banks can clean their balance sheet and this would reduce the probability of future non-performing assets (NPAs). This SPV can buy out the loan the banks have given to institutions; this way debt market will gradually mature and will have a wider reach.”

Farmers’ progress and increase in income

Speech: Pradhan Mantri Kisan Samman Nidhi (PM-KISAN). Under this programme, vulnerable landholding farmer families, having cultivable land upto 2 hectares, will be provided direct income support at the rate of Rs6,000 per year. This income support will be transferred directly into the bank accounts of beneficiary farmers, in three equal instalments of Rs2,000 each. This programme will be funded by government of India. Around 12 crore small and marginal farmer families are expected to benefit from this. The programme would be made effective from Dec. 01, 2018 and the first instalment for the period upto 31st March 2019 would be paid during this year itself. This programme will entail an annual expenditure of Rs75,000 crore.

Akshay Jogani, ISB: “While the payout per farmer isn’t a huge number, the number of farmers who will get this benefit is huge. Should have a significant positive impact on the small farmers and the rural economy”

Jayanth Parchuri, ISB: “The government went ahead with a populist budget but at the same time made a push for a more progressive India. Prominent to me was the spirit of federalism where the union adopts the best schemes from the state even if it is ruled by other parties. For, the direct income support to farmers announced by the government of India, Telangana stood as a torchbearer for this scheme. It is indeed a great scheme which will reduce the distress of farmers across the country. Adoption of direct benefit transfer (DBT) for this scheme is commendable, at the same time the government should focus on inclusivity to this scheme, especially the tenant farmers.”

Ritesh Kumar Singh, IIM-A: “Specially, the direct cash transfer in large scale Rs72,000 crore (6,000/year to 12 crore farmers) will be a path-breaking step to support the needy. We would have done this 15 years back.

Labour and workers’ dignity

Speech: Therefore, in nine addition to the health coverage provided under “Ayushman Bharat” and life & disability coverage provided under “Pradhan Mantri Jeevan Jyoti Bima Yojana” and “Pradhan Mantri Suraksha Bima Yojana,” our government proposes to launch a mega pension yojana namely “Pradhan Mantri Shram-Yogi Maandhan” for the unorganised sector workers with monthly income upto Rs15,000. This pension yojana shall provide them an assured monthly pension of Rs3,000 from the age of 60 years on a monthly contribution of a small affordable amount during their working age. An unorganised sector worker joining pension yojana at the age of 29 years will have to contribute only Rs100 per month till the age of 60 years. A worker joining the pension yojana at 18 years, will have to contribute as little as Rs55 per month only. The government will deposit equal matching share in the pension account of the worker every month. It is expected that at least 10 crore labourers and workers in the unorganised sector will avail the benefit of “Pradhan Mantri Shram-Yogi Maandhan” within next five years making it one of the largest pension schemes of the world. A sum of Rs500 crore has been allocated for the scheme. Additional funds will be provided as needed. The scheme will also be implemented from the current year.

Prince Jain, IIM-A: “Mega pension scheme, if implemented properly, would give crores of unorganised workers a constant stream of payment and smoothen the consumption pattern, which is essential to maintain a reasonable standard of living.”

Empowering youth to fulfill their potential

Speech: In order to take the benefits of artificial intelligence and related technologies to the people, a national programme…has been envisaged by our government. This would be catalysed by the establishment of the National Centre on Artificial Intelligence as a hub along with centres of excellence. Nine priority areas have been identified. A national artificial intelligence portal will also be developed soon.

Anmol Mishra, IIT Bombay: “Although I’m excited about this, the details are too superficial for any comment.” 

Empowering MSMEs and Traders

Speech: The government has undertaken many effective steps to strengthen MSME sector, which provides employment to crores of people. Recently, a scheme of sanctioning loans upto Rs1 crore in 59 minutes has been launched. Good and service tax-registered SME units will get 2% interest rebate on incremental loan of Rs1 crore. The requirement of sourcing from SMEs by government enterprises has been increased to 25%. Of this, the material to the extent of at least 3% will be sourced from women-owned SMEs.

Harsh Jain, IIM Shillong: “This measure will definitely benefit our small business, the majority of which fall within this limit and will mobilize growth in banking advances.”

Speech: “Our defence budget will be crossing Rs300,000 crore for the first time in 2019-20.”

Garg: “There seems a good opportunity for investors in companies manufacturing defense goods.”

Speech: Infrastructure is the backbone of any nation’s development and quality of life. Whether it is highways or railways or airways or even digital ways, we have gone beyond incremental growth to attain transformative achievements.

Garg: “The government should hasten the process of divestment in this sector and dilute its stake in railway by coming with an IPO so the funds can be utilised to invest in other areas.”

Digital India revolution

Speech: …India is now leading the world in the consumption of mobile data. Monthly consumption of mobile data increased by over 50 times in the last five years. The cost of data and voice calls in India is now possibly the lowest in the world. Today, under Make in India, mobile and parts manufacturing companies have increased from 2 to more than 268 providing huge job opportunities. More than 3 lakh common service centres (CSCs) employing about 12 lakh people are digitally delivering several services to the citizens. The CSCs are expanding their services and also creating digital infrastructure in the villages, including connectivity, to convert the villages into digital villages. The government will make 1 lakh villages into digital villages over next five years.

Anmol Mishra, IIT-B: “The cost of data and voice calls in India is certainly one of the lowest in the world. Even developed economies like Singapore and Europe still continue to offer 1 or 2 GB per month packs for exorbitant prices. Unlimited voice calls in prepaid plans is a luxury for the international exchange students at IIT. The push for bringing remote villages into the fold of technology will tremendously improve education and healthcare services availability. Digitising villages is the fastest way to bridge the urban-rural gap.”

Speech: Jan Dhan-Aadhaar-Mobile (JAM) and direct benefit transfer have been game changers. Bank nationalisation was first done 50 years ago, but a large part of the country was still left out of the economic mainstream with no access to formal banking. In the last five years, nearly 34 crore jan dhan bank accounts were opened. Aadhaar is now near universally implemented. This has helped ensure the poor and middle class receive the benefits of government schemes directly in their bank accounts by eliminating middlemen.

Rajat Magotra, IIM Shillong  “The Jan Dhan Yojna has led the banks to the mass unbanked population of the country. But a large number of these accounts are still lying dormant. As of March 2018, 20% of the total Jan Dhan accounts were lying dormant. The government should focus on increasing the user base as well as keeping the accounts active.”

Tax proposals

Speech: Individual taxpayers having taxable annual income up to Rs5 lakhs will get full tax rebate and therefore will not be required to pay any income tax. As a result, even persons having gross income up to Rs6.5 lakh may not be required to pay any income tax if they make investments in provident funds, specified savings, insurance etc.

Mishra: “Increasing the minimum taxable limit is a welcome step. It would encourage many more non-salaried individuals to file correct taxes.  The non-taxable investment limit could also have been doubled though. Given the push by the government for bringing more people into the formal economy, incentivising such investments could help significantly.”

Prince Jain: “While populist in essence, the budget must be evaluated by how much substance it carries. The lowering of the tax burden on the middle class was long due, but regardless, the major problem of tax evasion among the top 1% still persists and must be fought against. However, if materialised, the policies do give a sign of relief to the middle class, and to the workers in unorganised sector. Full tax rebate up-to Rs5 lakhs in income, and up-to gross income of 6.5 lakhs, given investments in mutual funds and prescribed equities, encourages progressive money management.”

Speech: TDS threshold on interest earned on bank/post office deposits is being raised from ₹10,000 to ₹40,000. This will benefit small depositors and nonworking spouses. Further, the TDS threshold for deduction of tax on rent is proposed to be increased from ₹1,80,000 to ₹2,40,000 for providing relief to small taxpayers.

Harsh Jain: “This will help small taxpayers to get out of compliance of filing tax returns to claim TDS refund. So will be the case with tax payers who derive their major income from rent. Although we can see a marginal fall in the filing of tax returns.”

Speech: The benefit of rollover of capital gains under section 54 of the Income Tax Act will be increased from investment in one residential house to two residential houses for a tax payer having capital gains up to Rs2 crore. This benefit can be availed once in a lifetime.

Ayush Vimal, IIM-A: “Given the increasing trend of nuclear families resulting in people owning multiple houses, the government has dispelled the notion of having a second house as a luxury. It has accordingly exempted a second owned house from notional rent that was attracted under the erstwhile provisions. On the contrary, it has allowed the investment in two houses to be deducted from capital gains earned from selling one house property. The concept of e-assessments that is expected to be introduced after two years will be a game changer as it seeks to avoid any human interface that tax authorities may have during assessments. It, thus, eliminates intermediaries and corrupt practices that may have earlier plagued the system, providing much-needed relief to the common man.”

Harsh Jain: “As per section 54 of the Income Tax Act, LTCG on one house was exempted but this has been now increased by one more house during the course of the lifetime of a tax payer. This tool will be beneficial for tax planning and will boost real estate although not up to a great extent.”