India’s Narendra Modi government tabled the union budget for 2019-20 today (July 5).
This is the first annual budget of the National Democratic Alliance government’s second term.
Given the slump in the Indian economy, weak consumption and record-high unemployment levels, there are high expectations from finance minister Nirmala Sitharaman. Among other things, there are hopes of new measures to promote spending and some tax relief.
The economic survey (pdf), which was released yesterday (July 4), targeted a fiscal deficit of 3.1% of GDP for 2019-20 compared with 3.4% the previous year. The economic survey has projected India’s economy to grow at 7% in the current fiscal, as compared with 6.8% in the previous year.
Below are some major highlights of Sitharaman’s speech so far:
Indian economy: will grow to $3 trillion in the current fiscal year. It is now the sixth largest in the world as compared to the 11th position five years ago. The economy has the capacity to reach $5 trillion in the next few years.
FDI: The government will consider relaxing foreign direct investment norms in aviation, insurance, insurance intermediaries, media and entertainment, animation and single brand retail.
Aviation: It is the right time for India to enter into aircraft financing, Sitharaman said. The government will also adopt suitable policy interventions for providing an enabling ecosystem for maintenance, repair, and overhaul of aircraft.
Corporate tax: Phased reduction of taxes will continue. Companies with an annual turnover of up to Rs400 crore will now be eligible for the lower 25% corporate tax. The earlier limit was Rs200 crore. Around 99.3% of companies will now come under the lower tax limit.
Tax on superrich: Taxpayers with income between Rs2 crore and Rs5 crore will now have to pay a surcharge of 3%. Those with an income of Rs5 crore and above will pay 7% tax.
Startup India: The government plans to start a new TV channel for startups under the Doordarshan umbrella. The channel will promote new businesses and enable matchmaking with venture capital. It will be designed and managed by the startups themselves.
Precious metals: The custom duty on gold and other precious metal increased to 12.5%.
Petrol and diesel: An increase in special additional excise duty, and road and infrastructure cess, each by Rs1 a litre, on petrol and diesel, have been proposed in order to boost the infrastructure.
Energy access: By 2022, every single rural family, except those who are unwilling to take the connection, will have electricity and clean cooking gas facility.
Disinvestment: The target for disinvestment from central government-owned enterprises has been raised from Rs90,000 crores to Rs1,005,000 crores.
One nation, one grid: The government will this year make available blueprints for water grids, gas grids, and regional airports across the country.
Social sector: The government will set up a “social stock exchange” under the market regulator Securities and Exchange Board of India for listing enterprises and voluntary organisations working in the social space so they can raise capital as equity, debt or instruments such as mutual funds.
Pension benefits: Under the Pradhan Mantri Karam Yogi Maan Dhan scheme, small retail traders and storeowners whose annual turnover is less than Rs1.5 crore will be eligible for pensions.
Space research: The commercial activities of the Indian Space Research Organisation (ISRO) will get a boost with the setting up of New Space India Ltd. “The company will spearhead commercialisation of various space products including the production of launch vehicles, transfer-of-technology, and marketing of space products,” the finance minister said.
Aaadhaar: Finance minister has proposed to make PAN card and Aaadhaar card interchangeable. “Those who don’t have a PAN card to file income tax returns can still do the same by quoting their Aadhar number,” Sitharaman said.
Education: The government announced an initiative called “Study in India” to invite foreign students to India for higher studies. “There was not a single Indian institution in the top 200 in world university ranking five years ago. Now, after concentrated and concerted efforts, we have three institutions in the top 200. India has the potential to be a hub of higher education,” Sitharaman said.