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SATURDAY, 2 FEBRUARY 2019 MUMBAI (CITY) ~12.00 VOLUME VI NUMBER 27 40 pages in 3 sections

TIGHT REVENUE & MORE SPENDING... ...FRESH PROMISES & NEW RESOURCES
G ~1 trillion G ~23 k cr G ~6,000 G Pensions G RBIdividend G Disinvestment target stays
Amount by which GST Value of tax Yearly dole from Govt to match Transfers from the FM insists that ~80,000 crore
collections will be lower than cuts, including Union govt contributions to Reserve Bank of disinvestment target for FY19
Budget Estimates full rebate for to 120 mn farm pension scheme for India to New Delhi will be met
G 2.5% those with households unorganised sector increase by one- G Benefits for second homes
taxable income that own less workers. It promises third in FY19,now
Estimated current account deficit up to ~5 lakh than 2 hectares ~3,000 a month total ~74,000 crore Notional rent on additional house
in 2018-19, as percentage of GDP not taxed; capital gains eased

FISCAL DEFICIT TARGET MISSED AGAIN

BUDGETING FOR VOTES

MIHIR S SHARMA
New Delhi, 1 February
Although the Centre’s share of goods and
services tax (GST) receipts is expected to be
Market mood
lus, together with the farm giveaway, buoyed
consumer-facing stocks such as fast moving
about ~1 trillion below the Budget Estimates consumer goods and automotive companies.

I
n his presentation of the interim Budget
for 2019-20 in the Lok Sabha on Friday,
Finance Minister Piyush Goyal made a
strong pitch for the re-election of the
National Democratic Alliance government.
Although the convention is that a govern-
ment facing re-election does not make any
major taxation or spending proposals that
would tie the hand of the next government,
which would present the full Budget subse-
quently, Goyal’s speech laid out a series of
appeals and promises to different sections of
the electorate.
While doing so, Goyal allowed the gov-
ernment’s commitment to fiscal consolida-
tion to slip further. For the second succes-
sive year, the fiscal deficit target will be
missed — the minister said that the 2018-19
fiscal deficit would be 3.4 per cent of gross
domestic product (GDP), where the target
was 3.3 per cent. In addition, the next year’s
fiscal deficit is predicted to also be 3.4 per
cent of GDP. Goyal reiterated the govern-
ment’s commitment to bringing the deficit
down to 3 per cent of GDP, and said it would
PHOTO: PTI
in 2018-19, this share is projected to grow at
over 20 per cent in 2019-20. Further, the net
borrowing requirement was increased in the
Revised Estimates of 2018-19 to ~4.47 trillion
from ~4.07 trillion in the Budget Estimates,
and as a result bond yields inched up.
Compromises on the deficit allowed the
government to fund its election-related sops.
The first big giveaway was to farmers. Barely
days after the opposition Congress party
promised a minimum income guarantee,
Goyal announced that farmers who owned
less than two hectares of land — about 120
million households — would receive income
support worth ~6,000 a year. This money
would come entirely out of the Union gov-
ernment’s kitty, and be transferred in three
instalments. Crucially, the scheme was intro-
duced with retrospective effect, so that
~20,000 crore was budgeted for the income
transfer in the ongoing fiscal year. In 2019-20,
the new income transfer is budgeted to cost
~75,000 crore. It is not known how the bene-
ficiaries will be selected, and whether tenant
farmers will be eligible. Nor will landless agri-
BSE Sensex 10-year G-sec
(intra-day) (intra-day)
tor will now be eligible for a reworked pen-
sion scheme, which Goyal said would yield
an income of ~3,000 a month on maturity. An
18-year-old could start paying in as little as
~55 a month; the Union government would
match that contribution. Although the
immediate budgetary impact is small, the
implications for the path of current spending
are less sanguine.
The big focus, however, was on wooing
back the salaried middle class. Goyal broke
with precedent to announce a tax cut: a rebate
for taxpayers with a taxable income of less
The Sensex initially responded positively to
the Budget speech but eventually ended only
212.7 points higher.
Goyal, in order to finance the new enti-
tlements and the income tax cut, had to not
just drastically alter the fiscal glide path but
also had to squeeze some other outlays.
Highways, in particular, were given budget-
ary support of ~83,016 crore for 2019-20 —
less than 6 per cent more than the Revised
Estimates for 2018-19. Defence was also
squeezed in real terms.
While ~3.05 trillion was allocated for spend-
ing in 2019-20, in terms of today’s dollars —
relevant for arms purchases — this is lower
than the allocation for 2018-19 of ~2.85 trillion
was worth in dollars on February 1, 2018.
Another question surrounded the esti-
mates for receipts from disinvestment. The
Union Budget for 2018-19 had set out a disin-
vestment target of ~80,000 crore; while bare-
ly half of this has been achieved so far, Goyal
said the government was confident of hitting
the target. In spite of the difficult of making
the current year’s target, the Budget

be achieved in 2020-21. cultural labourers receive direct transfers than ~5 lakh who would now, in effect, pay no Estimates for 2019-20 lay out a ~90,000 crore
However, the bond markets reacted with under this scheme. income tax. Exemption limits were also target for disinvestment receipts.
moderate scepticism to the Budget numbers. However, workers in the unorganised sec- raised marginally. This ~23,000-crore stimu- Turn to Page 7 >

THIS IS NOT MERELY AN INTERIM BUDGET, BUT A MEDIUM OF THE COUNTRY’S DEVELOPMENT JOURNEY
P I Y U S H G O YA L , Union finance minister

VISITORS’ GALLERY
Q&A
A‘Modi’ chant&
the handshake ‘Tax benefits for above
thatmattered
ADITI PHADNIS
~5 lakh income group
At 11:05 am, Congress MP Rajiv Satav
sidled into the House. He whispered
may be considered next’
something to colleague Sushmita Deb
Finance Minister PIYUSH GOYAL expressed confidence that the Narendra
and handed her a handful of laser-
printed placards. One set said: ‘How’s Modi government would return to power in the upcoming general
the jobs!’ Another simply elections, and that it might look at tax relaxations for individuals earning
said: ‘15 lakh?’ These more than ~5 lakh annually in the full Budget for 2019-20. Edited excerpts
placards were raised
every time Finance
from Goyal’s post-Budget press conference:
Minister Piyush Goel
mentioned the You said that in the main Budget, Do we have a new fiscal road map in
word ‘jobs’ in his you would further look at the income place?
interim Budget speech. tax rate slabs. A lot of economic growth has not been
As disturbances go, Goyal’s speech I hope that the next government under captured in the GDP numbers that
was relatively interruption-free, except the leadership of Prime Minister came out earlier. As the nation is
for bursts of maniacal and hysterical Narendra Modi will look at other tax moving towards formalisation, the tax
laughter for apparently no reason, as proposals in the main Budget. That base and revenues are also increasing.
Trinamool Congress MPs Kalyan would be the job of the finance Probably that has taken some time to
Banerji and Idris Ali advised him minister then. I have been reflect in the (GDP)
periodically to “drink water” (paani constrained by the nature numbers. As the
peejiye). Actually, it was the Treasury of interim Budget. “When we calculation is getting
benches that held up the finance However, there are many calculate with robust and given the new
minister as MPs chanted ‘Modi-Modi’ things that could not have the new numbers just came out,
for nearly 90 seconds when Goyal waited till the final Budget, estimates, we fiscal consolidation may
announced a tax rebate for people particularly relief for small have done not change much. When
earning less than ~5,00,000 annually. taxpayers, which I have better than the we calculate with the new
Minister for Food Processing passed on. The rest is for original (fiscal) estimates, we have done
Harsimrat Singh Badal sat the next FM to decide in road map” better than the original
impassively as the government July. Anyway, if you see the road map.
unveiled its plans to support farmer track record of this
incomes. Maneka Gandhi shook her government, for five years What do you have to say on the
head and pursed her lips as Goyal consistently, we have passed on many revised fiscal deficit numbers?
announced a small increase in the benefits to taxpayers. You would appreciate that this
Integrated Child Development government, for four years
Services outlay. Nirmala Sitharaman If a person’s taxable income is ~8 consistently, has given Budgets in
beamed as Goyal announced the lakh, would tax benefits be according which we have met (the fiscal target).
defence outlay, which is just 1.2 per to the present slabs? Our figures for actuals are close to the
cent more than last year. At the Yes. Keeping the convention of revised estimates. And it’s actually 3.36
mention of building a new airport in interim Budget in mind, we have not per cent (for 2018-19) – it could have
Sikkim’s Pakyong, Minister of State touched the tax slabs, and the existing become 3.30 per cent. Whatever figures
Babul Supriyo reached out to Minister slabs will continue. For only those come by working from the bottom, we
of Civil Aviation Jayant Sinha and with taxable income below ~5 lakh, we have maintained the sanctity of the
patted him on the back. have announced a measure in the Budget process, which is reflected in
Turn to Page 7 > interim Budget. the actual figures. Turn to Page 7 >

BUDGET SPECIALS
BUDGET ANALYSIS PAGE 12
PAGES 2 & 3 PAGE 7 II, 1 & 2 | THE COMPASS:
Major boost to | SHEKHAR GUPTA: On political economy,
| Fora second year, | Non-tax revenue | Budgeta mixed bag consumption but Modi scores over Manmohan’s UPA-2
govt misses fiscal for markets
growth pegged at scepticism around
deficit target | Gross borrowing growth stays | T T RAM MOHAN: Economy caught in a
11.2% in FY20, down 3.5%/7.5% trap?
from 27.3% in FY19 pegged at ~7.1 trillion
| Centre keeps GST for 2019-20 | Modest 6.35% | SIRAJ CHAUDHRY: The formula for
revenue target hike in defence success of farm economy
moderate for FY20 | Rlys capexat | Consumer & auto Budget, govt talks
all-time high firms geta leg-up up OROP BUDGET OPINION PAGE 13
| Interim Budget
ata glance PAGES 4, 5 & 6 | Experts cast doubt on | EDIT: Controlled hand-outs
new pension scheme | AJAY SHAH: The twin looming problems
| Fuel subsidy | Farm income support leaves of fiscal policy
burden to rise 12% to farmers unhappy | Goyal puts more cash in
~3.34 trillion pockets of middle class | A K BHATTACHARYA: Not an interim Budget
| Govt targets social infra,
in FY20 rural poor | Benefits for property sellers | JYOTIVARDHAN JAIPURIA:Juggling populism
with pragmatism
FM’S SPEECH & THE FINANCE BILL PAGES 8-11
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2 INTERIM BUDGET & GOVERNMENT
>
NUTS & BOLTS
THEPMKISANSAMMAN
NIDHIPROGRAMME,THE
MOVETOSETUP100,000
DIGITAL VILLAGES, AND
RISE IN ALLOCATION TO
INFRA WILL EMPOWER
COMMUNITIES
SANJIV PURI,
Managing Director,
ITC Limited
~ 58,166 cr
is the allocation for the
Northeastern states, up
21 per cent over 2019-20
~ 19,000 cr
is the allocation for
the Pradhan Mantri
Gram Sadak Yojana
Farmers in animal husbandry
get incentive to repay loans
An interest subvention of 2 per cent will be
provided to farmers engaged in animal
husbandry and fisheries who avail loans
through the Kisan Credit Card. Further, in case of
timely repayment of loans, they will also get an
additional three per cent interest subvention.
Farmers affected by severe natural calamities,
where assistance is provided from the National
Disaster Relief Fund (NDRF), will be provided an
interest subvention of two per cent and a
prompt repayment incentive of three per cent for
the entire period of rescheduling of their loans.
Single-window clearance for
entertainment industry
To give a push to the entertainment industry,
single-window clearance for ease of shooting
films, available only to foreigners, is now going
to be made available to Indian filmmakers as
well. Regulatory provisions will rely more on
self-declaration. Anti-camcording provisions
will be introduced in the Cinematograph Act
to control the menace of piracy.
Cleaning India mission
gathers momentum
The government declared that under the
Swachh Bharat Mission, India has achieved 98
per cent rural sanitation coverage and as many
as 545,000 villages have been declared ”Open
Defecation Free”. With the people’s particip-
ation, it has been transformed from a govern-
ment scheme to a national movement.
Electricity connections for all
families by March 2019
By March 2019, all willing families will get an
electricity connection. ~143 crore has been
provided for LED bulbs with the participation of
the private sector. This has resulted in savings of
approximately ~50,000 crore per year in
electricity bills of poor and middle-class families.
More money for Scheduled Castes,
Scheduled Tribes schemes
Allocations for the welfare of the Scheduled
Castes and Scheduled Tribes have been
increased. The allocation of ~56,619 crore made
in BE 2018-19 for Scheduled Castes will be
increased to ~62,474 crore in RE and enhanced to
~76,801 crore in BE 2019-20, an increase of 35.6
per cent over BE 2018-19. For Scheduled Tribes
also, the proposed allocation in BE 2019-20 is
~50,086 crore, as against ~39,135 crore in BE
2018-19, an increase of 28 per cent.
Income support for small and
marginal farmers
To provide assured income support to small and
marginal farmers, the government is launching
the Pradhan Mantri KIsan SAmman Nidhi (PM-
KISAN), under which vulnerable landholding
farmer families having cultivable land of up to
two hectares will be provided direct income
support at the rate of ~6,000 per year.
Fisheries development gets
pride of place
To give a boost to fisheries, which provides a
livelihood to over 14.5 million people at the
primary level, the government has decided to
create a separate department of fisheries.
People will feel confident to spend more Budget gives more than expectations
I T
t was a good Budget. Clearly, it had a lot of
political objectives owing to the impending
general elections. Having said that, some of
the good points I noticed was the steps taken
for farmers. The government is also encouraging
animal husbandry and fisheries through interest
subvention on loans.
This is welcome because
I believe it is important to
address farmers in different
ADI GODREJ
segments. The effort to give
Chairman,
relief to small and medium
Godrej group
entrepreneurs is also wel-
come. This will help the sec-
tor. The fiscal deficit has
also been reasonably contained at 3.4 per cent.
That is good. There is clearly an effort to
be inclusive and address various stakeholders –
farmers, entrepreneurs, individual tax payers,
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SLOWDOWN IN FISCAL CONSOLIDATION
For second year, govt misses target
3.4% fiscal deficit target for FY20,
but officials say revised GDP
figures to help contain it at 3.1%
ARUP ROYCHOUDHURY
T
he government has
revised the fiscal
deficit target for 2018-
19 or FY19 to 3.4 per
cent of gross domestic product
(GDP) from the Budget
Estimate (BE) of 3.3 per cent.
For 2019-20 or FY20, Finance
Minister (FM) Piyush Goyal has
retained the fiscal deficit at 3.4
per cent of GDP, thus delaying
the fiscal consolidation path to
3 per cent of GDP.
The Budget numbers for
FY20 did not take into account
revised GDP figures, Economic
Affairs Secretary Subhash Garg
said. “We have new GDP num-
bers. According to that, GDP
for 2019-20 is about ~225 tril-
lion, as against ~220 trillion
which we have assumed in our
CRESTS AND TROUGHS OF TAX COLLECTION
Centre aims for moderate
GST mop-up in FY20
~1-trn hole in GST in FY19 chips away states’ share in devolved taxes
SHRIMI CHOUDHARY
& ABHISHEK WAGHMARE
Despite a shortfall of ~1 trillion
in the expected central goods
and services tax (CGST) collec-
tion in 2018-19 (FY19), the
Centre is aiming for an ambi-
tious 18 per cent growth in the
overall GST mop-up in 2019-20
(FY20).
The government is eyeing
similar growth in income tax,
corporation tax and customs
revenue in FY20. Overall tax
revenue growth is pegged at
14 per cent.
This is in contrast with how
well the government was able
to meet its Budget Estimates
in the current year. Its Revised
Estimates of gross tax collec-
tion fell 1 per cent short of the
budgeted target, mainly due to
the CGST shortfall.
However, the Centre has
lesser worries than the states
in this bargain. States’ share in
the centre’s tax revenue, which
was budgeted at ~7.88 trillion,
fell 3.4 per cent to ~7.6 trillion in
the Revised Estimates. As a
result, the Centre’s net tax rev-
enue (gross minus states’
share) remained at the near-
budgeted level of ~14.8 trillion.
The direct tax collection in
FY19 (RE) is set to exceed the
budget target by ~50,000 crore
entirely due to enhanced cor-
poration tax revenue. The
Revised Estimates of personal
income tax is kept at the bud-
geted level.
Revenues from excise —
particularly levied on petrol
and diesel — have remained
static in the Revised Estimates
of FY19 as well as in the budg-
et estimate of FY20, despite the
fact that consumption of these
fuels tends to rise every year.
Despite the under-achieve-
ment in the goods and services
tax (GST), Finance Minister
Piyush Goyal was appreciative
of the government’s efforts.
“I think one should appre-
ciate that this government has
consistently gone to the GST
Council and reduced the GST
rates on hundreds of items. We
consumers.
The announcements, for instance, on personal
taxation, especially for the middle and lower mid-
dle-class, are good.
No income tax for those earning up to ~5 lakh per
annum will, to my mind, be a key relief. Plus, the
increase in standard deduction, increasing the
exemption on interest income coming from fixed
deposits in banks and post offices by ~40,000 is
also key.
There are many people who invest in these
instruments including senior citizens. I welcome all
these efforts.
Also, the sum total of all these announcements
will be that people will feel confident to spend more.
This will aid consumption and companies in
FMCG and agri will reap the benefits, at least for the
next four to five months, till the final budget by the
new government is announced.
https://t.me/TheHindu_Zone_official
papers. If you take there num-
bers, our fiscal deficit is 3.1 per
cent for the next year. So the
path remains as it is,” he said.
FY19 is the second consecu-
tive year that the government
has missed its fiscal deficit tar-
get. Goyal attributed the slip-
page to the income-support
package for the farm sector
announced in the interim
Budget for FY20 on Friday.
“We would have maintained
the fiscal deficit… and taken
steps to consolidate (it).
However, considering the need
for income support to farmers
we have provided ~20,000 crore
in FY19 (RE) and ~75,000 crore
in FY20 (BE),” he said.
With a possible eye on the
general elections barely months
away, the FM also announced a
direct transfer of ~6,000 per year
IMPORTS AND CORPORATE PROFITS HELP
REDUCE REVENUE SHORTFALL
Taxrevenue figures
„ FY19 BE „ FY19 RE
„ FY20 BE (Figures in ~ trillion) (LHS)
8.0
(17)
(13)
6.0
(8)
4.0
(0)
2.0
6.21
6.71
7.60
5.29
5.29
6.20
0
Corporation Taxes on
tax income
BE: Budget Estimates, RE: Revised Estimates
are ensuring 14 per cent growth
to states’ revenues from the
GST kitty to the states. It is
almost 50 per cent growth over
three years, which has never
happened before in indirect
tax collection,” he said in a
post-Budget media interaction.
Defending the shortfall,
Goyal said the average monthly
tax collection was ~97,100 crore
per month as compared to
~89,700 crore per month in the
BUDGET THE FINE PRINT
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MUMBAI | 2 FEBRUARY 2019
ILLUSTRATION BY AJAY MOHANTY
A TALE OF NUMBERS
Fiscal deficit(as % of GDP)
4.1 4.0 3.9 3.9 3.5 3.5 3.2 3.5 3.3 3.4 3.4
FY15 FY15 FY16 FY16 FY17 FY17 FY18 FY18 FY19 FY19 FY20
BE A BE A BE A BE A BE RE BE
A: Actuals; BE: Budget Estimates, RE: Revised Estimates Source: Indiabudget.gov.in
to small and marginal farmers. ~10,122 crore. The fiscal deficit
In absolute terms, the fiscal for FY20 has been pegged at
deficit for FY19 was revised to ~7.04 trillion.
~6.34 trillion from ~6.24 trillion,
providing for extra space of
Experts said it was com-
mendable the government
son is the shortfall in the CGST
collection.
Against an expectation of
~6.04 trillion from the CGST,
the Centre could garner only
~5.04 trillion.
Now, the CGST is a compo-
nent of the divisible pool of tax
revenue, 42 per cent of which is
shared with states. Thus, the
burden of the CGST shortfall
will be borne by both the
Centre and states.
This was partially compen-
sated by corporation taxes,
which have been revised
upwards by ~50,000 crore, and
by revenue from basic customs
duties, which have been
revised upwards by ~19,000
crore. Experts think that a dip
in devolution to states could
impact the finances of states,
pushing up their fiscal deficit
and market borrowing for FY19.
“The reduction in states’
share in devolved taxes sug-
Growth: FY19 RE vs BE gests that the deficit in revenue
Growth: FY20 BE vs FY19 RE has been in heads which are in
Figures in % (RHS) the divisible pool of taxes, and
(18) 20 the incremental jump in rev-
(16)
enue has been in heads which
are categorised as cess or sur-
charge,” said Pinaki
10
(12) Chakraborty, professor of eco-
nomics at the National Institute
of Public Finance and Policy.
0 0
Goyal said the GST has
(0) resulted in an increased tax
base, higher collections, and
(-13) -10 ease of trade, adding that with
the introduction of the GST,
inter-state movement of goods
1.13
1.30
1.45
2.60
2.60
2.60
7.44
6.44
7.61
has become faster, more effi-
Customs Union excise GST
-20
cient, and hassle free with no
entry tax, check posts, and
duties truck queues.
Source: Union Budget 2019-20
Pratik Jain, partner and
leader, indirect tax, PwC India,
first year of the GST. So far in said, “It’s interesting to see that
FY19, the total GST collection a growth of around 20 per cent
by the Centre and states stood has been projected on CGST
at over ~9.71 trillion, against the collections in FY20 over the
target of ~12.5 trillion.
The Budget documents
current year, whereas overall
growth in collection in FY19
show that the Centre’s gross tax has been around 8 per cent
revenues (pre-devolution to over FY18. Achieving this
states) are projected to fall 1 per ambitious growth target would
cent short of their target in call for substantial expansion
FY19, and have been revised in tax base, requiring stringent
downward from ~22.7 trillion measures to plug the tax leak-
to ~22.5 trillion. The key rea- ages.”
he government has been able to deliver
more than what was expected through this
Budget. While maintaining its focus on
the key priority sectors and programmes
introduced over the past four years, some new
schemes have also been announced keeping the
interest of economically
weaker sections in mind.
It is heartening to note
that greater allocation has
SANDIP SOMANY
been made for a number of
President,
socially and economically
Ficci
relevant areas, while keep-
ing fiscal consolidation on
track. This will go a long way
in improving investor confidence.
Agrarian crisis has been a major concern for the
economy. The government has attempted to address
this through introduction of annual Direct Income
managed to check the upward
revision of the fiscal deficit tar-
arising due to the implementa-
tion of the GST.
get by only this much despite a
~1-trillion shortfall in the goods
“The change in the fiscal
deficit is not a significant one.
and services tax (GST) collec-
tion. The higher fiscal deficit
Whether it will convert into a
fiscal stimulus triggering con-
will be financed through a even sumption growth needs to be
higher net market borrowings. seen,” said Richa Gupta, senior
Garg at the post-Budget director and senior economist,
press conference said the Deloitte India.
Centre’s net borrowings for the According to the interim
current fiscal year will be an Budget documents for FY20, the
additional ~32,500 crore. government will aim for a fiscal
“The revised fiscal deficit… deficit of 3 per cent of GDP in
is as per the market’s expecta- 2020-21 (FY21). This is a steep
tions. The markets were expect- road map. Earlier, it was sup-
ing a slippage on the larger side, posed to be 3.1 per cent in FY20
given the huge expenditure and then 3 per cent in FY21.
commitments this year. Hence For FY19, the total revenue
the slippage is within reason- (RE) is now pegged at ~18.23 tril-
able limits,” said Soumya Kanti
Ghosh, chief economic advisor,
lion, versus a BE of ~18.18 tril-
lion. Total expenditure has been
State Bank of India. revised to ~24.57 trillion, from a
This is not the first time that Budget target of ~24.42 trillion.
the government has slipped on For FY20, total revenue has
the fiscal path. been budgeted at ~20.8 trillion,
For 2017-18 also, the fiscal with gross borrowing pegged at
deficit was revised to 3.5 per ~7.04 trillion. The total Budget
cent of GDP, compared to a BE size is estimated at ~27.84 tril-
of 3.2 per cent. The reason was
the extraneous circumstances
lion, an increase of 13.3 per cent
from the FY19 revised numbers.
RISING INTEREST OUTGO,
MILD GROWTH IN SUBSIDIES
Subsidies (~ trillion) Interest payments as % of GDP (RHS)
Interest payments (~ trillion) Subsidies as % of GDP (RHS)
8 4
3.2 3.2
6 3
4.42 4.81
5.29
5.88 6.65
4 2.0 1.6 2
2.49 4.02 2.64
2 2.99 3.34 1
2.35 2.24
0 0
FY15 FY16 FY17 FY18 FY19 RE FY20 BE
Source: Union Budgets; RE: Revised Estimates, BE: Budget Estimates
Note: Assumption of 11% growth in nominal GDP in 2019-20
STABLE RISE IN INTEREST OUTGO,
SUBSIDIES RISE FASTER
Salaries* (~ trillion) Salaries and pensions as % of GDP (RHS)
Pensions (~ trillion)
3 2.0 2.5
2.35
1.8 2.18
2 2.0
1.77 1.31 1.93 1.45
1.34 1.67 1.75
1 0.94 1.45 0.96 1.5
1.0
FY15 FY16 FY17 FY18 FY19 RE FY20 BE
Source: Union Budgets; * Includes allowances RE: Revised Estimates, BE: Budget Estimates
Measures Impact
BORROW LESS }
40%
Govt to focus on The debt-to-GDP ratio
debt consolidation, of the central
government to reduce
in addition to fiscal from 46.5% in 2017-18
consolidation to 40% by 2024-25
} 2%
RUNNING
EXPENSE The spending on
The government has salaries and pensions
planned to increase on government
employees to remain
its staff strength high at 2% of GDP
by about 4%
Support (DIS) of ~6,000 for small and marginal farm-
ers. Through this measure the government will able
to cover all the small and marginal farmers as com-
pared to the MSP scheme which benefits just about
30 per cent of such farmers.
The government’s decision to offer 2 per cent
interest subvention and 3 per cent additional sub-
vention for timely payment of loans to farmers
and to animal husbandry and fisheries sectors
will further help in improving their overall financial
condition.
This will increase their buying power and the
overall rural demand. This will have a positive
impact on industries such as consumer goods, agri-
culture machinery, tractors, and two-wheelers.
Measures announced for unorganised labourers
and reduction of tax burden on the middle class by
raising the taxable income limit will also help the
economy in a similar fashion.
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MUMBAI | 2 FEBRUARY 2019 INTERIM BUDGET & GOVERNMENT 3 <

FUEL BILL PINCHES HARD BUDGET THE FINE PRINT

Subsidy burden may rise 12%

Petroleum subsidy may soar by 50%; shortfall likely to be ~17,000 crore this year
JYOTI MUKUL
The government’s subsidy burden
is expected to rise by about 12 per
cent to ~3.34 trillion next year, pri-
marily on account of a massive
increase in petroleum subsidy
that has risen by more than half.
The total revised subsidy esti-
mate for the current financial
year will increase by ~3,713.7 crore
over the Budget subsidy provi-
sion, indicating that some sub-
sidy for this year (2018-19 or FY19)
has been rolled over to the next
year (2019-20 or FY20).
Petroleum subsidy that goes
into providing cheap liquefied
petroleum gas (LPG) and keros-
ene for households is estimated to
rise to ~37,478 crore in FY20 com-
pared to ~24,833.18 crore in the
Revised Estimates (RE) for FY19.
K Ravichandran, senior vice-
Balancing of long- and
short-term priorities
T
he Budget has left us impressed with some of its profound statements.
TRACKING THE TREND part of the subsidy,” he said
As for FY20, the shortfall in
7.5 per cent next year. Finance
Minister Piyush Goyal has provi-
One must applaud the finance minister for containing and maintaining
the fiscal deficit at 3.4 per cent of GDP for FY20. This essentially calms
subsidy could be about ~7,000 sioned ~1.84 trillion for food sub- concerns about potential slippage on the fiscal front in an election year.
(in ~crore) 2017-18 2018-19 BE 2018-19 RE 2019-20 BE crore if the crude price stays at sidy during FY20, an increase of However, what impressed me more is how he finely balanced the long- and
Food 1,00,281.69 1,69,323 1,71,298 1,84,220 $70 a barrel and the dollar-rupee ~12,922 crore. The estimated incr- short-term priorities. The highlight on the spending side is the income support
exchange rate remains at 72. ease in the current year is ~71,016 scheme announced for marginal farmers, which marks an important step
Fertiliser 66,441.27 70,079.85 70,075.2 74,986 “There could be a surplus if the crore over the actual spending of towards income-based support to the
Petroleum 24,460.49 24,932.8 24,833.18 37,478 crude were to be below $67 a bar- ~1 trillion in FY18, translating to a farmers. In addition, tax sops for the
rel at a similar exchange rate,” massive 70 per cent hike in the middle-class are clearly welcome. At
Interest subsidy 22,146.37 23,061.25 22,676.64 25,146.01 said Ravichandran. The govern- food subsidy bill for FY19. the same time, the long-term vision
ment’s push to provide LPG con- This is primarily on account RASHESH SHAH for India was well articulated in the
Other subsidies 11,099.03 8,099.96 10,327.59 12,404.56 Chairman and CEO,
nection to poor households of the National Food Security speech with the aim of a $5-trillion
Total 2,24,428.85 2,95,496.86 2,99,210.61 3,34,234.57 under the Pradhan Mantri Act. Most of the subsidy amount Edelweiss Group economy and focus on physical infra-
RE: Revised Estimates, BE: Budget Estimates Source: Expenditure Budget Ujjwala Yojana reflects in the goes to the Food Corporation of structure, digital opportunities and
increase in LPG subsidy, esti- India (FCI) for procurement. environment. In effect, there was
mated to be ~32,989 crore. Since In FY20, the government is something for all. While one may argue there is an overemphasis on consump-
president and group head, cor- tributed to the shortfall. Options households getting LPG and expected to give the FCI ~1.51 tril- tion despite constraints on the revenue front, the broadening tax base and collec-
porate ratings, Icra, estimates a available to the government to power connection are not enti- lion, compared to ~1.41 trillion tion, higher GST collection, proposed disinvestment plans among others must
shortfall of around ~17,000 crore bridge the shortfall are to defer the tled to subsidised kerosene, sub- this year. The fertiliser subsidy is have given enough confidence to the FM. Two sectors, auto and real estate, are
in fuel subsidy for FY19 versus subsidy payments to oil compa- sidy on it is estimated to halve to expected to rise to ~74,986 crore going to get a shot in the arm from the announcements. While auto would con-
the subsidy provided in the RE. nies to the next fiscal year, with ~4,489 crore in two years from from ~70,075.2 crore this year. solidate its growth further, real estate would see a turnaround, helping recovery
“The depreciation of the rupee appropriation from FY20 budget- ~8,804.15 crore in 2017-18. However, a large part of the sub- across many other sectors. When the next government introduces the Full
against the dollar, and rise in crude ary allocation and ask downstream Both food and fertiliser subsi- sidy payment is expected to be a Budget, some of the benefits from this Budget would have already trickled down.
prices in year to date, have con- and upstream companies to bear a dies are expected to increase by 7- roll-over. For example, growth in rural income would lead to a growth in consumption.
Now, it’s time for other key players like the RBI to chip in.

BUDGET AT A GLANCE Adequate funding

(~crore)

1 Revenue receipts
2017-2018
Actuals
14,35,233
2018-2019
Budget Estimates
17,25,738
2018-2019
Revised Estimates
17,29,682
2019-2020
Budget Estimates
19,77,693
for ongoing projects
S
ustaining economic growth still depends on public expenditure for infra-
2. Tax revenue (net to Centre) 12,42,488 14,80,649 14,84,406 17,05,046 structure projects. Concern for the infrastructure sector has been fiscal he-
3. Non-tax revenue 1,92,745 2,45,089 2,45,276 2,72,647 adroom available to continue financing projects under implementation.
4 Capital receipts 1 7,06,742 7,16,475 7,27,553 8,06,507 Maintaining the momentum of project execution is crucial. Any interim
5. Recoveries of loans 15,633 12,199 13,155 12,508 hiccups for the lean period (March to September, due to elections) might lead to a
slowdown. Apprehensions in the run-up to February 1 justifiably related to:
6. Other receipts 1,00,045 80,000 80,000 90,000
One: Government spending has been high, revenues are down. Meeting the fiscal
7. Borrowings and other liabilities 2 5,91,064 6,24,276 6,34,398 7,03,999 Total receipts are inclusive of states’ share of taxes and duties, which have deficit target of 3.3 per cent of gross
been netted in the table on Budget At Glance. Figures have been rounded.
8. Total receipts (1+4) 21,41,975 24,42,213 24,57,235 27,84,200 Figures in brackets refer to corresponding position in BE 2018-19 domestic product (GDP) is a challenge.
9. Total expenditure (10+13) 21,41,975 24,42,213 24,57,235 27,84,200 The Prime Minister’s Economic
10. On revenue account of which 18,78,835 21,41,772 21,40,612 24,47,907 Advisory Council (PMEAC) and fiscal
VINAYAK CHATTERJEE hawks have warned against deviating
11. Interest payments 5,28,952 5,75,795 5,87,570 6,65,061 Chairman, from the fiscal deficit target.
12. Grants in aid for creation of capital assets 1,91,034 1,95,345 2,00,300 2,00,740 Feedback Infra Two: Indications that the tilt in the
13. On capital account 2,63,140 3,00,441 3,16,623 3,36,293 interim Budget will be towards agri-
14. Revenue deficit (10-1) 4,43,602 4,16,034 4,10,930 4,70,214 culture and social sectors.
(2.6) (2.2) (2.2) (2.2) Three: Funding needs of ongoing projects make a huge demand on budgetary
15. Effective revenue deficit (14-12) 2,52,568 2,20,689 2,10,630 2,69,474 outlays. The government has increased budgetary and extra-budgetary expendi-
(1.5) (1.2) (1.1) (1.3) ture on infrastructure from ~55,000 crore in 2014-15 to almost ~6 trillion in 2018-19.
Taking all this into account, the fear was that outlays for infrastructure
16. Fiscal deficit [9-(1+5+6)] 5,91,064 6,24,276 6,34,398 7,03,999 might be curtailed. So, how has the interim Budget delivered? For the infra-
(3.5) (3.3) (3.4) (3.4) structure sector, it has been a relief. There is a clear focus on implementation.
17 Primary deficit (16-11) 62,112 48,481 46,828 38,938 It provides expected allocations across sectors (like the erstwhile Railway
(0.4) (0.3) (0.2) (0.2) Budget) to continue with ongoing works. The message is clear in the vision
Total expenditure is inclusive of states’ share of taxes and duties, which part of the Budget speech. This is not the time for major policy announce-
Notes: (i) GDP for BE 2019-2020 has been projected at ~210 trillion assuming 11.5% growth over the estimated GDP of ~188 trillion for 2018-19 (RE). (ii) Individual have been netted against receipts
items in this document may not sum up to the totals due to rounding off (iii) Figures in parenthesis are as a percentage of GDP Figures in brackets refer to corresponding position in BE 2018-19 ments. Infra players should just get going with the budgetary support provid-
ed.This is what we wanted to hear. And, that is what we have got.

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4 INTERIM BUDGET & ELECTION
>
MUMBAI | 2 FEBRUARY 2019

CMs’ VIEW THE RURAL VOTE

Income support scheme

leaves farmers unhappy
~6,000 a year being described as a ‘pittance’; land records another issue FARM CREDIT GROWTH STAGNATES BELOW 10%
GOVT DOES NOT HAVE SANJEEB MUKHERJEE bank accounts before March 31, Figures in %
MORAL RIGHTTO PLACE GOVERNMENT INCREASED 2019. Goyal allocated ~20,000

H
aving lost three key Figures in ~cr crore for the scheme in the
SUCH ANNOUNCEMENT. state elections in the BUDGETARY ALLOCATION Revised Estimate (RE) of 2018-
WHY DID THEY NOT Hindi heartland
on account of farm-
19 to be spent this year, and he
has budgeted ~75,000 crore for
ANNOUNCE A SINGLE ers’ anger over falling prices, the scheme for 2019-20.
Finance Minister Piyush Goyal On account of the income
AGENDA FOR FARMERS IN announced that the government support scheme, the total alloca-
THE LAST FOUR YEARS? would transfer ~6,000 a year into tion for the farm sector rose to
the bank accounts of all eligible ~140,763.97 crore in 2019-20
MAMATA BANERJEE, small and marginal farmers to (Budget Estimates), up almost 78
West Bengal meet their investment needs. per cent from the RE of 2018-19.
Titled PM-KISAN (Pradhan According to the NABARD's Source: Reserve Bank of India
Mantri Kisan Samman Nidhi), *Actuals **Revised Estimate ***Budget Estimate All India Financial Inclusion
the support will be provided in Survey (NAFIS) released in
three equal instalments of GVA FOR AGRICULTURE August 2018, in 2015-16, the aver- INTEREST SUBVENTION LAND HOLDINGS GET
~2,000 each in a year.
“There is a need for provid-
AND ALLIED ACTIVITIES Figures in % age annual income of an agri-
cultural household was ~107,172
AND CROP INSURANCE MORE FRAGMENTED
ing structured income support Constant Prices Current prices Inflation impact compared to ~87,228 for families SUPPORT TREBLES OVER TIME
to the poor land-holder farmer (2011-12) engaged only in non-agricultur-
FY15 -0.20 8.68 8.80 Small and 2005- 2010 2015-
families in the country for al activities. This will now go up marginal 06 -11 16
procuring inputs such as seeds, FY16 0.60 6.29 5.64 by ~6,000 approximately. farmers Agriculture year
fertilisers, equipment, labour, FY17 6.30 11.60 5.31 The same data also showed
Number (mn) 108 118 126
etc, and to meet other needs. FY18 3.40 4.50 1.10 that a significant chunk of this
Such support will help them in FY19* 3.80 3.80 0 income of a farmer household, Share among 83 85 86
avoiding indebtedness as well *According to first advanced estimates of National Income Source: CSO that is almost 57 per cent, all farmers (%)
and falling into clutches of comes from non-farm sources, Area owned 65 71 74
money lenders,” Goyal said which the interim Budget fails (million hectare)
FINAL JUMLA OF MODI while presenting the interim to support. Share among 41 45 47
GOVT. IT DISAPPOINTS Budget of 2019-20. The NABARD survey defines all farmers (%)
The scheme is expected to farm households as families hav-
DELHI. OUR SHARE IN benefit around 86.21 per cent of ing over ~5,000 as value of pro-
For crop insurance, FY15 figure is of earlier
schemes, while later ones are of PM Fasal Bima
Note: Farmers with land holding less
than 5 acres, tenant and lessee farmers
Yojana. Interest subsidy on short-term crop
CENTRAL TAXES REMAINS landholding farmers who own
less than two hectares of land as
duce from agricultural operations
in the year preceding the survey.
loans under MoF till FY16; Source: Union Budgets
not included
Source: Agriculture census 2015-16

FROZEN AT ~325 CR, in 2015-16, according to the pro- Apart from income support,
visional data of the 10th agri- the interim Budget also created a
NOTHING EARMARKED cultural census. In 2010-11, this separate department for fisheries, Measures Impact
FOR LOCAL BODIES number was around 84.97 per which had been proposed by the

cent of total operational hold-
ARVIND KEJRIWAL, ings, defined as all land used
Delhi
wholly or partly for agricultural
production and is operated as
one technical unit by one per-
son alone or with others with-
out regard to the title, legal
form, size or location. The
scheme will not cover tenant or
landless farmers or labourers.
Since the support works out
to ~500 a month, farmers are
unhappy. “This is a pittance.
How can the government even
imagine that farmers will ben-
efit with a support of ~16.44 per
day. It also remains to be seen
how this scheme will be imple-
mented on ground as that is the
AT THE END OF THE key,” said Ram Inaniya, a core
TENURE, THEY HAVE
REMEMBEREDFARMERS,
THE POOR & GAUMATA. THE ‘FLOATING’ VOTER
Experts cast doubt on new pension scheme
INCOME SUPPORT
ANNOUNCED FOR
FARMERS IS A PITTANCE
KAMAL NATH,
Madhya Pradesh
THEYPROMISED~15
LAKHIN BANK A/CsBUT ANOTHER SCHEME FOR THE POOR
ENDED UP GIVING ONLY
~6,000/YEAR TO FARMERS
WITH UP TO 2 HECTARE OF
Monthly pension to be received
LAND, THAT TOO AT THE Monthly contribution by an
END OF THEIR TENURE individual at the age of 18
Monthly contribution by an
AMARINDER SINGH, individual at the age of 29
Punjab Sources: Pension Fund Regulatory and Development Authority, Budget speech
member of Aam Kisan Union, a
Madhya Pradesh-based farm-
ers’ association.
“The major problem facing
the farmers today is falling price
of their produce… I don’t know
how an income support of
~6,000 per year will compensate
for those losses. Also, how will
the farmers be identified?
Barring a few states, land
records in most parts of the
country are shabbily main-
tained,” Mahendra Dev, direc-
Existing New
Atal Pension Yojana (~) Pradhan Mantri Shram-Yogi
Maandhan Yojana (~)
5,000 (at the age of 40) 3,000 (at the age of 60)
210 55
529 100
}
United Progressive Alliance.
The interim Budget also FISH AND 23%
announced the creation of a com-
mission for welfare of cows, titled CATTLE This would raise non-
Rashtriya Kamdhenu Aayog. Interest subsidy to cultivation incomes as
That apart, it announced animal husbandry less than a fourth of
tor of Indira Gandhi Institute of restructuring of crop loans in and fishing an average farmer's
Development Research (IGIDR), the event of a natural calamity, activities income is from livestock
pointed out. and an extension on the interest
Government estimates say subvention on timely loan
around 120 million farmers will
be benefitted from the scheme.
To enhance the pro-
gramme’s appeal ahead of the
repayment to the entire period
of resettlement of such loans.
The interest subvention on
short-term crop loans of 2 per
AFFIRMATIVE
ACTION
Specific allocation to
} 25%
One fourth of the
spending on direct
general elections, the scheme cent, on which an additional 3
has been started with retro- per cent was given on timely SCs/STs under the income support
spective effect from December repayment, will now be extend- new farm income will go to vulnerable
1, 2018, and the first instalment ed to farmers pursuing animal support scheme farmers
of ~2,000 per farmer is expect- husbandry who take loans
ed to be transferred in their through Kisan Credit Cards. COMPILED BY ABHISHEK WAGHMARE
SUBHAYAN CHAKRABORTY real value of the monthly assured figure security to the country’s most vulnera-
of ~3,000 comes down to around ~500, by ble groups of the elderly, widows and
The government has announced yet the time a person entering the labour disabled,” Delhi-based rights group
another general pension scheme for the force retires decades from now,” Delhi- Pension Parishad said.
unorganised sector, but experts ques- based researcher Kinjal Sampat said. The elderly living below the poverty
tion low returns and high contributions. The new scheme will run parallel to line will continue to receive a paltry sum
Named the Pradhan Mantri Shram- the existing Atal Pension Yojana (APY). of roughly ~7 per day as income securi-
Yogi Maandhan Yojana, the scheme tar- APY was launched by the Narendra ty and widows and disabled ~10 per day,
gets marginal workers with monthly Modi government in June 2015, along it added. Since the Central government
income up to ~15,000. The scheme prom- the lines of the Swavalamban Scheme, only covers about 35.5 million benefici-
ises an assured monthly pension of launched by the United Progressive aries, more than 70 per cent of the vul-
~3,000 from the age of 60 years, in return Alliance. The latter scheme was phased nerable population will not be able to
for a nominal monthly contribution till out and subscribers transferred to APY. avail even these bare benefits.
then. Similar to existing voluntary Data from the Pension Fund However, others said the new
schemes, the government will deposit Regulatory and Development Authority scheme is more inclusive. “The new
an equal matching share in the pension (PFRDA) showed that almost eight years scheme seems to be an extension of the
account of the worker every month. later, both schemes have been able to existing APY. While APY was meant for
The government expects at least 100 cover a cumulative 10.9 million Indians, workers in the unorganised sector, the
million labourers and workers to sign way below their targets. As of August new scheme includes marginal wage
up for the new scheme within the next 2018, when details were last released, earners from organised sector as well.
five years. However, it may have diffi- 40 per cent of subscribers were women. Another difference is the upper age lim-
culty in calling it the “largest pension Rights groups say contributory pen- it of 60 years in the new scheme as
scheme in the world”, as mentioned in sion schemes are set to fail since those against 40 years in APY,” Ashok Varma,
the interim Budget, experts said. They
pointed to the dismal performance of
targeted find the monthly payments too
high. Even least developed economies
leader-social sector, PwC India, said.
According to official statistics, half of
previous contributory pension schemes like Bolivia, Lesotho and Botswana have India’s GDP comes from as many as 420
in attracting subscribers. no-strings-attached pension for the million workers in the unorganised sec-
Around ~500 crore has been provi- poor, they say. tor. Including street vendors, rickshaw
sionally allocated for the new scheme, “The interim Budget announcement pullers, construction workers, rag pick-
with implementation set to begin from is ominously silent about of the most ers, agricultural workers, among others,
the current year. important social protection schemes — this massive workforce remains outside
“If calculated, taking into account the National Social Assistance the purview of the formal banking and
core inflation over the past 10 years, the Programme, which provides income insurance industries.

BUDGET THE FINE PRINT

A directional, growth-oriented Budget ‘Kisan Samman is apaman’

I T
t is heartening to see the continued focus and No key measure being announced to increase he Prime Minister Kisan Samman Nidhi, far What is the government doing about the menace of
decisive thought around strengthening India’s the government’s revenue is a bit of a dampener from being a samman, is an apaman for farm- stray animals all over the country? ~6,000 per family
position as a digital economy through invest- as concerns around the fiscal deficit need to be ers. Frankly, it would have been all right if the per year amounts to an income support of ~500 per
ments around new age technologies. addressed with a sense of urgency. government had made no declaration at all. family a month. This is less than old age pension pre-
Technology would be one of the most important The Narendra Modi government’s continued After all, this was an interim Budget. I would have vailing in at least more than half the states. This
enablers for the inclusive, equitable and transparent focus on infrastructure development, including been happy if the government had simply supplied amounts to ~3.30 per day for a five-member family,
society that the government in the energy sector and the blue economy are answers to some of the fol- not enough even for a cup of tea.
endeavours to build. big positives; sectors like education and health lowing questions: This is nowhere compared to Telangana’s package
Cyber security will be one of care could do with further stimuli. How much has the farm- of ~10,000 per acre a year. This scheme bears no rela-
the key aspects in securing India needs to have sustainable growth, fuelled YOGENDRA YADAV ers’ income increased in the tionship to the cost of cultivation or the household
DEEPANKAR SANWALKA the interests of stakeholders by an entrepreneurial mindset in its heartland. first three years of the sup- cost of farmers. It is also not clear how it can be imple-
National President,
Partner and Leader-Advisory, and citizens in the While it is a positive that MSMEs have been kept in posedly six-year mission to mented because there is no comprehensive database
Swaraj India
PwC India digital economy. mind, impetus for the start-up community is also double the farmers income? on farmers. Tellingly, the government wants to imple-
Impetus for the agricul- the need of the hour. Why has the government not ment the scheme with retrospective effect. The idea
ture sector is welcome, Overall, it is a directional Budget, with the declared the data on farmer that somehow an instalment of ~2,000 per family
and provisions to provide income security to intent to strengthen India's future. As an interim suicides? How much procurement was done on the would make them forget the loot of farmers’ prices,
marginalised farmers and enhance disposable Budget, it is balanced and growth-oriented, with minimum support price under the much-celebrated the utter neglect during drought and the untold mis-
income for the middle-class augurs well for measures to meet short-term objectives and also PM Aasha scheme? Why has the coverage under PM ery of notebandi, shows the sheer cynicism with
India’s consumption story. with a long-term vision. Fasal Bima Yojana shrunk instead of increasing? which this government views farmers and their votes.

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MUMBAI | 2 FEBRUARY 2019 INTERIM BUDGET & ELECTION 5 <

SIGNALS FOR THE HUSTINGS

Goyal budgets for

political arithmetic
Departs from convention by presenting, in effect, a full Budget

The interim Budget attempted to tick all the boxes that could help the Narendra Modi government return to power

ARCHIS MOHAN the age of 60 years. There were also tence and arrogance has destroyed the
announcements to spur revival of the real lives of our farmers. Giving them ~17 a day

W
ith the Lok Sabha polls less
than 70 days away, the chal-
lenge for the Narendra Modi
government was to neu-
tralise the Opposition’s criticism of it hav-
ing been a ‘suit boot ki sarkar’ that failed
to prevent farm distress and caused
immense job losses with its demonetisa-
tion and “hurried implementation” of the
goods and services tax (GST).
The Modi government departed from
parliamentary conventions by present-
ing, in effect, a full Budget in an election
year. The interim Budget announced an
income support scheme for farmers with
retrospective effect. Finance Minister
Piyush Goyal said the Centre would give
~6,000 per annum in three instalments to
an estimated 120 million farmers.
Goyal promised a tax rebate for a sec-
tion of the middle class, which could help
his party retain the support it received from
them in 2014. He also announced a con-
tributory pension scheme for 100 million
unorganised workers that promises a pen-
sion of ~3,000 per month, if they pay ~100
per month with a matching contribution
from the government on their attaining
estate sector, and sops for the MSME sector,
which had borne the brunt of demonetisa-
tion and the advanced GST roll-out.
If the objective was to generate eupho-
ria over the interim Budget announce-
ments, and galvanise party workers
ahead of a tough election campaign,
Goyal might believe he has succeeded.
The government hopes to deposit the
first instalment of ~2,000 in bank
accounts by the time farmers queue up at
polling booths. Clearly, the Modi gov-
ernment betrayed that losses in three
Hindi heartland states in the December
Assembly polls haunted it.
The Opposition, after initially forced
on the back foot, started making sense of
the interim Budget, and it looked as if the
FM might rue his decision not to present a
vote-on-account. Several political leaders,
including Congress’ P Chidambaram,
Swaraj Abhiyan’s Yogendra Yadav, and
others, pointed out that the income sup-
port scheme did not cover sharecroppers,
there was little for landless farm labourers
or urban poor. They also said it was noth-
ing but the BJP’s “cash for farmers’ votes”.
“Dear NoMo, five years of your incompe-
is an insult to everything they stand and
work for,” Congress President Rahul
Gandhi tweeted. Congress leaders said
their party’s proposed minimum income
guarantee for all poor was a more com-
prehensive scheme.
Another criticism was that Goyal’s
interim Budget ignored the Modi govern-
ment’s poor record on creating jobs. The
minister suggested better growth deliv-
ered by the government and investments
in infrastructure “obviously” led to more
jobs, but did not identify the number of
jobs generated. The interim Budget
announced a ~750 crore increase for the
Rashtriya Gokul Mission and setting up
of Rashtriya Kamdhenu Aayog to enhance
production and productivity of cows. The
move would probably prove too late to
assuage farmers facing stray cow and bull
menace across northern Indian states.
The interim Budget has attempted to
tick all the boxes that could help the Modi
government return to power. It is now up to
the larger Sangh Parivar to deliver on its
threat to start building a temple around
the Ram Janmabhoomi disputed site in
Ayodhya in the forthcoming weeks.

INCLUDING THE MARGINALISED

Govt targets social infra, rural poor
SHREYA JAI
CENTRE-SPONSORED SCHEMES
In an attempt to appease all
sections of the society months
before the general elections,
the interim Budget of the NDA
government aimed at boost-
ing social infrastructure and
sops for marginalised sections.
“With this comprehensive
10-dimensional vision, we will
create an India where poverty,
malnutrition, littering and
illiteracy would be a matter of
the past. India would be a
modern, technology-driven,
high growth, equitable and
transparent society,” Piyush
Goyal said while presenting a
10-year vision under the
Union Budget 2019-20 (I).
Although the expenditure
on centrally sponsored
schemes is marginally higher
than last year by 7.5 per cent,
the interim Budget introduced
several new programmes and
enhanced allocations for many.
For the government’s
ambitious flagship scheme
for universal health insur-
ance, Ayushman Bharat, the
Core of the core schemes Core schemes
Total expenditure
2018-19 2,20,487.67
(RE)
84,361.7
2019-20 2,46,496.36
(BE)
81,183.07
government has provided for
~6,400 crore (BE), increase of
166 per cent over past year.
An additional allocation of
~250 crore is provided
under the National Urban
Health Mission for building
wellness centres against
~199.96 crore in the revised
estimates for 2018-19.
The Rashtriya Swasthya
Bima Yojana, which provides
health insurance to families
below the poverty line, saw an
enormous increase of 142 per
cent in the budgetary alloca-
tion to ~6,556 crore (BE).
Road connectivity through
(~ crore)
3,04,849.37
3,27,679.43
Source: Expenditure Budget
the Pradhan Mantri Gram
Sadak Yojana received an
enhanced allocation of ~19,000
crore (BE), up 27 per cent over
last year. Similarly, the National
Rural Drinking Water Mission
saw a budgetary allocation
boost of 50 per cent over last
year to ~8,201 crore (BE).
In line with the Centre’s aim
to provide urban facilities in vil-
lages to “keep the soul of rural
life intact”, the Rashtriya Gram
Swaraj Abhiyan, aimed at
strengthening panchayats, has
received support of ~831 crore.
The Shyama Prasad
Mukherji Rurban Mission,
which provides infrastructure,
skill and entrepreneurial devel-
opment in the villages, received
enhanced allocation of ~800
crore in the interim Budget, up
by 77 per cent last year. The
scheme was launched in 2016.
Several key schemes, how-
ever, saw allocation cuts. The
BJP’s ambitious Swachh
Bharat Mission had its budg-
etary allocation decreased
to ~12,750 crore (BE) from
~16,978 crore (RE) last year.
The rural electrification
programme, in which the cur-
rent government has
announced electrifying all
remaining 18,000 unelectri-
fied villages and 100 per cent
household electrification by
March 2019, the allocation has
been reduced by 38 per cent
to ~4,066 crore (BE).
Another scheme that saw
a reduction in budgetary allo-
cation was the programme for
LPG connection to poor
households. The allocation in
the interim Budget stood
at ~2,724 crore (BE) from
~3,200 crore (RE) last fiscal.

BUDGET THE FINE PRINT

Accelerating inclusive growth

T
he interim Budget builds upon the groundwork
for strong and inclusive growth, which has
been initiated with several structural reforms
such as Insolvency and Bankruptcy Code, Real
Estate (Regulation and Development) Act, direct bene-
fit transfer and the goods and services tax (GST). The
macroeconomic parameters
have also significantly
improved in the last few years
RAJIV MEMANI and at 7.2 per cent GDP
growth, India continues to be
Chairman, regional
the fastest growing economy.
managing partner, EY India
The government has
touched many lives through
multiple social sector
schemes in previous years. This year, too, significant
measures have been announced for the farm sector,
unorganised sector and the middle class — groups
who have been most impacted in the past one to two
years and needed policy impetus. The Pradhan
Mantri Shram-Yogi Maandhan — to provide an
assured monthly pension of ~3,000 from the age of 60
years to 100 million workers in the unorganised sec-
tor — is truly commendable. Combined with
Ayushman Bharat, the proposal can uplift the lives of
many deprived sections, though details of the scheme
will shed more light on likely impact.
The tax-GDP ratio has improved from 9.9 in 2014-15
to 11.9 in 2018-19, arising from an increase in direct tax col-
lections through determined efforts. Revised Estimates
for direct tax collections (~12 trillion) show an improve-
ment of ~50,000 crore against budgeted numbers. GST
collections have been lower than expected but should
improve with greater compliance.
The rebate for individual taxpayers with taxable
income up to ~5 lakh will reduce the burden on middle
income taxpayers. Enhancement of standard deduc-
tion by ~10,000 pre annum would provide additional
relief. However, unlike marginal relief provided in the
case of surcharge, there is no relief for this rebate to
avoid the additional tax liability becoming higher than
the additional income.
A positive proposal is the increased TDS threshold
for interest earned on bank/post office deposits from
~10,000 to ~40,000 and for a deduction of tax on rent
from ~1.8 lakh to ~2.4 lakh. Tax exemption to notional
rent on a second self-occupied house and one-time
benefit of capital gains rollover to investment in two res-
idential houses for a taxpayer having capital gains up to
~2 crore are welcome. The realty sector, too, would cheer
the extension of exemption on notional rent on unsold
inventories from one to two years, although they were
demanding complete exemption.
The biggest impact of leveraging technology for
reforms implementation is in taxation. If the government
is able to bring anonymous and expeditious e-assess-
ments and minimise interface with taxpayers, it could be
the next big game-changer after GST.

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6 INTERIM BUDGET & ELECTION
>
MUMBAI | 2 FEBRUARY 2019

NUTS & BOLTS REBATE BENEFIT, WITH AN EYE ON VOTES

THE GOVERNMENT HAS
ADDRESSED ISSUES OF
AGRARIAN DISTRESS
Goyal puts more cash in
AND EMPLOYMENT
BOTH OF WHICH WILL
REMAIN KEY PRIORITIES
FOR ANY POST-ELECTION
pockets of middle class
DISPENSATION
Besides the increase in rebate from ~2,500 to ~12,500, a
rise in standard deduction will also provide marginal benefit
BABA N KALYANI,
SANJAY KUMAR SINGH the 2018 Budget. The govern-
CMD, Bharat Forge ment did away with travel and
INDIVIDUAL INCOMES FROM
F
inance Minister medical reimbursement and
Piyush Goel has cho- instead introduced a standard
'OTHER SOURCES' RISE THE FASTEST
$ 10 trillion
sen to put extra money deduction of ~40,000.
in the pockets of the “Both people who have For AY2017-18 (~ crore)
middle class in an election salaried income and those Income from Total loss setoff
year. In addition, he has tried who have pension income are other sources 26,436
15,94,487 Salary
is the size of the to make life more convenient
for deposit holders.
entitled to standard deduc-
tion,” says Gupta.
16,495
Short-term 3,29,387
income Gross total
income*
economy envisioned With this change, those in capital gains Total 2,816,845
Tax benefit extended
in eight years Goyal has made changes to
the 30 per cent tax bracket will
get a benefit of ~3,000, those
52,229
Long-term
28,43,281 Return income
2,455,967
Section 87A of the Income Tax in the 20 per cent tax bracket capital gains 31,958
8,18,725 Aggregate
Act, which deals with rebates. will get an additional benefit Business House
tax liability

~ 12 trillion
The interim Budget proposes of ~2000, and so on. income property
273,405
to increase the limit of rebate income
from a taxable income of ~3.5 TDS limit on interest * Note: Adjusted for loss set-off
AY: assessment year, pertains to incomes in previous financial year
lakh to ~5 lakh. This means that income hiked
direct tax collections, people earning up to ~6.5 lakh
(tax benefits of ~1.5 lakh under
The tax deductible at source
(TDS) threshold on interest
up from ~6.38 trillion Section 80C) or more, depend- income from bank, co-opera- DELHI, MUMBAI ACCOUNT FOR HALF OF UNSOLD
in 2013-14 ing on the exemptions such as
medical insurance and others,
tive society and post office
deposits (other than interest
REALTY INVENTORY AMONG 7 MAJOR CITIES
will benefit from this move. on securities) has been raised. (in numbers) National Capital
186,710 Region
In short, this is how the tax This will not mean any tax

~ 1 trillion
benefit will work. The basic benefit, but it will result in
Kolkata
exemption limit of ~2.5 lakh
applies to everyone. Earlier, if
LOWER TAX INCIDENCE FOR SOME greater convenience.
Earlier, banks would start
49,470
Total Mumbai
Chennai 30,840 673,210 Metropolitan
your taxable income was up to Tax saving for those having income up to ~5 lakh from rebate (~) deducting TDS if your interest 219,490
Region
Goods and services ~3.5 lakh, you got a tax rebate of
~2,500. Now, this threshold has Income Tax Surcharge+cess* Rebate Total tax liability
income in a year exceeded
~10,000. Now, they will do so
Hyderabad
25,960
87,400
tax collections in been hiked further to ~5 lakh. 2,50,000 0 0 0 0 only if it exceeds ~40,000. Pune 73,340
The tax liability for some- “This change will benefit Bengaluru
January 2019 one earning ~5 lakh is ~12,500:
3,00,000 2,500 0 -2,500 0
people who do not have any Source: ANAROCK Research
~5 lakh less the basic exemp- 3,50,000 5,000 0 -5,000 0 taxable income but have inter-

Fillip for artificial intelligence

tion of ~2.5 lakh means a tax-
able income of ~2.5 lakh. When
5,00,000 12,500 0 -12,500 0 est income in excess of
~10,000, say, a housewife,” says
Measures Impact
and related technologies 7,00,000 52,500 2,100 0 54,600
this amount is taxed at 5 per Deepesh Raghaw, founder,
PENSION FOR
To provide the benefits of artificial intelligence
and related technologies to the people, a
national programme on AI is envisaged. It will be
cent, the tax liability is ~12,500.
“Now, if your total taxable
income is ~5 lakh or less, you
10,00,000
20,00,000
50,00,000
1,12,500
4,12,500
13,12,500
4,500
16,500
52,500
0
0
0
1,17,000
4,29,000
13,65,000
PersonalFinancePlan.in, a
Securities and Exchange Board
of India-registered investment
UNORGANISED } 93%
If all unorganised
catalysed by establishing the National Centre on do not have to pay any tax,” advisor. Pradhan Mantri Shram workers subscribe, 93%
Artificial Intelligence as a hub along with centres says Archit Gupta, founder and 70,00,000 19,12,500 2,75,400 0 21,87,900 Earlier, people had to fill Yogi Maandhan to pay of low-paid working
of excellence. Nine priority areas have been CEO, ClearTax. 1,00,00,000 28,12,500 4,05,000 0 32,17,500 form 15H (for senior citizens) unorganised workers Indians would get
identified. A National Artificial Intelligence portal The point to note here is and Form 15G (for others) ~3k/month pension pension on retirement
will also be developed. that since this is a rebate up to 1,50,00,000 43,12,500 8,45,250 0 51,57,750 declaring that they did not
a taxable income of ~ 5 lakh, if * Cess (4%) ; Standard deduction for salary income not considered Source: PwC India have any taxable income and,
More money for education
MISSION
}
anyone earns even little more hence, the bank should not
and child development
The allocation for the National Education Mission
(say, even ~100 more) than this
amount, he would have to pay
deduct TDS.
When TDS has been MIDDLE-CLASS
30 million
is being increased from ~32,334 crore in RE 2018- all the taxes, according to the on the 5 per cent tax slab, as Standard deduction deducted, the depositor has to About 30 million
19 to ~38,572 crore in 2019-20. The allocation for existing slabs. “Only individ- the benefit has been proposed limit raised file income tax return, and it To provide rebate of middle class income
the Integrated Child Development Scheme (ICDS) ual taxpayers with taxable by raising Section 87A rebate The FM has also raised the takes a few months for the tax up to ~12.5k to tax tax payers can save
is being increased from ~23,357 crore in RE 2018- income not exceeding ~5 lakh limit to ~12,500,” said Kuldip standard deduction from department to return the mon- payers with income up to ~1,000 per
19 to ~27,584 crore in 2019-20. no longer need to pay any tax. Kumar, partner and leader per- ~40,000 to ~50,000. Standard ey. This change will mean few- less than ~5 lakh /year month
Others will still need to pay tax sonal tax, PwC India. deduction was introduced in er hassles for a lot of people.
Focus on nomadic as well as
semi-nomadic communities
A committee will be set up under the NITI Aayog
to complete the task of identifying denotified
nomadic and semi-nomadic communities not
BUILDING SUPPORT
Significant benefits for property sellers
yet formally classified. A Welfare Development
Board will be set up under the ministry of social
justice and empowerment for implementing
welfare and development programmes for
these communities. TINESH BHASIN Besides LTCG tax relief, permitting

A boost for freight and inland The rationalisation of property-related

waterways in Northeast
Container cargo movement will be introduced in
the Northeast, by improving the navigation
capacity of the Brahmaputra river. For the first
time, container freight movement has started on
inland waterways from Kolkata to Varanasi.
Big move to enhance
productivity of cows
In a major push to animal husbandry, a
“Rashtriya Kamdhenu Aayog” is to be set up, to
scale up sustainable genetic upgradation of
cows and enhance the productivity of cows. The
Aayog will also look after effective
implementation of laws and welfare schemes
for cows. It has also increased the allocation for
the Rashtriya Gokul Mission to ~750 crore in the
current year itself.
Pension plan for unorganised
sector workers
The government will launch a pension scheme —
Pradhan Mantri Shram-Yogi Maandhan — for
unorganised sector workers with a monthly
income of up to ~15,000. This will provide them
an assured monthly pension of ~3,000 from the
age of 60. A worker joining the scheme at the
age of 29 will have to contribute ~100 per month
till the age of 60. A worker joining the scheme at
18 years needs to contribute ~55 per month.
taxes is the most significant sop that
Finance Minister Piyush Goyal offered in
his Interim Budget. Now, an individual
can declare two houses as self-occupied
instead of just one earlier. Also, on selling
a house property, a taxpayer can invest
the proceeds in two houses and still get the
long-term capital gains (LTCG) tax bene-
fit. Earlier, the benefit was available for
only one house.
The caveats when claiming the LTCG
benefit is that the total capital gains have
to be up to ~2 crore. Also, the benefit can be
claimed only once in a lifetime. The
changes in the tax laws benefit families
who want to sell one big property and buy
two separate houses to settle children or
during the partition of the family assets. It
also benefits individuals who live in met-
ros such as Mumbai and Delhi where prop-
erty prices are much higher compared to
the rest of the country. “Many bungalow
owners also sell their house to a developer
for construction of a building. In return,
the developer gives them two apartments.
Such property owners will also get the tax
benefit,” says Suresh Surana, founder, RSM
Astute Consulting Group.
The other conditions to get the tax
benefit remain the same. The house has to
be held for long-term – over two years.
The seller needs to purchase a residential
house either one year before the date of
sale/transfer or two years after the date of
sale/transfer. In case the seller is con-
structing a house, the seller has an
extended time, that is, he will have to con-
struct the residential house within three
years from the date of sale/transfer.
There is, however, no clarity on
whether an individual can sell multiple
MORE SAVINGS ON SECOND HOME
Monthly rent
Annual rent
Less: Standard deduction @30%
Net annual value
Less: Deduction under Section 24B*
for housing loan interest
Net income from house property
COMPUTATION OF TAX
Income-tax @5%
Health and education cess @4%
Total tax (not payable from tax year 2019-20)
*of the Income-tax Act, 1961
Flat tax rates have been considered here; No impact of tax slabs and Section 87A considered; No interest on
housing loan considered
houses and invest the gains in one prop-
erty to get the tax benefit under Section
54F. While a few tax officers objected to
this, many Income Tax Appellate
Tribunals (ITAT) have allowed the tax-
payer to avail the benefit in such cases as
Section 54 is a beneficial provision. In
most cases, ITAT allows the taxpayer to
take the benefit in case of grey areas if he
has fulfilled all other conditions man-
dated by the law. “The view of ITATs is
All figures in ~ taxpayers to declare two houses as self-
occupied brings a huge relief. In many
15,000 20,000 25,000 35,000 families, a couple stays in one house and
180,000 240,000 300,000 420,000 buys another for parents or children.
Until now, such taxpayers could choose
54,000 72,000 90,000 126,000 to declare any one house as self-occu-
1,26,000 1,68,000 2,10,000 2,94,000 pied. On the other one, they had to pay
tax on the rent the house could have
- - - -
fetched if it was let out – which is termed
as notional rent. Now, they can declare
1,26,000 1,68,000 2,10,000 2,94,000 both the houses as self-occupied and
don’t need to pay any tax.
The tax on notional rent has also been
6,300 8,400 10,500 14,700 one of the frequently disputed provisions.
252 336 420 588 In some specific cases, the income-tax
6,552 8,736 10,920 15,288 laws gave relief to the property owner
from paying tax if the second house was
not let out. One such situation was when
Source: PwC
the owner couldn’t rent out the house.
In such cases, the owner had to produce
sufficient documentary evidence prov-
that the assessing officer cannot put ing that he tried to let out the house, but
additional conditions,” says Naveen he failed to do so despite all possible
Wadhwa, a chartered accountant with attempts. The tax officer often disputed
Taxmann.com. the claim of the house owners and asked
Wadhwa also points out that the bene- them to pay the relevant tax, which led to
fit will not be available under Section 54F. the taxpayer going into appeal against
Under this section, a taxpayer can sell any the order. The interim Budget announce-
long-term asset and invest in a house to ment could reduce such litigation. In
save long-term capital gains tax. Long- addition, the tax deductible at source
term capital assets include a plot of land, threshold for rent has been increased
mutual funds, stocks, gold, and so on. from ~1.8 lakh to ~2.4 lakh.

BUDGET THE FINE PRINT

‘After me, the deluge’ Budget Jumla: Modi sarkar’s unique intellectual property
T
he interim Budget was the Narendra Modi there’s a catch with the middle class tax rebate.

T
he difference between an interim Budget and
a full Budget is that, first, the latter is preceded
by an Economic Survey. Second, it contains a
Finance Bill and seeks Parliament’s approval
for expenditure for the whole year. Third, it intro-
duces new items of expenditure. Now, wilfully, this
government has violated
Constitutional conventions,
and presented a full Budget.
As far as the Budget is
YASHWANT SINHA concerned, I am not sure
about the figures. If you look
Former finance minister
at the ‘Budget at a glance’, on
the first page they are saying
that they are assuming a GDP
growth of 11.5 per cent. I am not sure what is the
inflation and what is the growth content, but they have
expanded the denominator so that the fiscal deficit is
reduced. Then, look at the GST figures. The actual in
2017-18 was ~4,42,000 crore, and the Budget Estimate sarkar’s last chance to show that it could Only a new government can implement it.
(BE) was ~7,44,000 crore, and the Revised Estimate is actually do the right thing for India. Feels like the promise for depositing ~15 lakh in
~6,44,000, a decline of ~1 trillion. Yet the BE for next year Instead, it gave us another bravado display Jan-Dhan bank accounts all over again.
is ~7,61,000 crore. So, you can give any figure and show of jumlas, its unique intellectual property. The record allocation to the Railways hides the
the fiscal deficit is being contained at 3.4 per cent. The interim Budget announced ~60,000 crore fact that the government spent ~111 for every ~100 it
The BE for this year for expenditure on major items, for MGNREGA. However, over the last few years, it earned in this sector, a tribute to its inefficiency.
agriculture and allied activities, is approximately has never released the The claim that savings in various programmes
~64,000. It has gone up to ~86,000 crore, and the BE money to states on time, has given the government money to support its
for next year is ~64,000. Now, ~75,000 crore under the thus driving away the announcements shows that the government has
PM KISAN scheme is an additional burden, so there is poorest who desperately not been able to deliver on its promises from its
a gap of ~11,000 crore here. The BE of the current RAJEEV GOWDA needed this lifeline. previous, last legitimate Budget.
year represents an increase of ~11,000 crore from Congress Rajya Sabha member, Where farmers face loan The leaked NSSO jobs report showed that
the actuals of the previous year, which means other Chairman, Cong research dept burdens averaging ~45,000, unemployment under Modi was at a 45-year
items of expenditure, for which they have not the PM Kisan Samman high. CMIE reported 10.1 million jobs lost in
provided enough, will suffer. Nidhi Yojana provides a 2018 alone. The Modi era has been
These are sleights of hand by which you claim that paltry ~6,000 per year. Landless labour and tenant devastatingly destructive for India’s
Budget deficit is going to be reduced. It is nothing but farmers experiencing acute rural distress are young men and women.
an example of “After me the deluge”. ignored once again. There is nothing in the interim Budget which
(As told to Archis Mohan) The urban poor have also been ignored. And seeks to address this challenge.

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.
MUMBAI | 2 FEBRUARY 2019 INTERIM BUDGET & ECONOMY 7 <

REVVING UP

Non-tax revenue growth pegged at 11.2% for FY20 ~39,245 crore through this according to the data from the
Centre expects ~28K crore interim dividend from RBI; FACTS IN FIGURES route in FY19 (RE), lower than Department of Investment and
disinvestment target raised to ~90K crore for FY20 the target of ~48,661 crore.
The data from the
Public Asset Management. This
has been raised largely through
Controller General of Bharat-22 exchange traded
ISHAN BAKSHI tion services, the government FY20, similar to the level in Accounts shows that the fund (ETF) and Central Public
expects to marginally better its FY19. However, this is lower non-tax revenue collected till Sector Enterprises (CPSE) ETF

T
he Centre’s non- non-tax revenue target in FY19, than 1.82 per cent of GDP in November 2018 was ~1.38 tril- and a few buybacks.
tax revenues are as it expects an interim 2015-16. lion, or 56.6 per cent, of the In FY18, the total disinvest-
budgeted to increase dividend of ~28,000 crore Under the broad rubric of Budget target of ~2.45 trillion. ment proceeds had exceeded
by 11.2 per cent to from the Reserve Bank of non-tax revenues, proceeds On the other hand, non- the budgeted target of ~72,500
~2.72 trillion in (FY20) 2019-20 India (RBI). from dividend/surplus of debt capital receipts are crore to touch ~1 trillion.
(Budget Estimates, or BE), up The Centre also upped its the RBI, nationalised banks, expected to touch 0.49 per The interim Budget notes
from ~2.45 trillion in (FY19) disinvestment target to and financial institutions RE: Revised Estimates; BE: Budget Estimates Source: Union Budgets
cent of GDP in FY20, similar that proceeds from the
2018-19 (Revised Estimates, or ~90,000 crore in FY20 (BE), up are expected to rise to to that in FY19. This is lower disinvestment of government
RE), according to the interim from ~80,000 crore in FY19, ~82,911 crore in FY20, up from than 0.68 per cent in 2017-18 equity in selected CPSEs is
Budget. The non-tax revenues which the Centre expects to ~74,140 crore in FY19 (RE). from the RBI during FY19, and other investments declined relate to licence fees from tele- (FY18). Under this, the Centre channellised into a National
are estimated to have grown by meet even as concerns over In FY19, the Centre Department of Economic from ~52,494 crore in FY19 (BE) com operators and receipts hopes to mop up ~90,000 Investment Fund. This will be
27.3 per cent in FY19 (RE). a shortfall linger. had expected to collect Affairs Secretary Subhash to ~45,124 crore in the RE. The on account of spectrum usage crore through disinvestment. used to finance expenditure
Despite a shortfall in At the aggregate level, the ~54,817 crore, implying an Chandra Garg said in a government has projected this charges — are pegged at So far this year, against a on infrastructure projects,
dividend proceeds from Centre’s non-tax revenues are increase of ~19,323 crore from post-Budget interaction. to rise to ~53,159 crore in FY20. ~41,519 crore in FY20. Budget target of ~80,000 crore, the in education and health, and
public sector companies and pegged at 1.3 per cent of gross the BE. The government has In comparison, dividends Revenues from other com- documents show that the Centre has mopped up investment in railways towards
proceeds from communica- domestic product (GDP) in already received ~40,000 crore from public sector enterprises munication services — that Centre now expects to mop up ~35,532 crore, or 44 per cent, capital expenditure in FY20.

MIXED BAG
Rlys capex at life high; budgetary support cut for NHAI
SHINE JACOB, MEGHA MANCHANDA
& ARINDAM MAJUMDER WIN SOME, LOSE SOME resources, and ~55,498.14 crore
of extra budgetary resources.
ALLOCATIONS BE outlay in ~crore OPERATING In RE FY19, the capex
The interim Budget for 2019-20 was ~1.38 trillion, comprising
(FY20) was a mixed bag for the | Gross budgetary support | Internal resource RATIO (%)
~53,060 crore from budgetary
transportation sector. While the | Extra budgetary resource (IRFC/institutional financing) support, ~6,500 crore from internal
railways lined up its highest-ever resources, and ~79,297.52 crore from
capital expenditure (capex) of 2017-18 ~1.01 trillion extra budgetary resources.
~1.58 trillion and an all-time high 43,417.55 3,069.78 55,498.14 Meanwhile, the provision for
budgetary support of ~64,587 crore, the NHAI includes investment
the road and aviation sectors did 2018-19 (RE) 79,297.52 ~1.38 trillion for Bharatmala Pariyojana to be
not have much to smile about. executed by the authority and the
CORPORATE SALES GROWTH IMPROVES IN FY19 The National Highways Authority 53,060.00 6,500.00 expenditure is met from the Central
„ 2016-17 „ 2017-18 „ 2018-19 (April-September) % year-on-year of India (NHAI) must gear up for Road and Infrastructure Fund (CRIF),
higher fundraising through borrow- 2019-20 (BE) 64,587.00 83,571.00 ~1.58 trillion Permanent Bridge Fee Fund,
33.2

ings and monetisation of road assets and monetisation of the National

23.8

as the government has reduced its 10,500.00 Highways fund. The internal and
20.6

** Budget Estimates
19.7

budgetary support by ~631.63 crore. It Operating ratio is calculated based on how much money railways is spending to earn each rupee
extra budgetary resources utilised
16.7
16.3

15.3

has increased the authority’s bor- by the NHAI in FY19 include the
14.7
13.5
13.4

13.5
12.7
12.3

12.2

rowing limit by 21 per cent to ~75,000 authority’s loan of ~25,000 crore tied
10.7
10.4
9.6
9.2

crore for FY20. For the aviation sector, was a 5 per cent drop in the RE from extra budgetary resources, FY19 have deteriorated from 96 per up with the State Bank of India.
8.1

6.9
4.5

the government has increased the for 2018-19 (FY19) to ~1.38 trillion, apart from the budgetary support. cent and 92.8 per cent estimated The NHAI expects the road
4.3
3.3

2.8

allocation for a regional connectivity compared to ~1.46 trillion in last year’s In his speech, Finance Minister during the last Budget. monetisation drive or tendering
scheme by 8.84 per cent to ~480 crore, Budget Estimates (BE). Piyush Goyal has projected an The ambitious operating ratio of highway contracts on toll-operate-
Auto IT Steel Finance Pharma Infra* FMCG BSE 500 against ~441 crore (Revised Estimates, Interestingly, the gross budget- ambitious operating ratio of 95 per 95 per cent has been kept despite transfer basis will fetch the authority
Note: For BSE 500 companies; * Developers & Operators Source: Capitaline or RE) released last fiscal year. ary support of ~64,587 crore for the cent for the current financial year. the government announcing the over ~15,000 crore in the near future.
Though there was an increase in railways for FY20 is 21 per cent Operating ratio is calculated based hiring of more than 280,000 people The share of the road sector from
railways capex in FY20, the actual higher than the RE of ~53,060 crore on how much money the railways next financial year. For FY18, the the CRIF has gone down as the
capex for railways in 2017-18 (FY18) in Budget 2018. The BE for FY20 is spending to earn each rupee. capex was ~1.01 trillion, comprising allocation from the fund has been
PRE- AND POST-GST REGIME REVENUES ~ cr has seen a 15 per cent drop from the
RE of ~1.20 trillion last year. There
comprises ~10,500 crore from
internal resources and ~83,571 crore
The actual operating ratio for FY18
and revised operating ratio for
~43,417.55 crore of the budgetary
support, ~3,069.78 crore of internal
earmarked for other infrastructure
departments as well.
„ Excise duties* „ Cess on fuels** „ Customs and service tax*** „ GST****
2015-16 1,63,635 87,711 3,47,697 5,99,043

2016-17 2,31,107 91,180 4,06,426 7,28,713 BUDGET THE FINE PRINT

2017-18 1,24,320 3,79,949
1,16,886 1,10,459
2018-19 93,777 1,45,000 5,53,900
7,31,614

8,01,960
Pausing to pump-prime An aspirational, long-term Budget
T I
9,283 he interim Budget was to support farm incomes am very happy with the prudent decision, as covering
2019-20 1,55,200 6,60,000 8,96,765 framed under the backdrop and afford tax benefits to the interim Budget as it both categories would have
81,565 of farm distress and a slow- middle class. Farm support of touches almost 90 per required a bigger outlay
* Basic and special excise duties ** Cesses on petrol and diesel collected as excise *** Only ing global economy with ~20,000 crore proposed will push cent of the stakeholders and ~75,000 crore would
additional Customs and special CVD **** GST includes central GST and integrated GST
Source: Union Budgets risks tilted to the downside. India’s up fiscal deficit by 10 basis without creating fiscal stress not have sufficed.
growth in fiscal 2020 will be points (bps) this fiscal year. for the economy. Despite the What was surprising was
driven largely by exogenous or For fiscal 2020, this is budgeted ~20,000 crore that was added the income-tax rebate for the
luck factors to be 30 bps above the FRBM to the salaried class. It is a very
and, to some target of 3.1 per cent of GDP. expendi- big jump from the current
Measures Impact extent, by
budgetary
The consequent incremental
consumption should provide a
ture as
part of
~2.5 lakh. This will mean an
average benefit of ~6,000 per
D K JOSHI PAWAN GOENKA
SMALL TOWNS
}
initiatives. leg-up to GDP growth. the farmer person. While this does not

TAKE FLIGHT 13 Chief economist, CRISIL Two of

these are the
And between the interim and
the final Budgets, there is little
Managing director,
Mahindra & Mahindra
package,
the fiscal
affect the sales of farm
equipment, this will be close
The number of price of crude leeway, if both adhere to the deficit to 8-10 per cent of their
Central allocation new airports getting oil and mon- FRBM goals. Interestingly, when remains at income. This money will
for Regional connected to India’s soon. Brent crude at $60-65 per the National Democratic Alliance 3.4 per cent for the current go into better or more
Connectivity aviation network barrel and another spell of normal took reins in 2014, it maintained year, instead of inching up to agri inputs, which, in turn,
Scheme up by 8.84% rains, along with budgetary the key fiscal parameters proposed 3.6 per cent or 3.8 per cent. will help the output.
support, can help lift India’s gross in the interim Budget by the Everyone thought it would My biggest positive
domestic product (GDP) growth outgoing United Progressive be an interim Budget, but it takeaway from the interim
DIGITAL
INDIA
67% rise in allocation
} 100,000
The number of digital
villages to be created
rate to 7.3 per cent in fiscal 2020.
The interim Budget anyway
had limited ability to push growth,
given the Fiscal Responsibility
and Budget Management Act
Alliance II government.
The same story may play out
this time as well with some
tweaking within the various
schemes depending on the out-
turned out to be close to a
full Budget. A package for
farmers was expected. The
PM-Kisan scheme is applica-
ble only to farmers who
Budget is the 10-point agenda
laid out by the finance minis-
ter. It is a big step forward
and very aspirational and
long term. It is an agenda for
to provide across the country in (FRBM) constraints. come of the battle at the hustings. own up to 2 hectares of land. everyone to work on. No mat-
digital connectivity the next one year Clearly, the government has One thing is certain, though — the Therefore, half of the farmers ter who forms a government
in villages paused on fiscal consolidation and focus will stay sharp on the hinter- get impacted, while the other at the Centre, it is not possi-
made way for additional spending land, irrespective of who wins. half is left out. I think it is a ble not to follow that.

FROM PAGE 1
Budgeting for votes ‘What we inherited as unpaid subsidy VISITORS’ GALLERY
A ‘Modi’ chant &
Transfers from the Reserve Bank of particular on unsold inventory — no
India, which has been a bone of tax on notional rent for two years after was worst form of fiscal indiscipline’ the handshake
contention between the government completion — and they were given a
and Mint Road, have been sharply year’s extension if they wished to
increased, by over a third, in access benefits associated with start-
PHOTO: SANJAY K SHARMA That has been the strength of this government’s fiscal
consolidation — the integrity in making Budgets.
that mattered
the Revised Estimates for 2018-19 ing a new low-cost housing project. Do MPs use some kind of smoke
from ~55,000 crore to The government also Have you completely provided for fertiliser and signal before deciding what to
~74,000 crore. This high announced an institution petroleum subsidy in the revised estimates? wear on the Budget day?
level is planned to be Those with second devoted to cows, called the We have provided for all that is required. In fact, what we Urban Development Minister
maintained in 2019-20, homes received Rashtriya Kamdhenu inherited as unpaid subsidy was the worst form of fiscal Hardeep Puri and Minister
with ~83,000 crore two tax incentives Aayog, and increased the indiscipline in 2014. Almost ~1.60 trillion unpaid for Drinking Water
budgeted as dividend — notional rent on allocation for cow welfare bill was left behind by the UPA government, which S S Ahluwalia wore tur-
from the RBI.
One sector which
the second house
is no longer
to ~750 crore. More gener-
ally, a fisheries depart- Q&A this government paid. bans in matching blue.
The sixth row in the Lok
received considerable taxable, and ment was set up and farm- Will the income support scheme go along with Sabha was occupied by ladies, all of
attention in the interim a second home ers engaging in animal subsidy to farmers? whom wore ivory. Last year, it was yellow. The neon
Budget was the real could be husbandry would also be This is an income support scheme which has no co-relation green of HRD Minister Prakash Javadekar’s kurta
estate sector. Those with purchased while able to access interest sub- with subsidy. Land holdings have kept on getting divided. matched the green in the PM’s waistcoat, which in
second homes received saving on capital vention schemes. Over 70 million farmers have land holding of less than half turn was perfectly colour-coordinated with the
two tax incentives — gains tax Goyal also laid out a hectare. So you can imagine the impact this income support green waistcoat Agriculture Minister Radha Mohan
notional rent on the “vision for the next of ~6,000 will have on the farmers living in villages. Singh was wearing.
second house is no decade” in the speech This much is true: Piyush Goyal’s stock, already
longer taxable, and a second home which promised that India would up, soared as Narendra Modi walked up to him and
could be purchased while saving on become a $5-trillion economy in the
WE HAVE MAINTAINED THE SANCTITY OF THE BUDGET shook him by the hand. After that there was a surge
capital gains tax. Troubled real estate next five years and a $10-trillion PROCESS, WHICH IS REFLECTED IN THE ACTUAL FIGURES of MPs wanting to do the same. Some looked happy,
companies were handed lifelines, in economy in the eight years thereafter. P I Y U S H G O YA L , Union finance minister some plain envious.

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8 INTERIM BUDGETz FINANCE MINISTER’S SPEECH
>
Interim Budget 2019-2020
Speech of
Piyush Goyal
Minister of Finance
February 1, 2019
Madam Speaker,
I rise to present the Interim Budget for the year
2019-20.
PART A
2. I am deeply conscious of the absence of Shri
Arun Jaitley today.
I am sure the House joins me in wishing Shri
Jaitley speedy recovery, good health and a long life in
the service of the nation.
3. Madam Speaker, the people of India gave a
strong mandate to our Government. Under the
visionary leadership of Hon’ble Prime Minister Shri
Narendra Modi, we have given the most decisive,
stable and clean Government and have undertaken
transformational structural reforms. We have
reversed the policy paralysis engulfing the nation
and have restored the image of the country. The
major achievement of this Government was that we
strived our utmost to change the mind-set and ignit-
ed the self-confidence of the nation.
4. I can proudly say that India is solidly back on
track and marching towards growth and prosperity.
We have prepared the foundation for sustainable
growth, progress and better quality of life for all our
people.
5. We are moving towards realising a ‘New India’
by 2022, when we celebrate 75 years of India’s inde-
pendence: an India which is clean and healthy, where
everybody would have a house with universal access
to toilets, water and electricity; where farmers’
income would have doubled; youth and women
would get ample opportunities to fulfil their dreams;
an India free from terrorism, communalism,
casteism, corruption and nepotism.
State of the Economy
6. Madam Speaker, the last five years have seen
India being universally recognised as a bright spot
of the global economy. The country witnessed its
best phase of macro-economic stability during this
period. We are the fastest growing major economy
in the world with an annual average GDP growth
during last five years higher than the growth
achieved by any Government since economic
reforms began in 1991. From being the 11th largest
economy in the world in 2013-14, we are today the
6th largest in the world. Besides generating high
growth rate, we contained double-digit inflation
and restored fiscal balance.
7. 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%. The
then Prime Minister admitted as much when he
said, “We have also not been as successful in con-
trolling persistent inflation as we would have wished.
This is primarily because food inflation has
increased.” In contrast, our Govt. broke the back of
back-breaking inflation. We brought down average
inflation to 4.6% which is lower than the inflation
during the tenure of any other Government. In fact
inflation in December 2018 was down to 2.19% only.
If we had not controlled inflation, our families would
have been spending around 35-40% more today on
basic necessities such as food, travel, consumer
durables, housing etc.
8. From the high of almost 6% seven years ago, the
fiscal deficit has been brought down to 3.4% in 2018-
19 RE. The current account deficit (CAD), against a
high of 5.6% six years ago, is likely to be only 2.5% of
GDP this year. We contained the fiscal deficit notwith-
standing the Finance Commission’s recommenda-
tions increasing the share of the States from 32% to
42% in central taxes, which we accepted in the true
spirit of cooperative federalism, thereby transferring
significantly higher amounts to the States.
9. Due to a stable and predictable regulatory
regime, growing economy and strong fundamentals,
India could attract massive amount of Foreign Direct
Investment (FDI) during the last 5 years - as much as
$239 billion. This period also witnessed a rapid lib-
eralisation of the FDI policy, allowing most FDI to
come through the automatic route.
10. Madam Speaker, the last five years have wit-
nessed a wave of next generation structural reforms,
which have set the stage for decades of high growth.
We have undertaken path breaking structural reforms
by introducing Goods and Services Tax (GST) and
other taxation reforms.
Banking Reforms and Insolvency and
Bankruptcy Code (IBC)
11. The period of 2008-14 will be remembered as
a period of aggressive credit growth and, as per RBI,
the primary reason for spurt in non-performing loans
and stressed assets. Outstanding loans of public sec-
tor banks ballooned from ~18 lakh crore to
~52 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. There were high stressed and
non-performing assets (NPAs) amounting to ~5.4 lakh
crore in 2014. Many more were hidden through
restructuring or otherwise which were discovered
during Asset Quality Reviews and inspections carried
out since 2015.
12. We put a stop to such questionable practices and
stopped the culture of “phone banking”. The 4Rs
approach of recognition, resolution, re-capitalisation
and reforms has been followed. A number of measures
have been implemented to ensure Clean Banking.
Through a transparent and accountable process, we
recognised these NPAs. The Insolvency and
Bankruptcy Code has institutionalised a resolution-
friendly mechanism, which is helping in recovery of
non-performing loans while preserving the underlying
businesses and jobs. Earlier, only small businessmen
used to be under pressure of repayment of loans while
in the case of big businessmen, it was the headache of
banks. But now, defaulting managements are either
paying or exiting their businesses. An amount of close
to ~3 lakh crore has already been recovered in favour of
banks and creditors. To restore the health of public sec-
tor banks, recapitalisation has been done with an
investment of ~2.6 lakh crore. Amalgamation of banks
has also been done to reap the benefits of economies
of scale, improved access to capital and to cover a larg-
er geographical spread.
Steps against corruption
13. We have ushered in a new era of transparency.
We have given a corruption free government. The
Real Estate (Regulation and Development) Act, 2016
(RERA) and Benami Transaction (Prohibition) Act,
1988 are helping to bring transparency in the real
estate sector. The Fugitive Economic Offenders Act,
2018 will help confiscate and dispose off the assets of
economic offenders who escape the jurisdiction of
the laws in India. Additionally, we conducted trans-
parent auction of natural resources including coal
and spectrum. We have walked the talk.
Cleanliness
14. As a tribute to Mahatma Gandhi’s 150th birth
anniversary in 2019, our Government initiated the
world’s largest behavioural change movement with
the Swachh Bharat Mission. India has achieved 98%
rural sanitation coverage and as many as 5.45 lakh vil-
lages have been declared “Open Defecation Free.” It
is a holistic programme and has succeeded in chang-
ing the mindset of our people. With the people par-
ticipation, they transformed it from a Government
Scheme to a national movement. I thank the 130 core
people of the nation for the success of Swachh Bharat
Abhiyan who adopted it whole heartedly.
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Last five years have set
the stage for decades
of high growth
Poor and backward classes
15. The poor have the first right on the resources
of the nation. The Government while maintaining the
existing reservation for SC/ST/Other Backward
Classes, have now ensured 10% reservation in edu-
cational institutions and Government services for
poors. In these institutions, around 25% extra seats
(approximately 2 lakh) will be provided so that, there
is no shortfall of presently available/reserved seats for
any class.
16. To provide food grains at affordable prices to
the poor and middle classes, about ~1,70,000 crore
were spent in the year 2018-19 which is almost dou-
ble the amount of ~ 92,000 crore spent in the year
2013-14. We ensured that everyone gets food and
none goes to sleep hungry. ~60,000 crore are being
allocated for MGNREGA in BE 2019-20. Additional
amount would be provided if required.
17. We have worked to bridge the urban-rural
divide in the country. Hon’ble Members in this
August House, most of whom are from rural areas,
will agree that several times in the past, only empty
promises have been made to people living in our vil-
lages. During the last five years, we have undertaken
targeted expenditure to improve their quality of life
in all its dimensions. Our aim, is to provide urban
facilities in villages while keeping the soul of rural life
intact.
18. Under the Pradhan Mantri Gram Sadak
Yojana, construction of rural roads has been tripled.
15.80 lakh habitations out of a total of 17.84 lakh habi-
tations have already been connected with pucca
roads and work is going on to complete the rest very
soon. Pradhan Mantri Gram Sadak Yojana (PMGSY)
is being allocated ~19,000 crore in BE 2019-20 as
against ~15,500 crore in RE 2018-19. There was time
when a child used to reach school after walking on a
foot trail, today the situation has changed and a bus
can reach her/his village. During the period 2014-18,
a total number of 1.53 crore houses have been built
under the Pradhan Mantri Awas Yojana.
19. Till the year 2014, about 2.5 crore families were
forced to live the life of 18th century without elec-
tricity. Under ‘Saubhagya Yojna’, we provided free
electricity connection to almost every household.
By March, 2019, all willing families will get electrici-
ty connection. In mission mode, we have provided
143 crore LED bulbs with the participation of private
sector. This has resulted into a savings of approxi-
mately ~50,000 crore per year in electricity bills of
https://t.me/TheHindu_Zone_official
PHOTO: PTI
poor and middle class families.
20. Madam Speaker, past five years have seen
massive scale up of health care. Earlier, a poor man
used to be in dilemma whether to fulfil daily needs
of the family or save the life of an ailing member.
This situation has deeply pained our Hon’ble
Prime Minister. We launched the world’s largest
health care programme, Ayushman Bharat, to
provide medical treatment to nearly 50 crore
people. Already close to 10 lakh patients have
benefited for medical treatment which would
have cost them ~3,000 crore through free treat-
ment made available under the scheme. Lakhs of
poor and middle class people are also benefiting
from reduction in the prices of essential medicines,
cardiac stents and knee implants, and availability of
medicines at affordable prices through Pradhan
Mantri Jan Aushadhi Kendras.
21. There are 21 AIIMS operating or being estab-
lished in the country presently. 14 of these 21 AIIMS
have been announced since 2014. I am happy to
announce setting up of new the 22nd AIIMS in
Haryana.
22. The Aspirational Districts Programme is pro-
viding targeted development to the 115 most back-
ward districts of the country. The programme has
achieved notable results with improved perform-
ance on all indicators — health and nutrition, edu-
cation, agriculture and water resources, financial
inclusion and skill development.
Farmer’s progress and
increase in income
23. Madam Speaker, our hardworking farmers
were not getting the full value of their produce. With
an aim to double the income of farmers, our
Government, for the first time in history has fixed the
minimum support price (MSP) of all 22 crops at min-
imum 50% more than the cost.
24. Agriculture continues to be the main driver of
the rural economy. Our hardworking farmers, sup-
ported by pro-farmer policies of our Government in
the past four and half years, have produced agricul-
ture commodities in record quantities. Declining
prices of agricultural commodities in the interna-
tional market and fall in food inflation in India since
2017-18, relative to non-food sector, have however,
reduced the returns from farming. Small and frag-
mented land holding on account of repeated divi-
sions has also contributed in decline in the income of
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MUMBAI | 2 FEBRUARY 2019
the farmer family. Hence, there is a need for provid-
ing structured income support to the poor land-hold-
er farmer families in the country for procuring inputs
such as seeds, fertilizers, equipment, labour etc. and
to meet other needs. Such support will help them in
avoiding indebtedness as well and falling into clutch-
es of money lenders.
25. To provide an assured income support to the
small and marginal farmers, our Government is
launching a historic programme namely “Pradhan
Mantri Kisan SAmman Nidhi (PM-KISAN)”. Under
this programme, vulnerable landholding farmer fam-
ilies, having cultivable land up to 2 hectares, will be
provided direct income support at the rate of ~6,000
per year. This income support will be transferred
directly into the bank accounts of beneficiary farm-
ers, in three equal instalments of ~2,000 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 1st December 2018
and the first instalment for the period up to 31st
March 2019 would be paid during this year itself.
This programme will entail an annual expenditure of
~75,000 crore.
26. PM-KISAN would not only provide assured
supplemental income to the most vulnerable farmer
families, but would also meet their emergent needs
especially before the harvest season. PM-KISAN
would pave the way for the farmers to earn and live a
respectable living.
27. I propose an outlay of ~75,000 crore for PM-
KISAN for the
FY 2019-20. I am also providing ~20,000 crore
in the Revised Estimates of FY 2018-19.
28. During the last five years, for providing afford-
able loans to farmers, the amount of interest sub-
vention has been doubled. The crop loan to farmers
increased to ~11.68 lakh crore in year 2018-19. We
have made genuine efforts to remove the hardships
of farmers by providing them Soil Health Cards, qual-
ity seeds, irrigation scheme and Neem Coated Urea
to remove shortage of fertilizers.
29. Animal Husbandry and Fisheries sector also
needs considerable support. I have increased the
allocation for Rashtriya Gokul Mission to ~750 crore
in the current year itself. I announce setting up of
“Rashtriya Kamdhenu Aayog” to upscale sustain-
able genetic up-gradation of cow resources and to
enhance production and productivity of cows. The
Aayog will also look after effective implementation of
laws and welfare schemes for cows.
30. India is the second largest fish producing
nation in the world accounting for 6.3% of global
production, registering an average annual growth of
more than 7% in recent years. The sector provides
livelihood to about 1.45 crore people at the primary
level. To provide sustained and focused attention
towards development of this sector, our Government
has decided to create a separate Department of
Fisheries.
31. In the last Budget, our Government
announced the facility of extension of Kisan Credit
Card scheme (KCC) to Animal Husbandry and
Fisheries farmers. Now, I propose to provide the ben-
efit of 2% interest subvention to the farmers pursuing
the activities of animal husbandry and fisheries, who
avail loan through Kisan Credit Card. Further, in case
of timely repayment of loan, they will also get an
additional 3% interest subvention.
32. To ensure provision of easy and concessional
credit and to bring all farmers under KCC fold, our
Government has decided to initiate a comprehensive
drive with a simplified application form.
33. When natural calamities strike, farmers are
generally unable to repay their crop loans. Presently,
the crop loans are rescheduled for such affected farm-
ers and they get benefit of interest subvention of 2%
only for the first year of the rescheduled loan. Our
Government has now decided that all farmers affect-
ed by severe natural calamities, where assistance is
“I can
proudly say that India
is solidly back on track
and marching towards
growth and prosperity.
We have prepared the
foundation for sustainable
growth, progress and better
quality of life for all
our people
— BUDGET SPEECH ON
” units will get 2% interest rebate on incremental loan
FEBRUARY 1
provided from National Disaster Relief Fund (NDRF),
will be provided the benefit of interest subvention of
2% and prompt repayment incentive of 3% for the
entire period of reschedulement of their loans.
Labour and Workers Dignity
34. Madam Speaker, our Government firmly
believes that workmen and all the people working in
Government services should get benefit of the fast
growing economy. During the last five years India has
witnessed industrial peace.
35. High growth and formalistation of the econo-
my has led to the expansion of employment oppor-
tunities as shown in EPFO membership, which has
increased by nearly 2 crore in two years reflecting for-
malisation of the economy and job creations.
36. After submission of the 7th Central Pay
Commission Report, the recommendations were
implemented immediately. The New Pension Scheme
(NPS) has been liberalized. Keeping the contribution
of the employee at 10%, we have increased the
Government contribution by 4% making it 14%.
Maximum ceiling of the bonus given to the labourers
has been increased from ~3,500 pm to ~7,000 pm and
the maximum ceiling of the pay has been increased
from ~10,000 pm to ~21,000 pm. The ceiling of pay-
ment of gratuity has been enhanced from ~10 lakhs to
~20 lakhs. During the last five years the minimum
wages of labourers of the all categories have been
increased by 42%, which is the highest ever. The ceil-
ing of ESI’s eligibility cover has been increased from
~15,000 pm to ~21,000 pm. Minimum pension for every
labourer has been fixed at ~1,000 per month. In the
event of death of a labourer during service, the amount
to be paid by EPFO has been enhanced from ~2.5 lakh
to ~6 lakh. Under Anganwadi and Asha Yojana hono-
rarium has been enhanced by about 50% for all cate-
gories of workers.
37. Half of India’s GDP comes from the sweat and
toil of 42 crore workers in the unorganised sector
working as street vendors, rickshaw pullers, con-
struction workers, rag pickers, agricultural workers,
beedi workers, handloom, leather and in numerous
other similar occupations. Domestic workers are also
engaged in big numbers. We must provide them com-
prehensive social security coverage for their old age.
Therefore, in addition to the health coverage pro-
vided 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 up to ~15,000. This
pension yojana shall provide them an assured month-
ly pension of ~3,000 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 ~100 per month till the
age of 60 years. A worker joining the pension yojana
at 18 years, will have to contribute as little as ~55 per
month only. The Government will deposit equal
matching share in the pension account of the work-
er 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 mak-
ing it one of the largest pension schemes of the world.
A sum of ~500 crore has been allocated for the
scheme. Additional funds will be provided as need-
ed. The scheme will also be implemented from the
current year.
38. Our Government is committed to reach the
most deprived citizens of this country. To this end,
the condition of the De-notified, Nomadic and Semi-
Nomadic communities merits special attention.
These communities are hard to reach, less visible, and
therefore, frequently left out. The Nomadic and Semi-
Nomadic communities move from place to place in
search of a livelihood. The Renke Commission and
the Idate Commission have done commendable work
to identify and list these communities. A committee
under NITI Aayog will be set up to complete the task
of identifying De-notified, Nomadic and Semi-
Nomadic communities not yet formally classified.
Our Government will also set up a Welfare
Development Board under the Ministry of Social
Justice and Empowerment specifically for the pur-
pose of implementing welfare and development pro-
grammes for De-notified, Nomadic and Semi-
Nomadic communities. The Board shall ensure that
special strategies are designed and implemented to
serve these hard-to-reach communities.
Women’s development to
women-led development
39. Madam Speaker, in our Election Manifesto, we
had promised that we will transform the quality of life
of women in rural India by providing cleaner fuel. For
securing the health of every homemaker in rural
areas and to ensure that she does not have to shed
tears for cooking food to nourish her family, our
Government embarked upon a programme to deliv-
er
8 crore free LPG connections under the Ujjwala
Yojana. More than 6 crore connections have already
been given and the remaining will get free gas con-
nections by next year. Ujjwala is a remarkable success
story of our Government programme, defined by a
bold yet practical Vision of a responsible and com-
passionate leadership.
40. More than 70% of the beneficiaries of Pradhan
Mantri MUDRA Yojana are women who are getting
affordable and collateral-free loans to start their own
businesses. Amongst many measures, benefits of
maternity leave of 26 weeks and Pradhan Mantri
Matru Vandana Yojana for pregnant women have
provided financial support to women while empow-
ering them to participate in work.
Empowering youth to
fulfil their potential
41. India is amongst the most youthful nations in
the world. Through Pradhan Mantri Kaushal Vikas
Yojana, over 1 crore youth are being trained to help
them earn a livelihood. We have harnessed “Yuva
Shakti” through self-employment schemes including
MUDRA, Start-up India and Stand-up India. Under
MUDRA Yojana 15.56 crore loans have been disbursed
amounting to ~7,23,000 crore. The concept of
employment is changing all over the world, now the
employment generation is not confined merely to
Government services or factories. With job seekers
becoming job creators, India has become the world’s
second largest start-up hub. We are proud of the hard
work and innovative ideas of our youth.
42. In order to take the benefits of Artificial
Intelligence and related technologies to the people,
a National Programme on ‘Artificial Intelligence’ 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.
Empowering MSMEs and traders
43. Government has undertaken many effec-
tive steps to strengthen MSME sector, which pro-
vides employment to crore of people. Recently, a
scheme of sanctioning loans up to ~1 crore in 59
minutes has been launched. GST-registered SME
of ~1 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.
44. Government e-Marketplace (GeM), created
by our Government two years ago, has transformed
public procurement by making it fully transparent,
inclusive and efficient. MSMEs have an opportunity
to sell their products through GeM. Transactions of
over ~17,500 crore have taken place, resulting in aver-
age savings of 25-28%. The GeM platform is now
being extended to all CPSEs.
45. We have focussed on supporting domestic
trade and services. Our Government has recently
assigned the subject of “promotion of internal trade
including retail trading and welfare of traders, and
their employees” to the Department of Industrial
Policy and Promotion, which will now be renamed
as the Department for Promotion of Industries and
Internal Trade.
Strengthening defence
and national Security
46. Madam Speaker, our soldiers protect our bor-
ders in tough conditions. They are our pride and hon-
our. We also respected their dignity. In our Election
Manifesto, we had promised to implement One Rank
One Pension (OROP). This was pending for the last 40
years and has been resolved by us. The previous
Governments announced it in three budgets but sanc-
tioned a mere ~500 crore in 2014-15 Interim Budget; in
contrast we have already disbursed over ~35,000 crore
after implementing the Scheme in its’ true spirit. The
Government also announced substantial hike in the
Military Service Pay (MSP) of all service personnel and
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.
MUMBAI | 2 FEBRUARY 2019
special allowances given to Naval and Air Force per-
sonnel deployed in high risk duties.
47. Our Defence Budget will be crossing ~3,00,000
crore for the first time in 2019-20. For securing our
borders and to maintain preparedness of the highest
order, if necessary, additional funds would be pro-
vided.
Supporting Indians across the world
48. Today, all persons of Indian origin feel secure
that their motherland Bharat cares for them and at
times of need will support them. India’s transforma-
tion has inculcated a sense of pride and respect for
Indians and persons of Indian origin across the globe.
We have taken several initiatives to strengthen their
connect with India, facilitate their investment in
India and ease their travel.
Infrastructure development
49. Infrastructure is the backbone of any nation’s
development and quality of life. Whether it is high-
ways or railways or airways or even digi-ways, we
have gone beyond incremental growth to attain trans-
formative achievements.
50. Because of ‘UDAAN Scheme’, today an ordi-
nary citizen is also travelling by air. The number of
operational airports has crossed 100 with the com-
missioning of the Pakyong airport in Sikkim.
Domestic passenger traffic has doubled during the
last five years leading to large number of jobs being
created also. Today, India is the fastest highway devel-
oper in the world with 27 kms of highways built each
day. Projects stuck for decades like the Eastern
Peripheral Highway around Delhi or the Bogibeel
rail-cum-road bridge in Assam and Arunachal
Pradesh have been completed. The flagship pro-
gramme of Sagarmala along the coastal areas of the
country will develop ports for faster handling of
import and export cargo. For the first time, contain-
er freight movement has started on inland water-
ways from Kolkata to Varanasi. Our Government will
introduce container cargo movement to the North
East as well, by improving the navigation capacity of
the Brahmaputra river.
51. Indian Railways has experienced the safest
year in its history. All Unmanned Level Crossings on
broad gauge network have been eliminated.
Introduction of the first indigenously developed and
manufactured semi high-speed “Vande Bharat
Express” will give the Indian passengers world class
experience with speed, service and safety. This major
leap in wholly developed technology by our engi-
neers will give an impetus to the Make in India pro-
gramme and create jobs. Capital support from the
budget for railways is proposed at ~ 64,587 crore in
2019-20 (BE). The Railways’ overall capital expendi-
ture programme is of ~ 1,58,658 crore. The Operating
Ratio is expected to improve from 98.4% in 2017-18 to
96.2% in 2018-19 (RE) and further to 95% in 2019-20
(BE).
52. India provided leadership to the global effort
to address the problem of climate change. Our com-
mitment to promote renewable energy is reflected in
setting up the International Solar Alliance, the first
treaty based international inter-governmental organ-
isation headquartered in India. India’s installed solar
generation capacity has grown over ten times in last
five years. This sector is now creating lakhs of new age
jobs.
53. India’s import dependence on crude oil and
natural gas has been a source of big concern to our
Government. While we have taken a large number of
measures to moderate the increasing demand
through usage of bio fuel and alternate technologies,
urgent action is needed to increase hydrocarbon pro-
duction to reduce imports. A high level Inter-
Ministerial Committee, constituted by our
Government, has made several specific recommen-
dations, including transforming the system of bid-
ding for exploration, changing from revenue sharing
to exploration programme for Category II and III
basins. The Government is in the process of imple-
menting these recommendations.
54. The people of North East have also received
significant benefits of infrastructure development.
Arunachal Pradesh came on the air map recently
and Meghalaya, Tripura and Mizoram have come on
India’s rail map for the first time. Allocation for the
North Eastern Areas is being proposed to be
increased by 21% to ~ 58,166 crore in 2019-20 BE over
2018-19 BE.
Digital India Revolution
55. Madam Speaker, India is now leading the world
in the consumption of mobile data. Monthly con-
sumption 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 Common Service Centres 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.
56. 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 eco-
nomic 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 univer-
sally implemented. This has helped ensure the poor
THE FINANCE BILL, 2019
A 111A or section 112 or section 112A of the Income-
BILL
to continue the existing rates of income-tax for the
financial year 2019-2020 and to provide for certain
relief to taxpayers and to make amendments in cer-
tain enactments.
BE it enacted by Parliament in the Seventieth Year of
the Republic of India as follows:-
CHAPTER I
PRELIMINARY
1. (1) This Act may be called the Finance Act, 2019.
(2) Save as otherwise provided in this Act, sections
2 to 10 shall come into force on the 1st day of
April, 2019.
CHAPTER II
RATES OF INCOME-TAX
2. The provisions of section 2 of, and the First Schedule
to, the Finance Act, 2018, shall apply in 10 relation to
income-tax for the assessment year or, as the case
may be, the financial year commencing on the 1st
day of April, 2019, as they apply in relation to income-
tax for the assessment year, or as the case may be, the
financial year commencing on the 1stday of April,
2018,with the following modifications, namely: —
(a) in section 2,—
(i) in sub-section (1), for the figures “2018”, the fig-
ures “2019” shall be substituted;
(ii) in sub-section (3), for the first proviso, the fol-
lowing proviso shall be substituted, namely: —
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INTERIM BUDGETz FINANCE MINISTER’S SPEECH 9
and middle class receive the benefits of Government
schemes directly in their bank accounts by elimi-
nating middlemen.
Entertainment
57. Entertainment industry is a major employ-
ment generator. To promote entertainment indus-
try, single window clearance for ease of shooting
films, available only to foreigners, is now going to
be made available to Indian filmmakers as well.
Regulatory provisions will rely more on self-dec-
laration. We will also introduce anti-camcording
provisions in the Cinematograph Act to control
the menace of piracy.
Simplification of Direct Tax System to benefit
tax-payers
58. Madam Speaker, for making the life of our
direct tax-payers easy, we reduced tax rates, more
for the common man and middle class, and made the
interface with the tax department much simpler and
largely faceless. Due to this, the tax collections
increased significantly from ~6.38 lakh crore in 2013-
14 to almost ~12 lakh crore this year. The number of
returns filed have also increased from 3.79 crore to
6.85 crore showing 80% growth in tax base. I thank
the honest taxpayers of India for reposing faith in our
Government. Let me assure them that we have used
their contribution to serve the poor and create better
infrastructure.
59. The Income Tax Department now functions
online. Returns, assessments, refunds and queries are
all undertaken online. Last year, 99.54% of the income
tax returns were accepted as they were filed. Our
Government has now approved a path-breaking,
technology intensive project to transform the income
tax department into a more assessee-friendly one. All
returns will be processed in twenty-four hours and
refunds issued simultaneously. Within the next two
years, almost all verification and assessment of
returns selected for scrutiny will be done electroni-
cally through anonymised back office, manned by
tax experts and officials, without any personal inter-
face between taxpayers and tax officers.
60. Reducing the tax burden on middle class has
always been our priority ever since our Government
took over in 2014. We increased the basic exemption
limit from ~2 lakh to ~2.5 lakh and gave tax rebate so
that no tax was payable by persons having income up
to ~3 lakh. We also reduced the tax rate from 10% to
5% for the tax slab of ~2.5 lakh to ~5 lakh and intro-
duced Standard Deduction of ~40,000 for the
salaried class. Deduction of savings under section
80C was increased from ~1 lakh to ~1.5 lakh.
Deduction of interest for self-occupied house
property was raised from ~1.5 lakh to ~2 lakh.
61. Special benefits and incentives were also
given to small businesses and start-ups. Overall
compliance processes were simplified. Threshold
limit for presumptive taxation of business was
raised from ~1 crore to ~2 crore. The benefit of pre-
sumptive taxation was extended for the first time
to small professionals fixing threshold limit at ~50
lakh. In order to promote a less cash economy, the
presumptive profit rate has been reduced from 8% to
6%. The tax rate for companies with turnover of up to
~250 crore, covering almost 99% of the companies,
was reduced to 25% which was also applicable to new
manufacturing companies without any turnover lim-
its.
GST reform for benefit to
consumers and businesses
62. The Goods and Services Tax (GST) reforms lin-
gered on during the previous Government for almost
a decade. Our Government implemented the GST,
which is undoubtedly the biggest taxation reform
undertaken since Independence. Seventeen different
taxes levied by the Central and State/UT
Governments with cascading effect of tax on tax,
were consolidated into one GST. India became a com-
mon market. GST has resulted in increased tax base,
higher collections and ease of trade. This will reduce
the interface between the tax-payer and the
Government for day-to-day operations and assess-
ments. Now returns are fully online and e-way bill
system is in place. Inter-state movements have
become faster, more efficient, and hassle free with no
entry tax, check posts, and truck queues.
63. The high taxation levied on multiple com-
modities in the pre-GST regime has been ratio-
nalised and the burden on the consumer, espe-
cially the poor and the middle class, has been
significantly reduced. The GST Council, compris-
ing the Centre and States/UTs, finalised the GST
rates collectively mostly lower than pre-GST rates.
Since then, GST has been continuously reduced
providing relief of about ~80,000 crore annually to
consumers. Most items of daily use of the poor and
middle class are now in the 0% or 5% tax slab.
Cinema goers who were subjected to multiple tax-
es up to 50% are mostly paying much lower tax at
12% now. Our Government wants the GST burden
on homebuyers to be reduced and accordingly we
have moved the GST Council to appoint a Group of
Ministers to examine and make recommendations
in this regard at the earliest.
64. GST aims to benefit small traders, manufac-
turers and service providers. Exemptions from GST
for small businesses has been doubled from ~20 lakh
to ~40 lakh. Further, small businesses having
turnover up to ~1.5 crore have been given an attractive
composition scheme wherein they pay only 1% flat
rate and have to file one annual return only. Similarly,
small service providers with turnover up to ~50 lakh
can now opt for composition scheme and pay GST at
6% instead of 18%. More than 35 lakh small traders,
THE FINANCE BILL, 2019
“Provided that the amount of income-tax com-
puted in accordance with the provisions of section
tax Act shall be increased by a surcharge, for the
purposes of the Union, as provided in Paragraph
A, B, C, D or E, as the case may be, of Part I of the
First Schedule:”;
(iii) for sub-section (11) and sub-section (12),
the following sub-section shall be substituted,
namely:— ‘(11) The amount of income-tax as
specified in sub-sections (1) to (3) and as
increased by the applicable surcharge, for the
purposes of the Union, calculated in the man-
ner provided therein, shall be further increased
by an additional surcharge, for the purposes of
the Union, to be called the "Health and
Education Cess on income-tax", calculated at
the rate of four per cent. of such income tax
and surcharge so as to fulfil the commitment
of the Government to provide and finance
quality health services and universalised
quality basic education and secondary and
higher education.’;
(iv) sub-section (13) and sub-section (14) shall be
renumbered as sub-section (12) and sub-section
(13), respectively;
(v) in sub-section (13) as so renumbered, in clause
(a), for the figures “2018”, the figures "2019" shall be
substituted;
(b) in the First Schedule,—
(i) for Part I, the following Part I shall be substi-
tuted, namely: —
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manufacturers and service providers will benefit
from these trader-friendly measures. Soon, busi-
nesses comprising over 90% of GST payers will be
allowed to file quarterly return.
65. In spite of such major rate reductions and
relaxations, revenue trends are encouraging. The
average monthly tax collection in the current year is
~97,100 crore per month as compared to ~89,700 crore
per month in the first year. The State revenues are
improving with guaranteed 14% annual revenue
increase for the first five years.
Customs and trading across border reforms
66. To promote the “Make in India” initiative, we
have undertaken rationalization of customs duties
and procedures. Our Government has abolished
duties on 36 capital goods. A revised system of
importing duty-free capital goods and inputs for
manufacture and export has been introduced, along
with introduction of single point of approval under
section 65 of the Customs Act. Indian Customs is
introducing full and comprehensive digitalization
of export/import transactions and leveraging RFID
technology to improve export logistics.
Demonetisation and drive against black
money
67. Our Government is committed to eliminating
the ills of black money from our country. The anti-
black money measures taken by us during the last four
and half years in the form of Black Money Law, the
Fugitive Criminal Offenders Act, and Demonetisation,
have brought undisclosed income of about ~1,30,000
crore to tax, led to seizure and attachment of assets
worth approximately ~50,000 crore, and compelled
holders of large cash currency to disclose their source
of earnings. During this period, Benami assets worth
~6,900 crore and foreign assets worth ~1,600 crore
have been attached. As many as 3,38,000 shell com-
panies have been detected and de-registered, and
their directors disqualified. Growth of 18% in direct tax
“With this
comprehensive
ten-dimensional vision,
we will create an India
where poverty, malnutrition,
littering and illiteracy would
be a matter of the past. India
would be a modern, technology
driven, high growth, equitable
”
and transparent society
— BUDGET SPEECH ON
FEBRUARY 1
collection in 2017-18 and increase in tax base by as
many as 1.06 crore people filing income tax returns for
the first time in FY 2017-18 is mainly on account of
demonetization.
Vision for the next decade
68. Madam Speaker, the NDA Government
headed by Hon’ble Prime Minister Shri Narendra
Modi has laid the foundation for India’s growth
and development for times to come. We have
resolved many problems which were coming in
the way of realising our full potential as a society
and an economy. We are poised to become a Five
Trillion Dollar Economy in the next five years and
aspire to become a Ten Trillion Dollar Economy in
the next 8 years thereafter.
69. In the Indian ethos, anything which is good is
supposed to bestow, cause, create and do good in all
ten directions. I will, therefore, layout our vision for
ten most important dimensions in 2030.
70. The First Dimension of this Vision will be to
build physical as well as social infrastructure for a ten
Trillion Dollar economy and to provide ease of living.
It will comprise next generation infrastructure of
roads, railways, seaports, airports, urban transport,
gas and electric transmission and inland waterways.
On the social infrastructure side, every family will
have a roof on its head and will live in a healthy,
clean and wholesome environment. We will also
build a quality, science oriented educational system
with Institutes of Excellence providing leadership at
the top.
71. The Second dimension of our Vision is to cre-
ate a Digital India reaching every sector of the econ-
omy, every corner of the country and impacting the
life of all Indians. Digital Infrastructure and digital
economy of 2030 will be built upon the successes
achieved in recent years in digitisation of
Government processes and private transactions. Our
youth will lead us in this endeavour with innumer-
able start-ups creating digital India, and millions of
jobs in this eco-system.
72. Making India a pollution-free nation with green
Mother Earth and blue skies is the Third Dimension of
our Vision. This India will drive on Electric Vehicles
with Renewables becoming a major source of energy
PART I INCOME-TAX Paragraph A
(I) In the case of every individual other than the indi-
vidual referred to in items (II) and (III) of this
Paragraph or Hindu undivided family or association
of persons or body of individuals, whether 5 incor-
porated or not, or every artificial juridical person
referred to in sub-clause (vii) of clause (31) of section
2 of the Income-tax Act, not being a case to which any
other Paragraph of this Part applies, —
Rates of income tax
(1) where the total income Nil;
does not exceed ~2,50,000
(2) where the total income 5 per cent.
exceeds ~2,50,000 but does of the
not exceed ~5,00,000 amount by
which the
total income
exceeds
~2,50,000;
(3) where the total income ~12,500 plus
exceeds ~5,00,000 but 20 per cent.
does not exceed ~10,00,000 of the
amount by
which the
total income
exceeds
~5,00,000;
(4) where the total income ~1,12,500
exceeds ~10,00,000 plus 30 per
https://t.me/Banking4Exams
supply. India will lead the world in the transport rev-
olution through electric vehicles and energy storage
devices, bringing down import-dependence and ensur-
ing energy security for our people.
73. Expanding rural industrialisation using mod-
ern digital technologies to generate massive employ-
ment is the Fourth Dimension of our Vision. This
will be built upon the Make in India approach to
develop grass-roots level clusters, structures and
mechanisms encompassing the MSMEs, village
industries and start-ups spread in every nook and cor-
ner of the country. India is now on the way to becom-
ing a global manufacturing hub in various sectors
including automobiles and electronics, defence and
medical devices.
74. Our rivers and water bodies are our life sup-
porting assets. Our Government has worked vigor-
ously for cleaning River Ganga. Fifth Dimension of
our Vision for India of 2030 is Clean Rivers, with safe
drinking water to all Indians, sustaining and nour-
ishing life and efficient use of water in irrigation
using micro-irrigation techniques.
75.India’s long coastline has the potential of becom-
ing the strength of the economy, particularly through
exploitation of the Blue Economy, to ensure better stan-
dards and quality of life for a large number of people liv-
ing in the coastal areas. Our efforts in the Sagarmala pro-
gramme will be scaled up and we will develop other
inland waterways faster. Our coastline and our ocean
waters powering India’s development and growth is
the Sixth Dimension of our Vision.
76. The Seventh Dimension of our Vision aims at
the outer skies. Our space programme - Gaganyaan,
India becoming the launch-pad of satellites for the
World and placing an Indian astronaut into space by
2022 reflect this dimension of our vision.
77. Making India self-sufficient in food, exporting
to the world to meet their food needs and producing
food in the most organic way is the Eighth Dimension
of our Vision. High farm production and productiv-
ity will be achieved through modern agricultural
practices and value addition. An integrated approach
towards agro and food processing, preservation,
packaging and maintenance of the cold chain will be
our focus of attention.
78. A healthy India is the Ninth Dimension of our
Vision. We will be aiming at healthy society with an
environment of health assurance and the support of
necessary health infrastructure. Our Government has
rolled out the Ayushman Bharat scheme. By 2030,
we will work towards a distress free health care and
a functional and comprehensive wellness system
for all. Such a healthy India built with the partic-
ipation of women having equal rights and con-
cern for their safety and empowerment.
79. Our Vision can be delivered by Team
India - our employees working together with the
elected Government, transforming India into a
Minimum Government Maximum Governance
nation. This is the Tenth Dimension. Our India of
2030 will have a proactive and responsible bureau-
cracy which will be viewed as friendly to people.
80. With this comprehensive ten-dimensional
Vision, we will create an India where poverty, mal-
nutrition, littering and illiteracy would be a matter of
the past. India would be a modern, technology driv-
en, high growth, equitable and transparent society.
The fiscal programme
for 2019-20 and beyond
81. The estimate of incomes and expenditure
which I am presenting today, pegs the fiscal deficit of
year 2019-20 at 3.4% of GDP. We would have main-
tained fiscal deficit at 3.3% for year 2018-19 and tak-
en further steps to consolidate fiscal deficit in year
2019-20. However, considering the need for income
support to farmers we have provided ~20,000 crore in
2018-19 RE and ~75,000 crore in 2019-20 BE. If we
exclude this, the fiscal deficit would have been less
than 3.3% for 2018-19 and less than 3.1% for year 2019-
20.
82. Total expenditure rises from ~4,57,235 crore in
2018-19 RE to ~27,84,200 crore in 2019-20 BE, a rise of
~3,26,965 crore or approximately 13.30%. This reflects
a high increase considering low inflation. Capital
Expenditure for 2019-20 BE is estimated to be
~3,36,292 crore. Centrally Sponsored Schemes (CSS)
are proposed to be allocated ~3,27,679 crore in BE
2019-20 as against ~3,04,849 crore in 2018-19 RE.
Allocation for National Education Mission is being
increased from ~32,334 crore in RE 2018-19 to ~38,572
crore in BE 2019-20. Allocation for Integrated Child
Development Scheme (ICDS) is being increased from
~23,357 crore in RE 2018-19 to ~27,584 crore in BE
2019-20.
83. A substantial increase is proposed in the allo-
cation for welfare of the Scheduled Castes and
Scheduled Tribes. The allocation of ~56,619 crore
made in BE of 2018-19 for Scheduled Caste, further
increased to ~62,474 crore in RE is proposed to be
enhanced to ~76,801 crore in BE for 2019-20, an
increase of 35.6% over BE of 2018-19. For the Scheduled
Tribes also, proposed allocation in 2019-20 BE is
~50,086 crore as against ~39,135 crore in BE 2018-19, an
increase of 28%.
84. We have pursued the public enterprises asset
management agenda to make these enterprises
accountable to the people. As many as 57 CPSEs are
now listed with total market capitalisation of over ~13
lakh crore. The Government received over
~1 lakh crore from disinvestment proceeds during
2017-18. We are confident of crossing the target of
~80,000 crore this year.
85. We have maintained the glide path towards
our target of 3% of fiscal deficit to be achieved by
2020-21. India’s Debt to GDP ratio was 46.5% in year
2017-18. The FRBM Act prescribes that the Debt to
cent. of the
amount by
which the
total income
exceeds
~10,00,000.
(II) In the case of every individual, being a resident in
India, who is of the age of sixty years or more but less
than eighty years at any time during the previous
year,
Rates of income tax
(1) where the total income Nil;
does not exceed ~3,00,000
(2) where the total income 5 per cent. of the
exceeds ~3,00,000 but does amount by which the
not exceed ~5,00,000 total income
exceeds ~3,00,000;
(3) where the total income ~10,000 plus 20 per
exceeds ~5,00,000 but does cent. of the amount
not exceed ~10,00,000 by 25 which the total
income exceeds
~5,00,000; ~1,10,000
plus 30 per cent. of
the amount by which
the total income
exceeds ~10,00,000.
(4) where the total income
exceeds ~10,00,000
(III) In the case of every individual, being a resident
in India, who is of the age of eighty years or
<
GDP ratio of the Government of India should be
brought down to 40% by 2024-25. Along with com-
pletion of the fiscal deficit consolidation programme,
we will now focus on debt consolidation.
86. Our Government had promised last year that we
will carry out reforms in stamp duty levied and collected
on financial securities transactions. I am proposing,
through the Finance Bill, necessary amendments in this
regard. The amendments proposed would usher in a
very streamlined system. Stamp duties would be levied
on one instrument relating to one transaction and get
collected at one place through the Stock Exchanges. The
duty so collected will be shared with the State
Governments seamlessly on the basis of domicile of
buying client.
PART B:
Tax proposals
87. On behalf of all the people of India and our
Government, I would first like to thank all our tax-
payers for their valuable contribution to nation build-
ing and for providing a better life to the poor and mar-
ginalized sections of society. Your tax helps provide
dignity to our sisters and mothers with toilets and
cooking gas connections. Your tax pays for the elec-
tricity connections to the poor who lived in dark-
ness for generations. The tax you pay will provide
health care to 50 crore brothers and sisters, and chil-
dren. It is you who is ensuring respect, dignity, and a
secure future to our retired jawans through One Rank
One Pension. Thank you, taxpayers.
88. Because of major tax reforms undertaken by
us during the last four and half years, both tax col-
lections as well as the tax base have shown significant
increase and we have made progress towards achiev-
ing a moderate taxation-high compliance regime. It
is, therefore, just and fair that some benefits from the
tax reforms must also be passed on to the middle
class taxpayers. Keeping this in view, I propose to
further reduce the tax burden on such taxpayers.
Though as per convention, the main tax proposals
will be presented in the regular budget, small tax-
payers especially middle class, salary earners, pen-
sioners, and senior citizens need certainty in their
minds at the beginning of the year about their taxes.
Therefore, proposals, particularly relating to such
class of persons should not wait. Hence, while for the
present the existing rates of income tax will contin-
ue for FY 2019-20, I propose the following:
89. Individual taxpayers having taxable annual
income up to ~5 lakh will get full tax rebate and there-
fore will not be required to pay any income tax. As a
result, even persons having gross income up to
~6.50 lakh may not be required to pay any income tax
if they make investments in provident funds, speci-
fied savings, insurance etc. In fact, with additional
deductions such as interest on home loan up to
~2 lakh, interest on education loans, National Pension
Scheme contributions, medical insurance, medical
expenditure on senior citizens etc, persons having
even higher income will not have to pay any tax. This
will provide tax benefit of ~18,500 crore to an esti-
mated 3 crore middle class taxpayers comprising self
employed, small business, small traders, salary earn-
ers, pensioners and senior citizens.
90. For salaried persons, Standard Deduction is
being raised from the current ~40,000 to ~50,000.
This will provide additional tax benefit of ~4,700
crore to more than 3 crore salary earners and pen-
sioners.
91. Currently, income tax on notional rent is
payable if one has more than one self-occupied
house. Considering the difficulty of the middle class
having to maintain families at two locations on
account of their job, children’s education, care of
parents etc. I am proposing to exempt levy of income
tax on notional rent on a second self-occupied house.
92. 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 non-working
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.
93. 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 res-
idential houses for a tax payer having capital gains up
to ~2 crore. This benefit can be availed once in a life
time.
94. For making more homes available under
affordable housing, the benefits under Section 80-
IBA of the Income Tax Act is being extended for one
more year, i.e. to the housing projects approved till
31st March, 2020.
95. Also, for giving impetus to the real estate sec-
tor, I have proposed to extend the period of exemp-
tion from levy of tax on notional rent, on unsold
inventories, from one year to two years, from the end
of the year in which the project is completed.
Concluding remarks
96. Madam Speaker, this is not merely an Interim
Budget, but a medium of the country’s development
journey. All the transformation that we are witness-
ing, is because of the passion of the people of our
nation. The credit goes to them only. Development
has become a mass-movement during the period of
our Government.
97. We will transform India into a leading nation
of the world with the help of our people. We, along
with them, have laid the foundation. A grand edifice
will be erected with their support. We have given a
decisive leadership, whose intent is clear, policy is
transparent and integrity is resolute.
98. With this, I commend the Budget to this
august House.
more at any time during the previous year,
Rates of income tax
(1) where the total income Nil;
does not exceed ~5,00,000
(2) where the total income 20 per cent. of the
exceeds ~5,00,000 but does amount by which the
not exceed ~10,00,000 total income exceeds
~5,00,000;
(3) where the total income ~1,00,000 plus 30 per
exceeds ~10,00,000 cent. of the amount
by which the total
income exceeds
~10,00,000.
Surcharge on income tax
The amount of income tax computed in accor-
dance with the preceding provisions of this
Paragraph, or the provisions of section 111A or sec-
tion 112 or section 112A of the Income Tax Act, shall
be 40 increased by a surcharge for the purposes of
the Union, calculated, in the case of every individ-
ual or Hindu undivided family or association of
persons or body of individuals, whether incorpo-
rated or not, or every artificial juridical person
referred to in sub-clause (vii) of clause (31) of sec-
tion 2 of the Income-tax Act, —
(a) having a total income exceeding fifty lakh rupees
but not exceeding one crore rupees, at the 45 rate of
ten per cent. of such income-tax; and
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10 INTERIM BUDGETz THE FINANCE BILL
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(b) having a total income exceeding one crore
rupees, at the rate of fifteen per cent of such income
tax:
Provided that in the case of persons mentioned above
having total income exceeding, —
(a) fifty lakh rupees but not exceeding one crore
rupees, the total amount payable as income-tax
and surcharge on such income shall not exceed
the total amount payable as income-tax on a
total income of fifty lakh rupees by more
than the amount of income that exceeds
fifty lakh rupees;
(b) one crore rupees, the total amount payable as
income-tax and surcharge on such income shall
not exceed the total amount payable as income
tax and surcharge on a total income of
one crore rupees by more than the amount of
income that exceeds one crore rupees.
Paragraph B
In the case of every co-operative society, —
Rates of income tax
(1) where the total income 10 per cent. of the
does not exceed ~10,000 total income;
(2) where the total income ~1,000 plus 20 per
exceeds ~10,000 but does cent. of the amount
not exceed ~20,000 by which the total
income exceeds
~10,000;
(3) where the total income ~3,000 plus 30 per
exceeds ~20,000 cent. of the amount
by which the total
income exceeds
~20,000.
Surcharge on income tax
20 The amount of income-tax computed in accor-
dance with the preceding provisions of this
Paragraph, or the provisions of section 111A or sec-
tion 112 or section 112A of the Income-tax Act, shall,
in the case of every co-operative society, having a
total income exceeding one crore rupees, be
increased by a surcharge for the purposes of the
Union calculated at the rate of twelve per cent. of
such income-tax:
25 Provided that in the case of every co-operative
society mentioned above having total income
exceeding one crore rupees, the total amount
payable as income-tax and surcharge on such
income shall not exceed the total amount payable
as income-tax on a total income of one crore rupees
by more than the amount of income that exceeds
one crore rupees.
Paragraph C
In the case of every firm, —
Rate of income tax
On the whole of the total income 30 per cent.
Surcharge on income tax
The amount of income tax computed in accordance
with the preceding provisions of this Paragraph, or
the provisions of section 111A or section 112 or section
112A of the Income Tax Act, shall, in the case of every
firm, having a total income exceeding one crore
rupees, be increased by a surcharge for the purposes
of the Union calculated at the rate of twelve per cent.
of such income tax:
Provided that in the case of every firm mentioned
above having total income exceeding one crore
rupees, the total amount payable as income-tax and
surcharge on such income shall not exceed the total
amount payable as income tax on a total income of
one crore rupees by more than the amount of income
that exceeds one crore rupees.
Paragraph D
In the case of every local authority, —
Rate of income tax
On the whole of the 30 per cent.
total income
Surcharge on income tax
The amount of income-tax computed in accordance
with the preceding provisions of this Paragraph, or
the provisions of section 111A or section 112 or section
112A of the Income-tax Act, shall, in the case of every
local authority, having a total income exceeding one
crore rupees, be increased by a surcharge for the pur-
poses of the Union calculated at the rate of twelve per
cent. of such income tax: 5
Provided that in the case of every local authority
mentioned above having total income exceeding one
crore rupees, the total amount payable as income-tax
and surcharge on such income shall not exceed the
total amount payable as income tax on a total income
of one crore rupees by more than the amount of
income that exceeds one crore rupees.
Paragraph E
In the case of a company, —
Rates of income-tax
I. In the case of a domestic company, —
(i) where its total turnover or 25 per cent.
the gross receipt in the previous of the total
year 2016-2017 does not exceed income;
two hundred and fifty crore rupees
(ii) other than that 30 per cent. of
referred to in item (i) the total income.
II. In the case of a company other than a
domestic company, —
(i) on so much of the total income as consists of, —
(a) royalties received from Government or an Indian
concern in pursuance of an agreement made by it
with the Government or the Indian concern after
the 31st day of March, 1961 but before 1st day of
April, 1976; or
(b) fees for rendering technical services received
from Government or an Indian concern in pur-
suance of an agreement made by it with the
Government or the Indian concern after the 29th
day of February, 1964 but before the 1st day of April,
1976,
and where such 50 per cent.;
agreementhas, in either
case, been approved by
the Central Government
(ii) on the balance, if any,
of the total income 40 per cent.
Surcharge on income tax
The amount of income tax computed in accordance
with the preceding provisions of this Paragraph,or the
provisions of section 111A or section 112 or section
112A of the Income Tax Act, shall be 35 increased by
a surcharge for the purposes of the Union calculated,
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“We have undertaken targeted expenditure to improve their (people living in villages) quality of life in all its
dimensions. Our aim is to provide urban facilities in villages while keeping the soul of rural life intact”
(i) in the case of every domestic company, —
(a) having a total income exceeding one crore
rupees but not exceeding ten crore rupees, at the
rate of seven per cent of such income tax; and
(b) having a total income exceeding ten crore
rupees, at the rate of twelve per cent of such
40 income tax;
(ii) in the case of every company other than a
domestic company, —
(a) having a total income exceeding one crore
rupees but not exceeding ten crore rupees, at the
rate of two per cent of such income tax; and
(b) having a total income exceeding ten crore
rupees, at the rate of five per cent of such
income tax:
Provided that in the case of every company having a
total income exceeding one crore rupees but not
exceeding ten crore rupees, the total amount payable
as income tax and surcharge on such income shall not
exceed the total amount payable as income-tax on a
total income of one crore rupees by more than the
amount of income that exceeds one crore rupees:
Provided further that in the case of every company
having a total income exceeding ten crore rupees, the
total amount payable as income-tax and surcharge on
such income shall not exceed the total amount
payable as income-tax and surcharge on a total
income of ten crore rupees by more than the amount
of income that exceeds ten crore rupees.";
(ii) in Part III, in Paragraph E, in sub-paragraph I, in
clause (i), for the words and figures “previous year
2016-2017”, the words and figures “previous year
2017-2018” shall be substituted;
(iii) in Part IV, in Rule 8, —
(A) for sub-rules (1) and (2), the following sub-rules
shall be substituted, namely: —
“(1) Where the assessee has, in the previous year rel-
evant to the assessment year commencing on the
1st day of April, 2019, any agricultural income and
the net result of the computation of the agricultur-
al income of the assessee for any one or more of the
previous years relevant to the assessment years
commencing on the 1st day of April, 2011 or the 1st
day of April, 2012 or the 1st day of April, 2013 or the
1st day of April, 2014 or the 1st day of April, 2015
or the 1st day of April, 2016 or the 1st day of April,
2017 or the 1st day of April, 2018, is a loss, then, for
the purposes of sub-section (2) of section 2 of
this Act, —
(i)the loss so computed for the previous year rel-
evant to the assessment year commencing on the
1st day of April, 2011, to the extent, if any, such loss
has not been set off against the agricultural
income for the previous year relevant to the
assessment year commencing on the 1st day of
April, 2012 or the 1st day of April, 2013 or the 1st
day of April, 2014 or the 1st day of April, 2015 or the
1st day of April, 2016 or the 1st day of April, 2017
or the 1st day of April, 2018,
(ii)the loss so computed for the previous year-
relevant to the assessmentyear commencing
on the 1st day of April, 2012, to the extent, if any,
such loss has not been set off against the agri-
cultural income for the previous year relevant to
the assessment year commencing on the 1st
day of April, 2013 or the 1st day of April, 2014 or
the 1st day of April, 2015 or the 1st day of April,
2016 or the 1st day of April, 2017 or the 1st day of
April, 2018,
(iii) the loss so computed for the previous year rel-
evant to the assessment year commencing on the
1st day of April, 2013, to the extent, if any, such loss
has not been set off against the agricultural
income for the previous year relevant to the
assessment year commencing on the 1st day of
April, 2014 or the 1st day of April, 2015 or the 1st
day of April, 2016 or the 1st day of April, 2017 or the
1st day of April, 2018,
(iv) the loss so computed for the previous year rel-
evant to the assessment year commencing on the
1st day of April, 2014, to the extent, if any, such loss
has not been set off against the agricultural
income for the previous year relevant to the
assessment year commencing on the 1st day of
April, 2015 or the 1st day of April, 2016 or the 1st
day of April, 2017 or the 1st day of April, 2018,
(v) the loss so computed for the previous year rel-
evant to the assessment year commencing on the
1st day of April, 2015, to the extent, if any, such loss
has not been set off against the agricultural
income for the previous year relevant to the
assessment year commencing on the 1st day of
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— BUDGET SPEECH ON FEBRUARY 1
April, 2016 or the 1st day of April, 2017 or the 1st
day of April, 2018,
(vi) the loss so computed for the previous year rel-
evant to the assessment year commencing on the
1st day of April, 2016, to the extent, if any, such loss
has not been set off against the agricultural
income for the previous year relevant to the
assessment year commencing on the 1st day of
April, 2017 or the 1st day of April, 2018,
(vii) the loss so computed for the previous year rel-
evant to the assessment year 10 commencing on
the 1st day of April, 2017, to the extent, if any, such
loss has not been set off against the agricultural
income for the previous year relevant to the
assessment year commencing on the 1st day of
April, 2018,
(viii) the loss so computed for the previous year
relevant to the assessment year commencing on
the 1st day of April, 2018, shall be set off against
the agricultural income of the assessee for the
previous year relevant to the assessment year
commencing on the 1st day of April, 2019.
(2) Where the assessee has, in the previous year rel-
evant to the assessment year commencing on the
1st day of April, 2020, or, if by virtue of any provision
of the Income-tax Act, income-tax is to be charged
in respect of the income of a period other than the
previous year, in such other period, any agricul-
tural income and the net result of the computa-
tion of the agricultural income of the assessee for
any one or more of the previous years relevant to the
assessment years commencing on the 1st day of
April, 2012 or the 1st day of April, 2013 or the 1st day
of April, 2014 or the 1st day of April, 2015 or the 1st
day of April, 2016 or the 1st day of April, 2017 or the
1st day of April, 2018 or the 1st day of April, 2019, is
a loss, then, for the 25 purposes of sub-section (10)
of section 2 of this Act,-
(i) the loss so computed for the previous yearrel-
evant to the assessmentyear commencing on the
1st day of April, 2012, to the extent, if any, such loss
has not been set off against the agricultural
income for the previous year relevant to the
assessment year commencing on the 1st day of
April, 2013 or the 1st day of April, 2014 or the 1st
day of April, 2015 or the 1st day of April, 2016 or the
1st day of April, 2017 or the 1st day of April, 2018
or the 1st day of April, 2019,
(ii) the loss so computed for the previous year rel-
evant to the assessmentyear commencing on the
1st day of April, 2013, to the extent, if any, such loss
has not been set off against the agricultural
income for the previous year relevant to the
assessment year commencing on the 1st day of
April, 2014 or the 1st day of April, 2015 or the 1st
day of April, 2016 or the 1st day of April, 2017 or the
1st day of April, 2018 or the 1st day ofApril, 2019,
(iii) the loss so computed for the previous year rel-
evant to the assessment year commencing on the
1st day of April, 2014, to the extent, if any, such loss
has not been set off against the agricultural
income for the previous year relevant to the
assessment year commencing on the 1st day of
April, 2015 or the 1st day of April, 2016 or the 1st
day of April, 2017 or the 1st day of April, 2018 or the
1st day of April, 2019,
(iv) the loss so computed for the previous year rel-
evant to the assessment year commencing on the
1st day of April, 2015, to the extent, if any, such loss
has not been set off against the agricultural
income for the previous year relevant to the
assessment year commencing on the 1st day of
April, 2016 or the 1st day of April, 2017 or the 1st
day of April, 2018 or the 1st day of April, 2019,
(v) the loss so computed for the previous year rel-
evant to the assessment year commencing on the
1st day of April, 2016, to the extent, if any, such loss
has not been set off against the agricultural
income for the previous year relevant to the
assessment year commencing on the 1st day of
April, 2017 or the 1st day of April, 2018 or the 1st
day of April, 2019,
(vi) the loss so computed for the previous year rel-
evant to the assessment year commencing on the
1st day of April, 2017, to the extent, if any, such loss
has not been set off against the agricultural
income for the previous year relevant to the
assessment year commencing on the 1st day of
April, 2018 or the 1st day of April, 2019,
(vii) the loss so computed for the previous year rel-
evant to the assessment year commencing on the
1st day of April, 2018, to the extent, if any, such loss
has not been set off against the agricultural
income for the previous year relevant to the
assessment year commencing on the 1st day of
April, 2019,
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MUMBAI | 2 FEBRUARY 2019
(viii) the loss so computed for the previous year
relevant to the assessment year commencing on
the 1st day of April, 2019,
shall be set off against the agricultural income of the
assessee for the previous year relevant to the assess-
ment year commencing on the 1st day of April, 2020.";
(B) for sub-rule (4), the following sub-rule shall be
substituted, namely:--
"(4) Notwithstanding anything contained in this
rule, no loss which has not been determined by
the assessing officer under the provisions of these
rules or the rules contained in the First Schedule
to the Finance Act, 2011 (8 of 2011) or the First
Schedule to the Finance Act, 2012 (23 of 2012) or
the First Schedule to the Finance Act, 2013 (17 of
2013) or the First Schedule to the Finance (No. 2)
Act, 2014 (25 of 2014) or the First Schedule to the
Finance Act, 2015 (20 of 2015) or the First
Schedule to the Finance Act, 2016 (28 of 2016) or
the First Schedule to the Finance Act, 2017 (7 of
2017) or the First Schedule to the Finance Act,
2018 (13 of 2018) shall be set off under sub-rule (1)
or, as the case may be, sub-rule (2).”.
CHAPTER III DIRECT TAXES
Income tax
3. In section 16 of the Income-tax Act, 1961 (hereafter
in this Chapter referred to as the Income-tax Act), in
clause (ia) [as inserted by section 7 of the Finance Act,
2018], for the words "forty thousand", the words "fifty
thousand" shall be substituted with effect from the 1st
day of April, 2020.
4. In section 23 of the Income-tax Act, with effect
from the 1st day of April, 2020,—
(a) in sub-section (4), —
(i) in the opening portion, for the words “one house”,
the words “two houses” shall be substituted;
(ii) in clause (a), for the word “one”, the word
“two” shall be substituted;
(iii) in clause (b), for the words “other than the
house”, the words “other than the house or
houses” shall be substituted;
(b) in sub-section (5), for the words "one year", the
words "two years" shall be substituted.
5. In section 24 of the Income-tax Act, with effect
from the 1st day of April, 2020, —
(a) in the first proviso, after the words “the amount
of deduction”, the words “or, as the case may be, the
aggregate of the amounts of deduction” shall be
inserted;
(b) in the second proviso, after the words “the
amount of deduction”, the words “or, as the case
may be, the aggregate of the amounts of deduction”
shall be inserted;
(c) after the Explanation to the third proviso, the
following proviso shall be inserted, namely: —
“Provided also that the aggregate of the amounts of
deduction under the first and second provisos shall
not exceed two lakh rupees.”
6. In section 54 of the Income Tax Act, in sub-section (1),
after clause (ii), the following provisos shall be inserted
with effect from the 1st day of April, 2020, namely: —
'Provided that where the amount of the capital gain
does not exceed two crore rupees, the assessee, may
at his option, purchase or construct two residential
houses in India, and where such an option has been
exercised, —
(a) the provisions of this sub-section shall have
effect as if for the words “one residential house in
India”, the words “two residential houses in India”
had been substituted;
(b) any reference in this sub-section and sub-sec-
tion (2) to “new asset” shall be construed as a
reference to the two residential houses in India:
Provided further that where during any assessment
year, the assessee has exercised the option referred
to in the first proviso, he shall not be subsequently
entitled to exercise the option for the same or any
other assessment year.’
7. In section 80-IBA of the Income Tax Act, in sub-sec-
tion (2), in clause (a), for the figures “2019”, the figures
“2020” shall be substituted with effect from the 1st
day of April, 2020.
8. In section 87A of the Income Tax Act, with effect
from the 1st day of April, 2020, —
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(a) for the words “three hundred fifty thousand”,
the words “five hundred thousand” shall be
substituted;
(b) for the words “two thousand and five hundred”,
the words “twelve thousand and five hundred” shall
be substituted.
9. In section 194A of the Income-tax Act, in sub-sec-
tion (3), in clause (i), for the words “ten thousand”
wherever they occur, the words “forty thousand”
shall be substituted.
10. In section 194-I of the Income-tax Act, in the first
proviso, for the words “one hundred and eighty
35 thousand rupees”, the words “two hundred and
forty thousand rupees” shall be substituted.
CHAPTER IV
MISCELLANEOUS
PART I
AMENDMENTS TO THE INDIAN
STAMP ACT, 1899
11. The provisions of this Part shall come into force on
such date as the CentralGovernment may, by notifi-
cation in the Official Gazette, appoint.
12. In section 2 of the Indian Stamp Act, 1899 (here-
after in this Part referred to as the principal Act), —
(a) for clause (1), the following clauses shall be sub-
stituted, namely: —
'(1) “allotment list” means a list containing details
of allotment of the securities intimated by the
issuer to the depository under sub-section (2) of
section 8 of the Depositories Act, 1996;
(1A) "banker" includes a bank and any person act-
ing as a banker;';
(b) in clause (5), the following long line shall be
added at the end, namely:-- "but does not include
a debenture;";
(c) after clause (7), the following clauses shall be
inserted, namely: —
‘(7A) “clearance list” means a list of transac-
tions of sale and purchase relating to contracts
traded on the stock exchanges submitted to a
clearing corporation in accordance with the law
for the time being in force in this behalf;
(7B) “clearing corporation” means an entity estab-
lished to undertake the activity of clearing and
settlement of transactions in securities or other
instruments and includes a clearing house of a
recognised stock exchange;’;
(d) after clause (10), the following clauses shall be
inserted, namely: —
‘(10A) “debenture” includes —
(i) debenture stock, bonds or any other instru-
ment of a company evidencing a debt, whether
constituting a charge on the assets of the compa-
ny or not;
(ii) bonds in the nature of debenture issued by any
incorporated company or body corporate;
(iii) certificate of deposit, commercial usance bill,
commercial paper and such other debt instru-
ment of original or initial maturity upto one year
as the Reserve Bank of India may specify from
time to time;
(iv) securitised debt instruments; and
(v) any other debt instruments specified by the
Securities and Exchange Board of India from time
to time;
(10B) “depository” includes —
(a) a depository as defined in clause (e) of
sub-section (1) of section 2 of the Depositories Act,
1996; and
(b) any other entity declared by the Central
Government, by notification in the Official
Gazette, to be a depository for the purposes of
this Act;’
(e) in clause (12), the words and figures “and
includes attribution of electronic record within
the meaning of section 11 of the Information
Technology Act, 2000” shall be inserted at the
end.
(f ) for clause (14), the following clause shall be
substituted, namely: —
“(14) “instrument” includes —
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(a) every document, by which any right or liabil-
ity is, or purports to be, created, transferred, lim-
ited, extended, extinguished or recorded;
(b) a document, electronic or otherwise, created
for a transaction in a stock exchange or deposito-
ry by which any right or liability is, or purports to
be, created, transferred, limited, extended, extin-
guished or recorded; and
(c) any other document mentioned in Schedule I,
but does not include such instruments as may be
specified by the Government, by notification in the
Official Gazette;';
(g) after clause (15), the following clause shall be
inserted, namely:-
'(15A) "issuer" means any person making an issue
of securities;';
(h) for clause (16A), the following clauses shall be
substituted, namely:-
'(16A) "marketable security" means a security
capable of being traded in any stock exchange in
India;
(16B) "market value", in relation to an instrument
through which-
(a) any security is traded in a stock exchange,
means the price at which it is so traded;
(b) any security which is transferred through a
depository butnot traded in the stock exchange,
means the price or the consideration mentioned in
such instrument;
(c) any security is dealt otherwise than in the stock
exchange or depository, means the price or con-
sideration mentioned in such instrument;';
(i) after clause (23), the following clause shall be
inserted, namely:-
'(23A) "securities" includes-
(i) securities as defined in clause (h) of section 2 of
the Securities Contracts (Regulation) Act, 1956;
(ii) a "derivative" as defined in clause (a) of section
45U of the Reserve Bank of India Act, 1934;
(iii) a certificate of deposit, commercial usance
bill, commercial paper, repo on corporate bonds
and such other debt instrument of original or ini-
tial maturity upto one year as the Reserve Bank of
India may specify from time to time; and
(iv) any other instrument declared by the Central
Government, by notification in the Official
Gazette, to be securities for the purposes of this
Act;’;
(j) after clause (26), the following clause shall be
inserted, namely: —
‘(27) “stock exchange” includes —
(i) a recognised stock exchange as defined in
clause (f)of section 2 of the Securities Contracts
(Regulation) Act, 1956; and
(ii) such other platform for trading or reporting a
deal in securities, as may be specified by the
Central Government, by notification in the
Official Gazette, for the purposes of this Act.’.
13. In section 4 of the principal Act, after sub-section (2),
the following sub-section shall be inserted, namely: —
“(3) Notwithstanding anything contained in sub-
sections (1) and (2), in the case of any issue, sale or
transfer of securities, the instrument on which
stamp-duty is chargeable under section 9A shall be
the principal instrument for the purpose of this sec-
tion and no stamp-duty shall be charged on any
other instruments relating to any such transaction.”.
14. For section 8A of the principal Act, the following
section shall be substituted, namely:-
‘8A. Notwithstanding anything contained in this
Act or any other law for the time being in force, —
(a) an issuer, by the issue of securities to one or
more depositories, shall, in respect of such issue,
be chargeable with duty on the total amount of secu-
rities issued by it and such securities need not
be stamped;
(b) the transfer of registered ownership of securi-
ties from a person to a depository or from a deposi-
tory to a beneficial owner shall not be liable to duty.
Explanation.- For the purposes of this section,
the expression "beneficial ownership" shall have the
same meaning as assigned to it in clause (a) of sub-
section (1) of section 2 of the Depositories Act, 1996.'.
15. In Chapter II of the principal Act, after Part A
relating to 'Of the liability of instruments to duty', the
following Part shall be inserted, namely:-
“AA.— Of the liability of instruments of transaction
in stock exchanges and depositories to duty
9A. (1) Notwithstanding anything contained in
this Act, —
(a) when the sale of any securities, whether delivery
based or otherwise, is made through a stock
exchange, the stamp-duty on each such sale in the
clearance list shall be collected on behalf of the
State Government by the stock exchange or a clear-
ing corporation authorised by it, from its buyer on
the market value of such securities at the time of
settlement of transactions in securities of such buy-
er, in such manner as the Central Government may,
by rules, provide;
(b) when any transfer of securities for a considera-
tion, whether delivery based or otherwise, is made
by a depository otherwise than on the basis of any
transaction referred to in clause (a), the stamp-
duty on such transfer shallbe collected on behalf
ofthe State Government by the depository from the
transferor of such securities on the consideration
amount specified therein, in such manner as the
Central Government may, by rules, provide;
(c) when pursuant to issue of securities, any cre-
ation or change in the records of a depository is
made, the stamp-duty on the allotment list shall be
collected on behalf of the State Government by the
depository from the issuer of securities on the total
market value of the securities as contained in such
list and in such manner as the Central Government
may, by rules, provide.
(2) Notwithstanding anything contained in this Act,
the instruments referred to in sub-section (1) shall be
chargeable with duty as provided therein at the rate
specified in Schedule I and such instruments need
not be stamped.
(3) From the date of commencement of this Part, no
stamp-duty shall be charged or collected by the State
Government on any note or memorandum or any
other document, electronic or otherwise, associated
with the transactions mentioned in sub-section (1).
(4) The stock exchange or a clearing corporation
authorised by it or the depository, as the case may be,
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shall, within three weeks of the end of each month
and in accordance with the rules made in this behalf
by the Central Government, in consultation with the
State Government, transfer the stamp-duty collect-
ed under this section to the State Government where
the residence of the buyer is located and in case the
buyer is located outside India, to the State
Government having the registered office of the trad-
ing member or broker of such buyer and in case
where there is no such trading member of the buyer,
to the State Government having the registered office
of the participant:
Provided that before such transfer, the stock
exchange or the clearing corporation authorised by
it or the depository shall be entitled to deduct such
percentage of stamp-duty towards facilitation
charges as may be specified in such rules.
Explanation.- The term "participant" shall have
the same meaning as assigned to it in clause (g) of sec-
tion 2 of the Depositories Act, 1996.
(5) Every stock exchange or the clearing corpora-
tion authorised by it and depository shall submit to
the Government details of the transactions referred
to in sub-section (1) in such manner as the Central
Government may, by rules, provide.
9B. Notwithstanding anything contained in this
Act, —
(a) when any issue of securities is made by an issuer
otherwise than through a stock exchange or depos-
itory, the stamp-duty on each such issue shall be
payable by the issuer, at the place where its regis-
tered office is located, on the total market value of
the securities so issued at the rate specified in
Schedule I;
(b) when any sale or transfer or reissue of securities
for consideration is made otherwise than through
a stock exchange or depository, the stamp-duty on
each such sale or transfer or reissue shall be payable
by the seller or transferor or issuer, as the case may
be, on the consideration amount specified in such
instrument at the rate specified in Schedule I.".
16. In section 21of the principal Act,
(a) for the words "the value of such stock or securi-
ty according to the average price or the value there-
of on the day of the date of the instrument.", the
words "the market value of such stock or security:"
shall be substituted;
(b) the following proviso shall be inserted,
namely: —
“Provided that the market value for calculating the
stamp-duty shall be, in the case of
(i) options in any securities, the premium paid by
the buyer;
(ii) repo on corporate bonds, interest paid by the
borrower; and
(iii) swap, only the first leg of the cash flow.”
17. In section 29 of the principal Act, —
(i) in clause (a),
(a) the words, figures and brackets “No. 27
(Debenture)” shall be omitted;
(b) the words, figures, brackets and letter “No. 62
(a) (Transfer of shares in an incorporated Company
or other body corporate)” shall be omitted;
(c) the words, figures, brackets and letter “No. 62
(b) (Transfer of debentures, being marketable
securities, whether the debenture is liable to
duty or not, except debentures provided for by
25 section 8)” shall be omitted;
(ii) in clause (e), after the word “exchange”, the
words “including swap” shall be inserted;
(iii) in clause (f), the word “and” shall be omitted;
(iv) after clause (g), the following clauses shall be
inserted, namely: —
“(h) in the case of sale of security through stock
exchange, by the buyer of such security; 30
(i) in the case of sale of security otherwise than
through a stock exchange, by the seller of such
security;
(j) in the case of transfer of security through a
depository, by the transferor of such security;
(k) in the case of transfer of security otherwise
than through a stock exchange or depository, by
the transferor of such security;
(l) in the case of issue of security, whether through
a stock exchange or a depository or otherwise, by
the issuer of such security; and
(m) in the case of any other instrument not spec-
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INTERIM BUDGETz THE FINANCE BILL 11
— BUDGET SPEECH ON FEBRUARY 1
ified herein, by the person making, drawing or
executing such instrument.".
18. After section 62 of the principal Act, the following
section shall be inserted, namely:-
"62A. (1) Any person who,--
(a) being required under sub-section (1) of section
9A to collect duty, fails to collect the same; or
(b) being required under sub-section (4) of section
9A to transfer the duty to the State Government
within fifteen days of the expiry of the time spec-
ified therein, fails to transfer within such time,
shall be punishable with fine which shall not be
less than one lakh rupees, but which may extend
up to one per cent. of the collection or transfer so
defaulted.
(2) Any person who,--
(a) being required under sub-section (5) of section
9A to submit details of transactions to the
Government, fails to submit the same; or
(b) submits a document or makes a declaration
which is false or which such person knows or believes
to be false, shall be punishable with fine of one lakh
rupees for each day during which such failure con-
tinues or one crore rupees, whichever is less.
19. After section 73 of the principal Act, the following
section shall be inserted, namely:--
"73A. (1) The Central Government may, by notifi-
cation in the Official Gazette, make rules for carry-
ing out the provisions of Part AA of Chapter II.
(2) Without prejudice to the generality of the pro-
visions of sub-section (1), the Central Government
may make rules for all or any of the following mat-
ters, namely: —
(a) the manner of collection of stamp-duty on
behalf of the State Government by the stock
exchange or the clearing corporation authorised
by it, from its buyer under clause (a) of sub-section
(1) of section 9A;
(b) the manner of collection of stamp-duty on
behalf of the State Government by the deposito-
ry from the transferor under clause (b) of sub-
section (1) of section 9A;
(c) the manner of collection of stamp-duty on
behalf of the State Government by the deposito-
ry from the issuer under clause (c) of sub-section
(1) of section 9A;
(d) the manner of transfer of stamp-duty to
the State Government under sub-section (4) of
section 9A;
(e) any other matter which has to be, or may be,
provided by rules.”.
20. In section 76 of the principal Act, after sub-section
(2), the following sub-section shall be inserted,
Amendment namely: —
“(2A) Every rule made by the Central Government
under this Act shall be laid, as soon as may be after it
is made, before each House of Parliament, while it is
in session, for a total period of thirty days which may
be comprised in one session or in two or more suc-
cessive sessions, and if, before the expiry of the ses-
sion immediately following the session or the suc-
cessive sessions aforesaid, both Houses agree in
making any modification in the rule or both Houses
agree that the rule should not be made, the rule shall
thereafter have effect only in such modified form or
be of no effect, as the case may be; so, however, that
any such modification or annulment shall be without
prejudice to the validity of anything previously done
under that rule.”
21. In Schedule I of the principal Act, —
(i) in Article 19, in column (1), —
(a) after the words “CERTIFICATE OR OTHER
DOCUMENT”, the brackets, words, figures
and letter “(except the certificate or other
document covered under Articles 27 and 56A)”
shall be inserted;
(b) the words, brackets and figures “See also
LETTER OF ALLOTMENT OF SHARES (No. 36)”
shall be omitted;
(ii) for Article 27 and the entries relating thereto, the
following Article and entries shallbe substituted,
namely: —
(1) (2)
"27. DEBENTURE-[as defined by
section 2 (10A)] (see sections 9A and 9B)
(a) in case of issue of debenture; 0.005%
(b) in case of transfer and re-issue
of debenture. 0.0001%";
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(iii) in Article 28, for the entry in column (1), after the
words "DELIVERY ORDER IN RESPECT OF
GOODS,", the brackets and words "(excluding deliv-
ery order in respect of settlement of transactions in
securities in stock exchange)" shall be inserted;
(iv) in Article 36, for the entry in column (1), the fol-
lowing entry shall be substituted, namely:--
"36. LETTER OF ALLOTMENT in respect of any
loan to be raised by any company or proposed
company.";
(v) after Article 56 and the entry relating thereto, the
following Article and entries shall be inserted,
namely:--
(1) (2)
"56A. SECURITY OTHER THAN
DEBENTURES
(see sections 9A and 9B)--
(a) issue of security other than debenture; 0.005%
(b) transfer of security other than
debenture on delivery basis; 0.015%
(c) transfer of security other than
debenture on non-delivery basis; 0.003%
(d) derivatives--
(i) futures (equity and commodity) 0.002%
(ii) options (equity and commodity) 0.003%
(iii) currency and interest rate derivatives 0.0001%
(iv) other derivatives 0.002%
(e) Government securities 0%
(f) repo on corporate bonds 0.00001%";
(vi) in Article 62, items (a) and (b) and the entries
relating thereto shall be omitted.
PART II
AMENDMENT TO THE PREVENTION OF
MONEY-LAUNDERING ACT, 2002
22. In section 8 of the Prevention of Money-laun-
dering Act, 2002, in sub-section (3), with effect from
such date as the Central Government may, by notifi-
cation in the Official Gazette, appoint,--
(i) in clause (a), for the words "ninety days", the
words "three hundred and sixty-five days" shall be
substituted;
(ii) after clause (b), the following Explanation shall
be inserted, namely:--
"Explanation.-- For the purposes of computing
the period of three hundred and sixty-five days under
clause (a), the period during which the investigation
is stayed by any court under any law for the 40 time
being in force shall be excluded.".
STATEMENT OF OBJECTS AND REASONS
The object of this Bill is to continue the existing
rates of income-tax for the financial year 2019-2020
and to provide certain relief to taxpayers and to make
amendments in certain enactments.
2. Clause 2 of the Bill seeks to provide for the rates
of income-tax. The rates of income-tax which were
specified in Part III of the First Schedule to the
Finance Act, 2018 for the purposes of charging
income-tax in certain cases, deduction of tax at
source from salaries during the financial year 2018-
2019, computation of “advance tax” payable during
that financial year in relation to current incomes and
for certain special purposes, are proposed to be con-
tinued for the purposes of assessment for the assess-
ment year 2019-2020. Further, the same rates are
proposed to be continued also for the purposes of
charging income tax in certain cases, deduction of tax
at source from salaries during the financial year 2019-
2020, computation of “advance tax” payable during
that financial year in relation to current incomes,
and also for the said special purposes.
3. The rates for deduction of tax at source during
the financial year 2018-2019 from incomes other than
salaries specified in Part II of the First Schedule to the
Finance Act, 2018, are also proposed to be continued
for deduction of tax at source from such incomes
during the financial year 2019-2020.
4. It accordingly proposes to apply the provisions
of section 2 of, and the First Schedule to, the Finance
Act, 2018, with consequential and other necessary
modifications, to the assessment year 2019-2020 or,
as the case may be, the financial year 2019-2020.
5. Clause 3 of the Bill seeks to amend section 16 of
the Income-tax Act to provide relief to the salaried
taxpayers by way of increasing the amount of deduc-
tion from salary income, from existing forty thousand
rupees to fifty thousand rupees.
6. Clause 4 of the Bill seeks to amend section 23
of the Income-tax Act so as to provide relief to the
taxpayer by allowing him an option to claim nil
annual value in respect of any two houses, declared
<
PHOTO: REUTERS
as self-occupied, instead of one such house as cur-
rently provided. It further seeks to provide relief to
the taxpayers that notional rent in respect of unsold
inventory shall not be charged to tax up to two
years, instead of existing one year, from the end of
the financial year in which the certificate of com-
pletion is obtained from the competent authority.
7. Clause 5 of the Bill seeks to amend section 24 of
the Income-tax Act to provide that the monetary lim-
it of deduction on account of interest payable on bor-
rowed capital shall continue to apply to the aggregate
of the amounts of deduction in case of more than one
self-occupied houses.
8. Clause 6 of the Bill seeks to amend section 54
of the Income-tax Act so as to provide relief to the
taxpayers having long-term capital gains up to two
crore rupees, arising from transfer of a residential
house, by affording the assessee a one time oppor-
tunity, at his option, to utilise the said amount for
the purchase or construction of two residential
houses in India instead of one residential house as
currently provided.
9. Clause 7 of the Bill seeks to amend section 80-
IBA of the Income-tax Act so as to augment the
supply of affordable houses by extending the time
limit from 31st March, 2019 to 31st March, 2020 for
obtaining approval of the housing project for avail-
ing deduction.
10. Clause 8 of the Bill seeks to amend section
87A of the Income-tax Act to provide relief to the
individual taxpayers by increasing the maximum
amount of tax rebate to twelve thousand five hundred
rupees from existing two thousand five hundred
rupees. The tax rebate shall now be admissible to
taxpayers having total income up to five hundred
thousand rupees, instead of existing three hundred
fifty thousand rupees.
11. Clause 9 of the Bill seeks to amend section
194A of the Income-tax Act so as to ease the burden
of compliance by way of increasing the threshold
limit from ten thousand rupees to forty thousand
rupees, for deduction of tax at source on interest
income, other than interest on securities, paid by a
banking company, co-operative society or a post
office.
12. Clause 10 of the Bill seeks to amend section
194-I of the Income-tax Act to rationalise the thresh-
old limit from one hundred and eighty thousand
rupees to two hundred and forty thousand rupees, for
deduction of tax at source on rental income.
13. Clauses 11 to 21 of the Bill seek to amend the
Indian Stamp Act, 1899 for levy and administration
of stamp duty on securities market instruments by
the States at one place through one agency, viz.,
through Stock Exchanges or its Clearing Corporation
or Depositories on one instrument, and for appro-
priately sharing the same with respective State
Governments based on State of domicile of the ulti-
mate buying client.
14. Clause 22 of the Bill seeks to amend sub-sec-
tion (3) of section 8 of the Prevention of Money-laun-
dering Act, 2002 so as to extend the time limit of
ninety days for which the attachment shall remain
valid during the period of investigation to three hun-
dred and sixty-five days and also to provide that in
computing the period of three hundred and sixty-five
days, the period during which the investigation is
stayed by any court shall be excluded.
PIYUSH GOYAL.
NEW DELHI;
The 30th January, 2019.
PRESIDENT'S RECOMMENDATION UNDER
ARTICLES 117 AND 274 OF THE
CONSTITUTION OF INDIA
[Copy of letter No. 2(5)-B(D)2019, dated the 30th
January, 2019 from Shri Piyush Goyal, Minister of
Finance, to the Secretary-General, Lok Sabha.]
The President, having been informed of the sub-
ject matter of the proposed Bill, recommends under
clauses (1) and (3) of article 117, read with clause (1) of
article 274, of the Constitution of India, the intro-
duction of the Finance Bill, 2019 to the Lok Sabha and
also recommends to the Lok Sabha the consideration
of the Bill.
2. The Bill will be introduced in the Lok Sabha
immediately after the presentation of the Budget on
the 1st February, 2019.
LOK SABHA
A
BILL
to continue the existing rates of income tax for the
financial year 2019-2020 and to provide for certain
relief to taxpayers and to make amendments in cer-
tain enactments.
Shri Piyush Goyal,
Minister of Finance
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12 INTERIM BUDGET & OPINION
>
MUMBAI | FRIDAY, 2 FEBRUARY 2019

Modi scores over Economy caught in a 3.5%/7.5% trap?

Manmohan’s The notion of the fiscal deficit falling steadily and making way for a rise in private
investment and faster growth is beginning to look doubtful
UPA-II it for income tax. The finance minister revenues of 15 per cent seems reason-
has indeed cast the net for votes pretty able compared with the increase of 19
ther to 12.4 per cent and 12.7 per cent
in 2019-20 and 2020-21 respectively.
wide. per cent in 2018-19. But it hinges cru- The Budget for 2019-20 pours cold
The five things Modi has got right on the The question, as always, is what the cially on an increase in goods and serv-
government’s spending plans and ices tax (GST) collections of 18 per cent.
water on these hopes. It shows the tax-
to-GDP ratio as 11.9 per cent in 2018-19
giveaways mean for fiscal consolida- The Fiscal Responsibility and and stagnant at 12.1 per cent in 2019-20
political economy shows good tion. In the present Budget, the pic- Budget Management (FRBM) Act target and 2020-21.
ture is rendered even murkier than of a fiscal deficit-to-GDP ratio of 3 per The truly bad news is on the expen-
economics isn’t necessarily bad politics usual by the latest gross domestic cent is beginning to look like a distant
product (GDP) growth numbers dream. The Finance Act 2018, moved
diture side. The total expenditure-to-
GDP ratio declined from 14.3 per cent in
FINGER ON THE PULSE released two days before the Budget. the target of 3 per cent from 2018-19 to 2010-15 to 13 per cent in 2018-19. In
the government holding its nerve and The Budget estimates GDP growth of 2020-21. The target for 2018-19 was set 2019-20, it rises to 13.3 per cent. This is
keeping oil prices high. T T RAM MOHAN 7.2 per cent for 2018-19. Based on the at 3.3 per cent and that for 2019-20 at only the beginning. The cash transfer to
Inflation-targeting, therefore, is the revised figures for 2016-17 and 2017-18 3.1 per cent. The revised farmers (which amounts to 0.36 per
second big success of the Modi govern- issued by the Central figures now are 3.4 per cent of GDP) is below the range of 0.5-

T
ment’s somewhat instinctive and non- he interim Budget for 2019-20 Statistics Office (CSO), cent for both the years. 1.5 per cent that most economists
academic doctrine of political economy. has “general elections” writ all it appears that GDP Meeting the target of 3 regard as reasonable support. It is
Most Indian governments have been over it. The big ticket item is, of growth for 2018-19 There appears to be per cent in 2020-21 bound to rise further in the years to
tempted to let fuel prices fall and buy course, the cash transfer scheme for would be closer to 6 per a growing would be a tall order. come. There is no sign that subsidies
peace with the noisy urban elites. farmers that will cost ~75,000 crore. cent! The Budget for perception amongst The time may have will fall to make way for income support
The politics of prices, however, has a There is also an interest subvention of 2019-20 assumes nomi- the political class come to revisit the — these remain at 1.4 per cent of GDP.
NATIONAL INTEREST mystique of its own. UPA-I increased 5 per cent on timely repayment of farm nal growth of 11.5 per that faster growth FRBM targets. One rea- The notion of the fiscal deficit falling
farm Minimum Support Prices (MSPs) loans. The middle class is being wooed cent which would trans- won’t create jobs son is that the value of steadily and making way for a rise in
SHEKHAR GUPTA relentlessly, made the farmer and farm just as assiduously. There is a doubling late into real GDP fast enough, and these targets is under- private investment and faster growth
labour feel much better, and easily won of the income tax exemption limit to ~5 growth of almost 8 per therefore, welfare mined by resort to off- is beginning to look doubtful. The fail-
a second term. In its second term con- lakh. The standard deduction for cent (based on the earli- spending needs to budget financing, as the ure to quickly resolve the twin balance
be increased

D
epending entirely on where your
voting preference lies, the
Narendra Modi government has
either performed brilliantly or disas-
trously on the economy in its five years.
Its fans say, look at the data. Critics
counter, indeed, look at the data, but
how do we judge when you merrily
fudge? We shall let the experts on both
sides wrestle over it, and merely take a
broader view of five years of the political
economy under the Modi government.
As the Modi government’s five-year
term ends, let us list the five things it
has got right. I repeat, for emphasis, that
I look at this picture from the lens of pol-
itics, or political economy, not pure eco-
nomics. Hence, in my book, the biggest
positive is implementation of the IBC, or
Insolvency and Bankruptcy Code
process.
It is true that only 12 defaulters have
sumer food prices rocketed and wide-
spread stress built up, destroying it. The
Modi government, now, made consumer
food prices crash, some by refusing to
increase MSPs, and some by over-enthu-
siastic encouragement (as with pulses),
without bothering about market forces.
As a result, the farmer got pauperised
and farm labour wages fell. It was only in
the last three crop cycles that the NDA
started increasing MSPs. But it is too
soon to make an impact. Rahul Gandhi,
therefore, is not wrong to say that the
farmer has lost out in the five Modi years.
It is a cruel political truism that as
long as interests of the consumer and
the farmer are contradictory, a govern-
ment could lose power as much for high
prices as for record lows. The only way
out of that chakravyuha would be
sweeping agricultural reform, which the
NDA entirely failed to do.
salaried employees goes up from
~40,000 to ~50,000. These two propos-
als themselves amount to giveaways of
~23,200 crore.
There is more in this vein. For capi-
tal gains up to ~2 crore, rollover of cap-
ital gains under Section 54 of the
Income Tax Act will be allowed for two
residential houses instead of one. The
government’s contribution to the New
Pension Scheme for government
employees has been increased from 10
per cent to 14 per cent. For unorgan-
ised workers, the government dangles
the prospect of pension of ~3,000 per
month. The cash transfer scheme is
estimated to cover 12 crore farmers.
About 3 crore taxpayers will benefit
from the increase in the exemption lim-
er CSO estimates). How Comptroller and sheet problem is hampering private
the fiscal deficit-to-GDP Auditor General (CAG) investment. The revised budget esti-
ratio will pan out based report on FRBM per- mates for 2018-19 do not have the addi-
on the revised GDP formance in 2016-17 has tional allocation promised for recapi-
numbers is anybody’s guess. pointed out. The CAG recommends talisation of public sector banks; the
Even without this complication, the full disclosure of off-budget financing Budget for 2019-20 has no allocation at
fiscal deficit-to-GDP ratio of 3.4 per cent in the Budget. Only then would we all.
for 2018-19 would be hard to meet with- have a correct picture of fiscal deficits More importantly, there appears to
out expenditure compression. The over various financial years and arrive be a growing perception amongst the
revised estimates for 2018-19 assume at targets that are meaningful. political class that faster growth will
total tax revenues to be in line with the The other reason is that fiscal con- not create jobs fast enough and, there-
Budget estimates when we know that so solidation rests on a rising tax-to-GDP fore, welfare spending needs to be dras-
far tax revenues have lagged behind ratio and a declining expenditure-to- tically increased. In the medium term,
targets. This allows the finance minis- GDP ratio. The Budget for 2018-19 held there appears no easy way out of the
ter to actually show an increase in cap- out the promise of both happening. combination of a fiscal deficit of 3.5 per
ital expenditure over the Budget esti- The tax-to-GDP ratio for the Centre cent and growth rate of 7.5 per cent.
mate. It is more likely that the figure for rose impressively from an average of
capital expenditure will end up getting 10.2 per cent in 2010-15 to 12.1 per cent The writer is a professor at IIM Ahmedabad.
pruned. For 2019-20, the increase in tax in 2018-19. It was projected to rise fur- ttr@iima.ac.in

A Budget clearly focused on polls

been put under bankruptcy proceedings
yet. But these are the 12 biggest and the
most powerful. What follows is that these
are the types with the most number of
powerful politicians and civil servants
on speed-dial, with many accumulated
IOUs. The fact that none of them has
been able to secure a “phone-banking”
reprieve, not even the mighty Ruias of
Essar, shows a new political intent.
See it this way. Once you know there
is no possibility of getting a reprieve or
ever-greening through a “friendly”
phone call, you learn to deal with a new
era in Indian capitalism. Where bank-
W hat did the Modi government do
with all this additional money it
collected from fuel taxes? The answers
lies in the next thing we think they got
right—cutting fiscal deficit, despite all
the tens of thousands of crores paid out
The rebate for individual taxpayers encouraging faceless and paperless inter- ginal taxpayers from the burden of com-
action with the taxpayer. This move will pliance and seeking tax refunds, besides
in voter giveaways, largely because of
this oil bonanza. is not as bold as it looked when have far reaching impact on digitisation freeing up the tax administration’s
of records including real time data ana- machinery to focus on important tasks.
While enormous investments have lytics for the administration to monitor Increase in standard deduction for the
been pumped into the highways, we take
inadequate notice of the ports,
it was announced taxpayer trends. salaried class from ~40,000 to 50,000 and
An important highlight of direct tax gratuity exemption from ~10 lakhs to 30
Sagarmala projects, the northeast and “This is not merely an Interim Budget, but Though only two pages were devoted proposals included focus on real estate lakhs again is targeted to enhance dis-
the railways. Broader data tells us that a medium of the country's development to Part B of the speech, which dealt with sector, particularly for low housing proj- posable income of citizens.
India’s infrastructure spending has journey — FM” tax proposals, an important announce- ects. Besides extending the sunset clause The Budget documents on tax rev-

ruptcy is an inevitability if your busi-
ness fails. For its capitalism to come of
age, a society has to learn to accept the
bitter fact of failure. In India, bankrupt-
cy has been seen as a family embarrass-
ment to be hidden.
An avowedly Left-socialist, but
“phone-banking” state was complicit in
this. The Modi government ended that.
The big boys are going bust. It is out of
this bonfire of corporate vanities that a
new Indian capitalism can emerge. I see
this as essentially a welcome political
and cultural change.
T he Modi government has faced
much criticism for keeping prices of
petroleum high, despite falling crude.
But if it hasn’t caused the kind of outcry
as it did under the UPA, it is because the
consumer also watches the total shop-
ping bill at the end of the month. The
Modi years have seen high oil prices, but
low inflation overall, particularly food.
No one is still calling the inflation data
fudged, nor has it been re-set retrospec-
tively unlike the GDP. So we can make a
fair comparison.
When the Modi government took over
in the summer of 2014, UPA-II had hand-
ed it an economy with retail inflation
(based on consumer price index) at 8.33
per cent. Today, as of December 2018, it is
just 2.19 per cent. This, mind you, despite
increased about three times in the past
10 years as a percentage of the GDP, and
much of this has come in the last four.
Helping this along is the fourth of the
five successes in our list: Improvement in
tax compliances and tax to GDP ratio from
about 9 to 12 per cent of a much larger
GDP. At higher levels, the taxman has been
rough, drawing charges of tax-terrorism.
But at lower- and middle-class levels, the
reforms in tax administration have been
effective, greatly reducing human inter-
face. If you aren’t a sizeable business or
specifically targeted by the “agencies” or
politically victimised, your experience
with the taxman is cleaner. The fifth and
last, indeed, is the goods and services tax
(GST). It had its hiccups and discontents in
BJP’s core constituency of traders. But it
stayed the course.
Of course, there are many areas of fail-
ure, from agriculture to exports, and from
manufacturing to jobs to unreformed
PSUs and, finally, the globally embarrass-
ing data fudges. There was also demon-
etisation, which rivalled in its nuttiness
Mao’s war on the sparrows. We’ve been
complaining about these things and more,
and will continue to do so. This week, we
acknowledge the rarer instances of a gov-
ernment showing that good economics
isn’t necessarily bad politics, or vice versa.
By special arrangement with ThePrint
I
n line with successive finance minis-
ters who have presented an interim
Budget, the vote on account for 2019,
as presented by the interim finance min-
ister (FM) is no different. High on sloga-
neering, the FM highlighted achieve-
ments of the Narendra Modi
government, trends on increase in tax
base laying down 2030 vision as to where
the Indian economy could possibly be
heading in the next five to eight years
estimating it to touch $5-10 trillion,
respectively. Highlighting accomplish-
ments of the government’s flagship
schemes, the focus clearly was to con-
tinue pursuing transparency agenda be it
by way of disruptive policy moves such as
demonetisation or enforcement of tough
laws such as Fugitive Economic
Offenders Act, etc.
On predictable lines, rural distress
appeared on top of the agenda, with FM
using the term kisan or ’farmer’ over 30
times in his speech. The focus was to
address agrarian crisis that I expected to
have been achieved by capital invest-
ments; instead dole outs were announced
— a short term approach to revive the for-
tunes of a segment of the economy whose
share in the GDP basket is witnessing con-
sistent decline. On broader policy aspects,
there was a little of everything including
for youth, women, national security,
MSMEs, labour, etc in the Budget.
ment was on the digitisation project,
Cabinet approval for which came a fort-
night ago. As a background, in 2009, the
THE DIRECT TAX
AGENDA
MUKESH BUTANI
Department of Revenue, Income Tax in
particular, embarked upon setting up a
Central Processing Centre (CPC) in
Bengaluru to streamline the process of
granting automated tax refunds. The
Budget announcement and Cabinet
approval, rebranded as "Integrated E-
Filing and CPC 2.0", has increased the
allocation three times. The underlying
objective being faster and accurate out-
come for taxpayers, improving taxpayer
awareness and education, e-assessments,
etc besides accuracy to process tax
refunds. The digital drive is expected to
roll out international best practices
for tax exemption by a year, which was enue receipts reveal a 13 per cent bud-
expiring on March 31, 2019, developers geted increase in Corporate Tax collec-
who were paying taxes on notional rent tion over the current fiscal year on the
for unsold inventory have been exempt- back of 17 per cent expected to be
ed for a period of two years. This has been achieved for this year. The individual tax
a long-standing demand of real estate collections that have shown an impres-
developers. Following this trend, indi- sive trend of 23 per cent in the current
viduals with second residential house are year is estimated to increase by 17 per
exempted from taxability of such notion- cent in the next fiscal year. Not surpris-
al rent. Similarly, though the overall lim- ing, the goods and service tax target has
it of ~2 lakhs deduction towards housing been revised downwards by ~1 lakh crore
loan remain unchanged, such benefit in light of subdued collections, though
shall extend to second estimated to increase by
residential house. Lastly,
capital gains exemption On predictable lines,
18 per cent in the next fis-
cal year. These are bold
rural distress
up to ~2 crores by way of
investment in the second
residential house has
appeared on top of
the agenda, with FM
bets, and I guess, that’s
how the fiscal math adds
up to. The guiding phi-
been introduced. The using the term losophy on fiscal deficit
overall impact of tax pro- kisan or ’farmer’ target could be, "We shall
posals, insofar as, the over 30 times in his cross the bridge when
housing sector is con- speech and if we get there".
cerned shall positively Though this is a challenge
impact segments that for every new govern-
support the sector. Cement, steel, paint, ment, even if the same party returns to
housing finance companies would bene- power, what is important to debate is that
fit from these proposals. having introduced an entitlement, how
The rebate for individual taxpayers is challenging it is to reverse such decisions!
not as bold as it looked when it was Better leave this to the wisdom of
announced. It will benefit only if the tax- Economists!!
able income is less than ~5 lakhs with
relief of roughly ~900-1,000 per month. The writer is managing partner, BMR Legal.
The enhancement of withholding tax on The column has been written with assistance
bank interest and rentals shall save mar- from Joseph K Antony, advocate

The formula for success of farm economy

The government must focus on four key areas in order to fulfill the initiatives announced
tives aim to help tackle rural distress
and increased remuneration for farmers
in the longer run.
In my view, four key areas that need
work include:
1. Direct benefit transfers to
farmers
While a lot of measures have already
been initiated by the government, this
SIRAJ CHAUDHRY budget saw the introduction of the PM
Kisan Plan that will transfer additional
direct income of ~6,000 per year to
distress and supplement government’s
efforts of doubling farmers’ income by
easing farmers’ financial burden. This
needs to be done in parallel with
replacement of all fertiliser, electricity,
irrigation and other similar subsidies
to make direct income transfer pro-
grammes effective. States such as
Odisha and Telangana, have already
adopted such programmes over farm
loan waivers that have been the tradi-
tional recourse.
2. Improving farm productivity
With India in this phase of IT revo-
lution, the need for integrating tech-
nology comes largely from the fact that
India’s population is rapidly increasing
with limited natural resources available.
And this while consumers are becoming
more and more aware and health con-
scious demanding transparency and
traceability even in developing markets
like India.
With advances in biotechnology, farm-
ers can use a wide variety of new bio-
science technologies to increase yields
of the Indian farm economy. However,
there is still a need for greater farmer:
market linkage. If the focus is on pro-
ducing what the market needs, the
demand and remuneration will auto-
matically scale upwards. The industry is
already playing a vital role in enabling
the farmers to shift from traditional
crops to more remunerative crops.
Emphasis on educating the farmers to
deal with markets is also essential.
Imparting entrepreneurial skills to the
youth so that they can be confident in
tion scheme announced of two per cent
interest subvention for farmers hit by
natural calamities, while offering three
per cent more to them for timely loan
payment will aid farm income increase.
On the other hand, technology that is
available needs to be deployed to reduce
risk in areas of weather prediction, soil
improvement, dry land farming, seed,
pesticides, fertilisers, irrigation, farm
equipment and delivering services in
the form of financing, crop insurance
and agri extension. All this will help
farmers invest in better sustainable pro-
duction tools with even better approach
to help them mitigate climatic risks.
Along with this the government also
needs to ensure farmers get linked to
the banking system in order to strength-
en their access to finance.
The formula for success of farm

T
he agriculture sector was quite the
focus in the Union Budget 2018-19
and that continued in the interim
Budget presented on February 1, 2019.
Proposals addressing growth of farmer
income and stimulating rural economy
found center stage in today’s
announcements. Whether it is the direct
income support scheme launched,
interest subvention on farm loans to
farmers’ animal husbandry and fish-
eries or increased Mahatma Gandhi
National Rural Employment Guarantee
Act (MGREGA) outlay, all these initia-
small holder farmers holding under 2
hectares of land. We need to see good
implementation of Direct Benefit trans-
fers (DBT) so that it can work for bet-
terment of farmers giving them the free-
dom to operate as per market demands.
But this requires an accurate assess-
ment of land records and a plan to
include farmers who are not land own-
ers. Additionally, it will not distort mar-
ket with increased focus on few crops,
leakage of subsidised inputs and unsus-
tainable agricultural production.
DBT is aimed at reducing agrarian
This can be done by focusing on farm
mechanisation, leveraging technology
at farm level, investing in seed and
biotechnology. In India, mechanisation
of agriculture has been in progress at a
reasonable pace but we need to embrace
it more widely for it to show results.
Deploying technology in the farm sector
helps farmers not just in improving farm
and labour efficiency, but improvements
in both quantity and quality as well as
value addition of farm produce with bet-
ter utilisation of natural resources.
while reducing costs. It can help in pro-
ducing high-nutrient staple crops which
can combat undernourishment and
enhance food utilisation. Biotechnology,
thus, is quite an essential for countries
like India, where malnutrition and pover-
ty remain serious concerns.
3. Connect farmers to markets and
food processing industry
Better integration with focus on agri-
exports, National Agriculture Market or
fast tracking eNAM, etc are all good ini-
tiatives working towards improvement
understanding future markets, working
the crop economics etc.
From the government side, a balance
is needed between protecting farmers’
interests through the use of subsidies,
price floors or trade barriers and con-
sumer interests as this may come in the
form of higher prices for consumers.
4. Risk mitigation
For a large number of farmers in India,
uncertain weather conditions affecting
crops and insecure land ownership are
major concerns. The interest subven-
economy is very simple - farmers should
be able to produce more from the same
piece of land at reduced cost while min-
imising risk and be connected to market
to get higher realisation for their pro-
duce. These measures should be
focused on by the government (with the
support from industry of course) as a
combination of risk mitigation and
reward enhancement for the large
Indian population dependent on agri-
culture for their livelihood.
The writer is senior advisor, Cargill India

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INTERIM BUDGET & OPINION 13

Volume VI Number 27

CONCERNS FOR FISCAL POLICY

MUMBAI | 2 FEBRUARY 2019

Controlled hand-outs Proper institutional apparatus can bring rationality in our budgetary process
Fiscal discipline has been maintained
in an election year ity in these areas that is seen with one-
rank-one-pensions. The administrative

A
s pre-election Budgets go, Piyush Goyal’s isn’t too capacity to execute these systems has
bad. While vote-oriented announcements cost not yet been built, and most citizens
about ~1 trillion (or about half of 1 per cent of next have not felt promises translate into
year’s GDP), the fiscal deficit will remain unchanged action, so policy makers continue to
from this year’s revised figure of 3.4 per cent of GDP. A pause have wiggle room to extricate them-
selves. But this window for policy flexi-
in fiscal correction is tolerable, whereas a reversal of direction bility is closing as the implementations
would have been a much more negative development. It could
well have been a reversal if any of the hairier schemes for a
THE BIG come about.

basic minimum income had been announced. Still, the deficit

PICTURE Policy makers worldwide have learned
the hard way that these kinds of entitle-
could climb for the current year if the somewhat ambitious AJAY SHAH ment programmes are a very troublesome
matter, and every decision should be
Revised Budget numbers don’t materialise — especially on
made while comparing the short-term
corporation tax revenue and disinvestment proceeds. Already,

W
hile we take in the interim
the scale of the government’s borrowing programme has told Budget, this is a good time to
on interest rates in the bond market, while the government’s think about the larger picture.
debt-to-GDP ratio has climbed instead of falling. The budgetary process and fiscal policy in
Over the five years, the government has done very well to India now face two big problems. The first
is the mismeasurement of GDP and poten-
raise the tax-to-GDP ratio from 10.1 per cent in 2013-14 to 11.9
tially its over-estimation. This has impor-
per cent in the revised numbers for the current year. Tax tant consequences for tax targets and the
compliance too has improved if one is to judge by the rise in bond issuance programme. The second
the numbers paying income tax. The fiscal correction is the emergence of population-scale enti-
achieved over the period (about 1.1 per cent of GDP) is also tlement programmes. These have induced
creditable. The primary deficit (fiscal deficit minus interest adverse effects upon the political econo-
my worldwide; India will need to build
payable on accumulated debt) is negligible, so almost all of the
the countervailing forces to check and bal-
deficit is on account of past sins. But the target deficit of 3 per ance the political imperative.
cent is perennially receding; next year the Finance The interim Budget will be in force
Commission’s recommendations on sharing resources with for April-June, and then the next team
the states could impose additional pressures. In fact, the cur- will come out with a July Budget speech
rent year’s numbers benefit from a decline in budgeted trans- which will make decisions that will shape
Union government policy for the rest of
fers to states.
the year. This last Budget is, however, a
What of the election-oriented announcements? The gov- good time to stop and take stock of the
ernment’s defence of the announcement carrying the biggest Indian budgetary process and the chal-
ticket (~75,000 crore as income support for small and marginal lenges of fiscal policy.
farmers) is that it compensates for depressed prices for farm The first looming question that I see is
output, and therefore is nothing more than compensation for that of GDP data. Everyone knows that
official statistics in India are untrustwor-
adverse terms of trade. This sounds logical, except that most thy. This is considered an obscure prob-
small and marginal farmers do not have a surplus to unload lem, of interest to only economists.
on to the market. The unalloyed truth would be that this is one However, GDP data has direct conse-
more step towards creating a minimal welfare state. It comes quences in one sphere: budget-making.
tinged with politics, for no effort is made to dovetail it with In each Budget process, the GDP num-
similar schemes announced by states — naturally, since what ber comes in, gets multiplied by roughly
0.08, and this becomes the target for the
the central government looks for is political credit. vast tax bureaucracy. Errors in GDP esti-
The other welfare measure, a pension plan for workers in mation induce errors in the tax targets.
the unorganised sector, with the government paying half the The tax revenue for 2018-19 was 7.9 per
cost, is a post-dated cheque that might become burdensome cent of GDP, and the tax target for 2019-20
in the fullness of time, just as many open-ended welfare pro- has been set to 8.1 per cent of GDP.
grammes have become in even rich countries. As for We in India are reasonably certain
that there are important errors in GDP
estimation. Some independent data
sources — corporate sales, corporate
profits, private investment — suggest
that the official GDP data is over-esti-
mated. As an example, from 2014-15 to
2017-18 (three years), nominal GDP went
up by 37 per cent but the nominal net
sales of the 5,019 non-oil, non-finance
companies went up by 22 per cent.
If GDP is over-estimated, the tax tar-
gets are too high. We get an overzealous
army of tax inspectors pushing the econ-
omy too hard. This becomes one source
of stress for the economy.
In 2014-15, the net tax revenue (BE)
was ~9.8 trillion and was supposed to be
7.5 per cent of GDP. Five years later, it
stands at ~17.1 trillion and is supposed to be
8.1 per cent of GDP. Did nominal GDP go
up by 62 per cent in these five years, as was
assumed in making the Budget?
The Budget calculations that lead up to
the bond issuance programme are also
affected by mismeasurement of GDP. If
GDP is over-estimated, the magnitude of
bond sales is too large, compared with
what the economy can absorb.
While the lack of GDP data really
harms tax policy, it is possible to keep
government debt on track even when
GDP is mismeasured. There is one robust
rule about debt dynamics that does not
require a GDP estimate. If we run a pri-
ILLUSTRATION BY BINAY SINHA
mary surplus, we are paying down debt
and the debt/GDP ratio is going down
for sure, even if we do not know what
GDP is. It would be prudent for fiscal pol-
icy makers in our data-poor environment
to use such a rule.
Right now, in India, the primary deficit
is about ~40,000 crore. To come up to the
demands of this robust rule requires a
reduction of the deficit by ~40,000 crore,
which is not a large adjustment. This
would protect us from the possibility of
faulty fiscal policy calculations flowing
from faulty GDP estimates.
The second looming concern in public
finance is the rise of population-scale enti-
tlement programmes. When we look back
in our history, the costliest single decision
made by the Union government was one-
rank-one-pension. Expressed in net pres-
ent value terms, this was the biggest single
decision, ever, in the history of the Indian
state. While the US has 20 aircraft carriers,
we might have been able to buy 40 aircraft
carriers using the net present value (NPV)
of this decision.
The trouble is that the NPV of one-
rank-one-pension was not computed
before decisions were taken. Even today,
we do not know how much this costs.
An array of new promises are now
coming along, particularly in the fields
of health and pensions. So far, we have
not yet reached the level of irreversibil-
political gains versus the NPV over a 75-
year horizon. As with one-rank-one-pen-
sions, the new promises that are coming
along in India, in health and pensions,
are not backed by these calculations. It is
all too easy to fall for a tempting pro-
gramme based on a projected expendi-
ture for next year.
We in India are at the early stage of
middle income. We are coming into the
zone of prosperity where entitlement pro-
grammes appear affordable when 75-year
calculations are not made. It is essential to
build the institutional apparatus through
which countervailing forces are brought
into these decisions.
The institutional apparatus of the
(presently weak) bond market, the (cur-
rently absent) Public Debt Management
Agency and Fiscal Council is required, to
bring rationality into the Budget process.
As we graduate from captive bond buy-
ers to a market-based system where
bond buyers are voluntary, difficult
questions will be asked about fiscal
soundness on long-term horizons.
The bond market is the key counter-
weight to the political pressures in
favour of announcing more generous
entitlement programmes.
We have come into middle income,
and we now urgently require the institu-
tional apparatus of a middle-income
economy to determine our fiscal policy.
This involves GDP measurement, a non-
coercive bond market, the PDMA, and
the Fiscal Council.
The writer is a professor at National Institute
of Public Finance and Policy, New Delhi

Ayushman Bharat, it is hard to believe that the budget sum of

about ~6,000 crore will be enough for what is claimed to be the

Not an interim Budget

world’s largest health insurance programme. Even with a mates for the same year, has been large-
top-up from states’ contributions, and given the likelihood of ly made good by a sharp rise in corpora-
at least a couple of hospitalisations being required in a life- tion tax revenues by about ~50,000 crore
time, it should be safe to assume that something like 15 mil- over and above the Budget estimates, a
land in Uttar Pradesh and Bihar. The elec- ferent yardsticks. If the schemes are effi- ~17,500-crore increase in customs duty
lion people in the covered population of 500 million will toral benefit of such a scheme, therefore, ciently rolled out, this is a huge number of collections, thanks to the decision to raise
need treatment every year. At a combined outlay of ~10,000 should not be underestimated. beneficiaries in the country across states customs duty on a variety of goods during
crore, what seems to be assumed is either very partial cover- No interim Budget in the past and across sections of society. the year, and a ~29,000-crore decline in
age next year, or an average cost per hospitalisation of about announced a pension scheme and also The total financial burden for all these expenditure under its grants and loans
~6,000. How realistic is that? provided a token expenditure allocation schemes would not be less than ~99,000 to states, due to lower requirements under
of ~500 crore for rolling out such a pro- crore in a year. Since these are not one-off compensation to the states for revenue
In an increasingly unequal society, it is hard to argue
gramme for an estimated 100 million benefits, these will constitute a financial losses on rolling out the GST.
against hand-outs to distressed or generally disadvantaged workers in the unorganised sector. The burden for the coming years as well. This Receipts from disinvestment, which
sections, especially when tax giveaways are announced simul- scheme will cover only those workers, is almost close to half a per cent of the so far have been estimated at only
taneously for the middle-class. But one must not lose sight of A K BHATTACHARYA who get monthly wages of less than gross domestic product (GDP) India is ~35,500 crore, are expected to reach the
the fact that the fiscal space for the hand-outs has been cre- ~15,000 and would thus cover about a estimated to have next year. Forget about target of ~80,000 crore, according to the
ated partly by squeezing the funding of existing programmes. fourth of the total workers in the unor- interim Budgets, one cannot easily recall interim Budget, which appears to be an

T
his is not an interim Budget. What
The flagship Mahatma Gandhi National Rural Employment
Finance Minister Piyush Goyal
Guarantee Scheme (MNREGS) gets less next year than the cur- presented on Friday has no resem-
rent year’s spend; so does Ujjwala (LPG connections for poor blance with any of the previous three
households), the Employees Pension Scheme, the “umbrella interim Budgets presented by his prede-
scheme for development of Scheduled Castes”, a similar pro- cessors — Jaswant Singh in 2004, Pranab
gramme for “Other Vulnerable Groups”, the Pradhan Mantri Mukherjee in 2009 and Palaniappan
Chidambaram in 2014.
Awas Yojana, the Swachh Bharat mission, the White
No interim Budget in the past
Revolution, Nutrient-Based Subsidy, and so on. Other allo- announced a new programme with as
cations are less than the Budget allocation in the current huge an annual expenditure outlay of
year, including for the Green Revolution, the Blue Revolution ~75,000 crore as Mr Goyal’s scheme,
(though we have a new fisheries department!), the National Pradhan Mantri Kisan Samman Nidhi
Social Assistance Programme, and the Rurban Mission. (PM-KISAN), which will offer an annual
income support of ~6,000 per year to all
Perhaps the government has put into practice the argument
farmer families that have cultivable land
that a new hand-out should be funded at least partly by up to 2 hectares.
cuts elsewhere. Of the 146 million operational land
The relief given to the lowest slab of income-tax payers is holdings in the country, according to the
politically understandable, but the tax floor could have been Agriculture Census of 2015-16, almost 86
set lower, at about ~3.5 lakh, bearing in mind the extent of per cent have an area below two hectares.
This gives a figure of around 125 million
inflation since the last reset in 2014 when the tax-free income operational land holdings of below
limit was put at ~2.5 lakh. But that would not have led to pro- 2 hectares. The Budget numbers are not
longed thumping of desks in the Lok Sabha, to rhythmic far off the mark. The scheme, according to
shouts of “Modi, Modi”. Mr Goyal, will benefit over 120 million
farmer families. Remember that almost a
third of these families live and cultivate
ganised sector.
No interim Budget in the past also
announced as big an income-tax conces-
sion as Mr Goyal did by providing full tax
rebate to those who have a total taxable
income of ~5 lakh and below. His estimate
is that it would cover even those whose
gross annual income is up to ~6.5 lakh and
the total number of beneficiaries next year
could be as high as 30 million small tax-
payers. In addition, there are other bene-
fits such as increasing the standard deduc-
tion limit for all salaried persons to
~50,000 and raising the limit for deducting
tax at source for bank interest earnings
from ~10,000 a year to ~40,000.
In other words, the interim Budget for
2019-20 has offered financial relief to at
least about 130 million individuals and
another 120 million farmer families. The
monthly amount of income support
could be small at ~500 per month, but
since the beneficiaries would be largely in
Uttar Pradesh, Bihar, Madhya Pradesh
and Maharashtra, the scheme would pro-
vide an effective political answer to a sim-
ilar cash transfer scheme rolled out in
Telangana and Odisha, though using dif-
even a full Budget of any government in
recent times having rolled out benefits
of this order to such a large number of
people. If these moves do not fetch Mr
Modi the required number of votes to
retain power in New Delhi, the disen-
chantment with the Modi government
must also be huge and widespread.
Yet, the surprise is that the fiscal slip-
page that has been shown in spite of
bearing the burden of these schemes is
almost negligible. In 2018-19, the fiscal
deficit has been revised at 3.4 per cent,
compared to the Budget estimate of
3.3 per cent of GDP. Similarly, for 2019-
20, a fiscal deficit of 3.4 per cent of GDP
represents only a minor slippage from
the 3.1 per cent figure promised last year.
And given the government’s recent
record having revised its GDP estimates
upwards for the last few years, the final
numbers may actually not deviate from
even the targets.
But a few questions on the interim
Budget’s revenue assumptions still need
to be asked. The GST revenue shortfall of
~1 trillion in the revised numbers for 2018-
19, when compared with Budget esti-
ambitious task. If any of these revenue
estimates are not met by the end of
March 2019, the final fiscal deficit num-
ber for the current year could be a cause
for concern.
For 2019-20, the Budget numbers
show an attempt at reining in expendi-
ture under various heads. The govern-
ment’s capital expenditure, after going
up by 20 per cent this year, is slated to
grow by only 6 per cent next year. The
outlay for the national rural employ-
ment guarantee programme and the
National Highway Authority of India will
see a marginal decline, though defence
outlay is seeing a 7 per cent increase in
2019-20 after witnessing a small rise of
3 per cent this year.
On the whole, Mr Goyal’s first Budget
for the Modi government seems to be an
elaborate exercise that resembles all the
features of a full Budget. The similarities
include even the assumptions on revenue
growth and expenditure compression
that a full Budget makes in the belief that
the same government would come back
next year to present the revised numbers
if they go astray.

Juggling populism with pragmatism

ment demand till private capex revives
continues to vest with the public sector
enterprises (PSUs). The PSUs have led the
investment thrust over the past five years,
too, with their borrowings having dou-

T
he challenge in any election year
Budget before every finance min-
ister is how to give sops to the
electorate without straining the fiscal
deficit. In that light, the finance minister
has been able to balance populism with
pragmatism. Let’s first look at the
key constituents the finance minister
has given sops to followed by whether
he has achieved the fiscal consolidation
objective.
The first constituent the Budget
addressed was the rural poor, given the
distress in the agriculture sector. With
the buzz of a Universal Basic Income
(UBI) scheme being loud before the
Budget, the actual amount of ~75,000
crore is in some sense lower than what
was generally expected. The Prime
Minister Kisan Samman Nidhi (PM-
Kisaan), aims at benefitting 120 million
poor farmer families and seeks to pro-
vide ~6,000 per year to farmers with less
than 2 hectares of cultivable land. With
a focus on the poor, unorganised labour-
ers, the Budget has launched a pension
scheme which is a laudable beginning to
providing a social security net. through tax breaks. The other question that arises in aspect is that the capital expenditure bled as they embark on capex plans. Also,
The second constituent that the While providing these subsidy meas- every Budget is the credibility of the has been marginally cut to achieve the the measures for the real estate sector
Budget addressed was the middle class ures and tax concessions, how much has assumptions in terms of revenue and fiscal deficit target assumptions. could help improve demand that provides
through a tax rebate scheme for those who fiscal consolidation suffered? Thankfully, expenditure and hence the probability of In terms of implications, first on the relief to not just the sector but also the
earn up to ~5 lakh annually. This will help the answer is not much, with the fiscal slippage in the fiscal deficit targets. First, bond market. The concern is on the larg- banking and NBFC space where real
save tax of ~18,500 crore for around 30 deficit target of 3.4 per cent for FY19 if we look at the tax revenue, there is an er than expected size of gross borrowings estate is one area of stress.
million tax payers. being a marginal miss assumption of around 13.5 per cent at ~7.04 trillion. While the Finally, from the equity
Another ~4,700 crore over the Budget increase in tax revenues, which may not net borrowings at The Budget helps markets point of view, we
tax-saving comes to the Estimates. The fore- be very aggressive if the assumed 11.5 ~4.48 trillion is in line consumption over think the importance of
salaried class through casts for FY20 of 3.4 per cent nominal GDP growth is with estimates, a much investment with a Budgets have waned con-
an increase in standard per cent are not out of achieved. Within the tax break-up, it is greater reliance has been fiscal stimulus of siderably and this Budget
deduction. The above whack, though, of possible that the GST revenues lag (espe- placed on the National around ~1 trillion to is no different. The equity
measures together con- course, the glide path cially if the rates are cut further), but are Small Savings Schemes the section of markets are not cheap at
stitute a ~1-trillion fiscal towards 3 per cent made up by stronger than estimated and draw-down of cash population whose nearly 18x one-year for-
stimulus. keeps getting extend- direct tax collections. The worry could balances, which poses a propensity to ward earnings. Hence, the
The third con- ed. The good news is be more on the disinvestment target of risk. Secondly, the other consume is very high long awaited acceleration
stituent that the JYOTIVARDHAN JAIPURIA that we have managed ~90,000 crore that is aggressive and may risk factor is that the OMO in earnings is the key to
Budget addressed was to reduce the fiscal force the government to resort to passing by the RBI may not be as driving markets. We think
the real estate sector, which has been deficit to 3.4 per cent from 4.4 per cent on the burden to other public sector high as in FY19. These risks are balanced FY20 will be a year of strong earnings
seeing a lot of strain over the past few five years ago. Critics may argue that this undertakings. The second reason of con- by likely low inflation that will likely growth that will provide support to mar-
years. There were four specific measures is led by an oil bonanza with a drastic cern is the ask on dividend from banks, help keep bond yields stable. kets. The other key positive for the mar-
to help the sector. Of these, two meas- fall in oil prices globally and taking loans where the burden may fall on the RBI. The second is the implication on kets has been the dovish Fed that could
ures were aimed at increasing housing off the balance sheet, especially of Food But overall, we are not too concerned on growth. The Budget helps consumption help trigger a move from developed mar-
demand by giving tax concessions for Corporation of India. But from a govern- the revenue side. It is on the expenditure over investment with a fiscal stimulus of kets to emerging markets.
owning a second house. The other ment point of view, this is balanced by side that the government needs to keep around ~1 trillion to the section of popu-
measures were aimed at improving the the fact that a big reform like GST was in a tight leash on all expenditure other lation whose propensity to consume is The writer is founder and managing director,
profitability of the real estate company an implementation phase. than the UBI scheme. The negative very high. The onus of sustaining invest- Valentis Advisors

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