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Union Budget of India (2019-20)

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Last updated: Jul, 2019

The Union Budget for 2019-20 was announced by Ms Nirmala Sitharaman, Minister for Finance and Corporate Affairs, Government of India, in Parliament on July 05, 2019. India is all set to become US$ 3 trillion economy by the end of FY20. The budget focusses on reducing red tape, making best use of technology, building social infrastructure, digital India, pollution free India, make in India, job creation in Micro, Small and Medium Enterprises (MSMEs) and investing heavily in infrastructure.

Total expenditure for 2019-20 is budgeted at Rs 2,786,349 crore (US$ 417.95 billion), an increase of 14.09 per cent from 2018-19 (budget estimates).

Highlights of Union Budget 2019-20

  • Overview of the economy
    • India was a US$ 1.85 trillion economy in 2014 and it has reached US$ 2.7 trillion in five years, the fastest growing major economy and the sixth largest economy in world, compared to 11th largest in 2013-14.
    • Metro rail network of 657 km has become operational in the country.
    • India target to become US$ 5 trillion economy in the next five years and might become a US$ 10 trillion economy in the next eight years thereafter.
    • The Indian economy grew at 6.8 per cent in 2018-19 and fourth quarter growth slumped to 5.8 per cent which was a 17 per cent quarter low.
    • Movement of cargo on Ganga is estimated to rise four times in next four years.

  • Major Expenditure Items
    • Total capital expenditure will be Rs 876,209 crore (US$ 131.43 billion) for 2019-20.
    • Centrally sponsored schemes have been allocated Rs 331,610 crore (US$ 49.74 billion) in 2019-20.
    • Defence budget is Rs 305,296 crore (US$ 45.79 billion) for the first time in 2019-20.
    • Amount of Rs 174,300 crore (US$ 26.14 billion) has been approved for pension in the budget 2020.
    • The government has allocated Rs 184,220 crore (US$ 27.63 billion), Rs 79,996 crore (US$ 11.99 billion) and Rs 37,478 crore (US$ 5.62 billion) for Food, fertiliser and Petroleum subsidies respectively.

  • Labour and Youth Welfare
    • National Sports Education Board to be setup under Khelo India to prepare youth for new age skills, Artificial Intelligence, IoT, Big Data, 3D Printing, Virtual Reality etc.
    • National Research Foundation to be established to fund, coordinate and promote R&D.
    • Rs 400 crore (US$ 60 million) provided for ‘World Class Institutions’ for FY20
    • “Study in India” to bring foreign students to higher educational institutions
    • The Government of India has decided to extend the pension benefit to about three crore retail traders & small shopkeepers whose annual turnover is less than Rs 1.5 crore (US$ 0.22 million) under “Pradhan Mantri Karam Yogi Maandhan Scheme.

  • Support for Farmers
    • Government is planning to form 10,000 new Farmer Producer Organizations, to ensure economies of scale for farmers over the next five years.
    • Government will work with State Governments to allow farmers to benefit from e-NAM (National Agriculture Market).
    • Government might replicate “one count: Zero Budget Farming” model which can help in doubling our farmers’ income in time for our 75th year of Independence.
    • The focus of the government is on the “Pradhan Mantri Matsya Sampada Yojana” (PMMSY) for addressing critical gaps in the value chain, including infrastructure, modernization, traceability, production, productivity, post-harvest management, and quality control.

  •  Infrastructure
    • Ministry of Railways have been allocated Rs 94,071 crore (US$ 14.11 billion) in 2019-20.
    • The government has suggested the investment of Rs 5,000,000 crore (US$ 750 billion) for railways infrastructure between 2018-2030.
    • Metro rail network has reached to 657 Km.
    • Operating ratio improved by 95 per cent in 2019-20.
    • Government has announced to invest Rs 10,000,000 crore (US$ 1.5 trillion) in infrastructure over the next five years
    • To upgrade 1,25,000 kms of road length over the next five years, the estimated cost of Rs 80,250 crore (US$ 12.03 billion) is envisaged under Pradhan Mantri Gram Sadak Yojana-III (PMGSY)
    • 30,000 kms of PMGSY roads have been built using Green Technology, Waste Plastic and Cold Mix Technology.
    • Government has ensured power availability to states at affordable rates through model – One Nation, One Grid.
    • Government has proposed to permit investments made by Foreign Institutional Investor’s (FIIs)/Foreign Portfolio Investments (FPIs) in debt securities issued by Infrastructure Debt Fund.
    • Road - Bharatmala phase 2 going to be launched to develop the state road networks.
    • Government has finalised the model tendency law- promotion of rental housing.

  • Micro, Small and Medium Enterprises (MSMEs) and Traders
    • Government has proposed granting of loans up to Rs 1 crore (US$ 0.15 million) for MSMEs within 59 minutes through a committed online portal. Under the Interest Subvention Scheme for MSMEs, Rs 350 crore (US$ 52.50 million) has been allocated for FY 2019-20
    • Government will create a payment stage for MSMEs to enable filing of bills and payment thereof on the platform itself.
    • The Government e-Marketplace (GeM) is being extended to all Central Public Sector Enterprises (CPSEs), providing more opportunities for MSMEs to sell their products.

  • Tax Proposals
    • Individual taxpayers with annual income up to Rs 500,000 (US$ 7,500) will get full tax rebate and hence will not be required to pay any tax.
    • Tax Deducted at Source (TDS) of 2 per cent on cash withdrawal exceeding Rs 1 crore (US$ 0.15 million) in a year from a bank account to promote less cash economy
    • Effective tax rate for individuals having taxable income above Rs 2 crore (US$ 0.30 million) has been increased.
    • Limit for applicability of lower corporate tax rate of 25 per cent increased from Rs 250 crore (US$ 37.50 million) to Rs 400 crore (US$ 60 million)
    • Enhanced interest deduction up to Rs 350,000 (US$ 5,250) for purchase of an affordable house.
    • The government increased income tax surcharge for HNIs (high net worth individuals) earnings more than Rs 2 crore (US$ 0.30 million) a year. Those earning between Rs 2-5 crore (US$ 0.30-0.75 million) will have shell out 3 per cent more, with surcharge rate being increased from 15 per cent to 25 per cent. Those earning above Rs 5 crore (US$ 0.75 million) will have to shell out a surcharge of 37 per cent, from current 15 per cent.
    • No charges or Merchant Discount Rate (MDR) on specified digital mode of payments. These modes are to be compulsorily provided by large businesses.
    • The government announced Rs 150,000 (US$ 2,250) income tax deduction on interest paid on loans for purchase of electric vehicles.
    • Sabka Vishwas Legacy Dispute Resolution Scheme proposed for quick closure of service tax and excise related litigations.
    • To increase Special Additional Excise duty and Road and Infrastructure Cess each by one rupee a litre on petrol and diesel.
    • It also proposed to increase custom duty on gold and other precious metals from 10 per cent to 12.5 per cent.
    • Scheme of faceless electronic tax assessment
    • Aadhaar and PAN to be interchangeable and permit those who do not have PAN to file Income Tax returns by only citing their Aadhaar number.
    • Taxpayers having annual turnover of less than Rs 5 crore (US$ 0.75 million) can now file quarterly returns.
    •  Fully automated GST refund module shall be implemented.
    • An electronic invoice system is proposed that will eventually eliminate the need for a separate e-way bill

  • Vision for the Next Decade
    • The become a US$ 3 trillion economy by the end of 2019
    • Make in India with emphasis on MSMEs, Start-ups, defence manufacturing, automobiles, electronics, fabs and batteries, and medical devices
    • Building physical and social infrastructure
    • Digital India reaching every sector of the economy
    • India plans electricity, clean cooking facilities for all Indian families by 2022.
    • To ensure 'Har Ghar Jal' by 2024
    • 125,000 km of road to be upgraded over next 5 years at a cost of Rs 80,250 crore (US$ 12.03 billion)
    • Aims to achieve housing for all by 2022
    • Blue Economy
    • Healthy society – Ayushman Bharat, well-nourished women & children. Safety of citizens
    • Team India with Jan Bhagidari. Minimum Government Maximum Governance.
    • 19.5 million household to be built in rural areas.

Exchange Rate Used: INR 1 = US$ 0.015 as on July 05, 2019

Click here for more details on the Union Budget 2019-20 Part 1.

Click here for more details on the Union Budget 2019-20 Part 2.