INTERIM BUDGET 2019

INTERIM BUDGET 2019

Kamaraj IAS Academy | INTERIM BUDGET 2019
  • February 1, 2019, 4:11 pm

Numbers in interim budget:

 

GROWTH/DEFICIT

- GDP growth in 2018/19 estimated at 7.2 percent

- Fiscal deficit for 2018/19 seen at 3.4 percent of GDP

- Fiscal deficit for 2019/20 estimated at 3.4 percent of GDP

- Fiscal deficit for 2020/21 and 2021/22 estimated at 3 percent of GDP

- Government’s stated commitment earlier was to bring down the fiscal deficit to 3.1 percent of GDP by the end of March 2020, and to 3 percent by March 2021

- India’s current account deficit for 2018/19 seen at 2.5 pct of GDP

BORROWING

- Gross market borrowing seen at 7.1 trillion rupees in 2019/20

- Net market borrowing seen at 4.73 trillion rupees in 2019/20

- Government to buy back 500 billion rupees worth of bonds in 2019/20

- India to raise 1.08 trillion rupees via cash management bills in 2019/20

- Debt to GDP ratio to be brought down to 40 percent by 2024/25

RECEIPTS

- Revenue receipts seen at 1.98 trillion rupees in 2019/20 (2.2 percent of GDP)

- Capital receipts seen at 8.06 trillion rupees in 2019/20

EXPENDITURE

- Total expenditure in 2019/20 budgeted at 27.84 trillion rupees

- Capital expenditure for 2019/20 seen around 3.36 trillion rupees in centrally sponsored schemes

- Defence budget raised to beyond 3 trillion rupees in 2019/20

- To allocate 645.87 billion rupees for railways capital expenditure in 2019/20

- Allocation to India’s northeast region proposed to be increased by 21 percent over previous fiscal year

FARMING/RURAL AFFAIRS

- India to allocate 750 billion rupees ($10.56 billion) per year to support farmers’ incomes

- Impact of 200 billion rupees in current fiscal year

- Vulnerable farmers to receive 6,000 rupees per year under new scheme

- Farmers affected by natural disasters to receive 2 percent interest subvention, additional 3 percent if they repay loans on time

- Government to provide 2 percent interest subvention for farmers pursuing animal husbandry, fisheries

- India to allocate 190 billion rupees for construction of rural roads in 2019/20

TAXATION

- Income tax exemption limit doubled to 500,000 rupees in 2019/20, tax slabs for others unchanged

- Benefit of rollover of capital tax gains to be increased from investment in one residential house to that in two residential houses, for a taxpayer having capital gains up to 20 million rupees; can be exercised once in a lifetime

- Average monthly tax collection at 971 billion rupees per month so far this year

- Small and medium-sized businesses registered under the Goods and Services Tax to get 2 percent interest subvention on loan of 10 million rupees - finance minister

BANKING/FINANCE

- Dividends to government from the Reserve Bank of India (RBI) and public sector financial institutions dividends seen at 829.1 billion rupees in 2019/20

- Dividends to government from RBI and public sector financial institutions dividends revised to 741.4 billion rupees in 2018/19

- Goyal says expects other banks on the central bank’s Prompt Corrective Action list to be removed soon

EMPLOYMENT

- India to launch social security coverage for workers in unorganised sector

- New scheme to provide assured monthly pension of 3000 rupees per month, with contribution of 100 rupees per month, for workers in unorganised sector after 60 years of age

- Scheme will benefit 100 million workers in unorganized sector, may become the world’s biggest pension scheme for unorganised sector in five years - Goyal

- Government to allocate 600 billion rupees for a rural employment scheme in 2019/20

FINANCE MINISTER COMMENTS

- “We have reversed the policy paralysis engulfing the nation, and have restored the image of the country”

- “Several times in the past only empty promises have been made to the people living in our villages”

- “We are poised to become a 5 trillion dollar economy in the next five years, we aspire to become a 10 trillion dollar economy in the next eight years”

- “India is now on the way to becoming a global manufacturing hub in several sectors”

Brief Analysis

 

The government has pegged a realistic growth target but failed to address the historically high unemployment rate of 6.1%. No initiatives for job creation has been seen nor any formalization of the very huge unorganized sector in India.But ensuring the minimal social security coverage for the unorganized sector could be seen as a step toward securing the highly potential unorganized sector in India.

 

Rural spending has seen a considerable rise which will address issues in the long stagnant agricultural sector.The investments in rural infrastructure and rural credits are yet to see its results from previous investments.It’s a good measure of not encouraging farm loan waivers and tackling the distressed sector by pumping in investment in the form of vulnerable farm support of 6000 rs per head and providing interest subventions to increase farm loan repayment and unexpected calamities .Along with this the revised investment for rural job creation has seen a rise which is really needed for India to solve the disaster of jobless growth.This step will ensure the poverty rates to fall.

 

The reduction of tax slab has to be seen more as populist measure rather than seeing it from fiscal perspective or reducing tax burden as the tax to gdp ratio is still low for us.In Fact the measure along with not well formed GST structure,stressed assets and increased defense allocation will see a deviation from the fiscal targets to be pursued for the fiscal disciplinary and consolidation measures. It’s evident that this is reflective in the altered fiscal deficit targets from 3 to 3.1%.

 

In finance and banking sector ,there is a mention of removing banks from the prompt corrective action framework of RBI.This measure ensures trust in the financial sector.The govt decision to buy back bonds worth 500 billion rupees will bring back liquidity in the economy and remove the slowdown effect created Post demonetization in a very little manner. The cash management bills plans to raise money for boosting investment in the economy is a welcome measure.

 

Even though the rural sector policy is good and reformative ,no clear boosts have been done in health or educational sector which is weighing down the economy on the other side. The talk of developing ease of living index rather than ease of business has ensured the talk of ‘universal ‘ basic income along with digital villages campaigns,and realization of previously mentioned policies of smart cities and skill development with no considerable rise or fall in allocations in social sector.

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