An All-Encompassing Union Budget 2019
The first budget of the Modi-2 government, what is being called Bahi Khata, has been introduced in the Parliament by the first woman full fledged Finance Minister of India, Nirmala Sitharaman. There is always a public pressure on the government to present such a budget in which there is something for every section and everyone is satisfied. After the overwhelming majority in the Lok Sabha elections, this pressure was more on this government. But the given the country’s economic situation, fiscal prudence required the budget not to be populist, and rather should include measures to encourage both investment and consumption demand, to take the economy out of recession. For the development of infrastructure, on which the government expects 100 lakh crores to be spent in the next five years, provisions were sought in the budget.
Financial sector such as banks and non-bank financial institutions too are in bad shape. The finance minister had to worry about the poor health of banks and non-bank financial institutions due to piling up of NPAs and bankruptcy of NBFCs. On the other hand, the rising pollution in the country and the world and resulting ‘Climate Change’ in the world, has become a matter of concern for farmers and the common man. This called for concerted efforts on the part of the government. There was also a need to revive manufacturing sector, after taking the same out of to the recession. This was possible only if they could be protected from the cheap foreign imports.
Significant provisions for infrastructure
There is a significant provision for Pradhan Mantri Gram Sadak Yojana. It has been said that 1,25,000 km road would be upgraded with an expenditure of Rs 80,250 crore in the next 5 years. Apart from this, there was a need for some plans for the expansion of railway tracks which has been happening at a very slow pace since long. Given the rail track requirements, its expansion is very insufficient due to lack of funds. Finance Minister has proposed that the railway track be expanded in the PPP ie the public private partnership mode, and thereby achieve the target in track expansion in a short period of time.
For the last several years, housing sector has been going through a huge crisis. Millions of flats are lying unsold for the want of buyers. Therefore the construction of new houses has come to a standstill. Real Estate and Housing is one of the areas, that can help many industries flourish, including cement, iron, tiles, glass and many others. The Finance Minister has made a big announcement for the housing sector. So far, investing in the affordable housing upto Rs 18 lakhs would fetch interest subventions and rebate in income tax. In this budget, the provision for exemption of income tax up to Rs 3.5 lakh annually in the interest on loans for homes up to Rs 45 lakh has been provided. On the other hand, heavy emphasis is being laid on building rural and urban houses, which will not only benefit people, the economy can get huge boost from the same. It has been said that from now on, a 1.95 crore new rural houses will be built by 2022. The technology will also be used for the same. These houses will be equipped with facilities like LPG, electricity and toilets.
Make in India
There are provisions in the budget for the Make in India. Additionally, going ahead with its spree in the previous year budget, import duty has been hiked on many imported items this year too, such as Vinyl Flooring, Tiles, Marble etc. This will encourage import substitution and help increase the production of these items in the country.
Rupees 70,000 crores are being made available to the public sector banks that are struggling with NPA crisis, so that they can meet their capital requirements and increase the lending. In addition to helping NBFCs, the decision has been taken to bring the housing loans given by NBFCs under the Reserve Bank.
In the single brand FDI, the government has decided to relax the provision of domestic sourcing, as opposed to its earlier resolve, which is unfortunate. It is worth noting that so far single brand FDI companies have been mandated to purchase minimum 30 percent from within India. This move will go against Make in India. The point of contentment is that this time the decision has not been taken to open new areas for FDI in the budget. Instead the government has contemplated to have stakeholders consultations with regard to allowing FDI in media, insurance and others. This is a welcome move because the government will get the chance to understand the implications of opening FDI through this consultation process.
Overall, this budget can not be called a populist budget though, but it can prove to be an effective step towards increasing the pace of development in the country, helping the manufacuring, improving the financial sector health, and developing infrastructure.
By Ashwani Mahajan