BUDGET 2019-20
Girish Khare
PGDM, IIM Ahmedabad
Head, Academic Development (Mathematics)
Budget 2019-20
• Interim budget was presented by Piyush Goyal in
February 2019.
• In interim budget, parliamentary nod is sought for the
expenditure for first 4 months of the financial year (April to
July) in an interim budget and the final budget is
presented in July.
• Historic budget- first budget presented by full time lady
Finance Minister.
• Earlier, Prime Minister Indira Gandhi presented budget of
1970 in capacity as Finance Minister.
Economic Survey
• Presented one or two days before budget.
• Elaborate document on the state of the economy in last
one year. Prepared by Ministry of Finance.
• Economic Survey has two volumes. Volume-I is of the
form of recommendations and Volume-II discusses all the
factors affecting the state of the economy.
Economic Survey: Recommendations
Hike in minimum wages
Usage of the principles of behavioural economics in policy making
GDP growth in 2019-20 pegged at 7%
Need to grow at 8% for next 6 years if we want to accomplish the dream
of $5 trillion economy
Economic Survey
Source:
https://timesofindia.indiatimes.com/business/india-business/economic-survey-2019-
Background
Falling GDP rate
Ailing banking. Significant NPAs limiting investment
growth.
Declining productivity in agriculture, farmer suicides, rural
distress.
Rupee under stress due to external factors, such as oil
price, trade war between the US and China, Donald
Trump’s policies.
Terminologies
• Budgeted Estimate (BE): The amount expected to be
spent or earned by the government in FY 2019-20.
• In the budget presented on 1 February 2018, BE was for
FY 2018-19. In the interim budget presented on 1
February 2019 and the final budget presented on 5 July
2019, BE is for FY 2019-20.
• Revised Estimate (RE): Revised numbers for the
amounts expected to be spent or earned in the current
financial year when the budget is presented.
Budgeted estimates vs. revised estimates
Ref: https://www.indiabudget.gov.in/doc/AFS/afs1.pdf
Terminologies
• Part A of the budget speech: Expenditure proposals
• Part B of the budget speech: Income proposals (taxes)
Terminologies
• Revenue Account: Affects the Profit & Loss account (For one year)
1. Revenue income: Income from taxes for the government.
2. Revenue expenditure: Day-to-day expenditure i.e. expenditure not
incurred on creation of assets or repayment of liabilities.
• Capital Account: Affects the balance sheet (Longer term)
1. Capital income (receipts): Loan taken by the government in the
form of bonds or other borrowing.
2. Capital expenditure: Expenditure incurred on creating assets.
Annexures to budget mention budgeted (expected) revenue income,
revenue expenditure, capital receipts and capital expenditure for the
next financial year.
Terminologies
• Revenue Deficit:
Revenue expenditure – Revenue income
• Fiscal Deficit:
(Revenue expenditure + Capital expenditure) – (Revenue income +
Capital income except borrowing)
Terminologies
INR
Revenue income (taxes) 10,000
Revenue expenditure 12,000
Revenue deficit 12,000 – 10,000 = 2,000
Capital receipt other than borrowing 4,000
(debt repayment, disinvestment)
Capital expenditure 5,000
Fiscal deficit (12,000 + 5,000) - (10,000 + 4,000)
= 3,000
Budget at a glance
Ref: https://www.indiabudget.gov.in/doc/Budget_at_Glance/bag1.pdf
Budget 2019-20 highlights: Rural area
1. Major emphasis on Pradhan Mantri Gram Sadak Yojana:
Upgradation of 1.25 Lakh km roads (Total outlay: Rs. 80,250
crores)
2. Swachh Bharat Abhiyan to include solid waste management in
rural areas
3. New Pradhan Mantri Matsya Sampada Yojana for addressing
infrastructure gaps in fisheries sector
4. Free LPG (Saubhagya) and Electricity (Ujjwala) to be given to all
rural households by 2022
5. Formation of Jal Shakti Mantralaya by merging Ministry of Water
Resources and Ministry of Drinking Water & Sanitation. Har ghar jal
by 2024
6. Pradhan Mantri Awas Yojana (Gramin)- houses for all in the rural
area by 2022
Budget 2019-20 highlights: Infrastructure
1. Public Private Partnership in railways
2. Aim to make India a hub of Aircraft Financing and Leasing as well
as Maintenance, Repair and Overhaul (MRO) of planes
3. Development of gas grids, water grids and regional airports
4. Formation of Credit Guarantee Enhancement Corporation in
FY2019-20 for infrastructure companies
5. Modernization of railway stations
6. Package of power sector tariff and structural reforms would soon
be announced
No specific details of any of these programs have been given.
Budget 2019-20 highlights: Social Sector
1. Pradhan Mantri Karam Yogi Maandhan Yojana: ~3 Crore small
shopkeepers and retail traders with annual turnover less than 1.5
Crore will get pension after the age of 60
2. Formation of Social Stock Exchange regulated by SEBI
3. Every member of women’s self help group to get an overdraft
(short term loan) of Rs. 5000 in Jan Dhan account.
4. One member of every women’s self help group eligible to get a
loan of Rs. 1 Lakh under MUDRA scheme.
Budget 2019-20 highlights: Start-ups
1. Angel tax issue to be resolved through requisite declarations and
furnishing information in IT returns.
2. No IT scrutiny of the funds raised by start-ups through angel
investors (prevention of so called ‘tax terrorism’)
3. A dedicated DD channel for start-ups
Budget 2019-20 highlights: Banking and Financial
Services
1. Equity infusion of Rs. 70,000 Crores in PSU banks
2. Credit guarantee by the government for the purchase of loan
portfolio of NBFCs by PSU banks (limited to Rs. 1 Lakh crores upto
10% of the first loss)
3. Disinvestment target of Rs. 1.05 Lakh Crores
4. Efforts to privatize Air India to be taken up again
Budget 2019-20 highlights: Electric vehicles and
affordable housing
1. Reduction of GST from 12% to 5% on Electric Vehicles
2. Additional IT deduction of Rs. 1.5 Lakhs on repayment of loan for
electric vehicle
3. Additional IT deduction of Rs. 1.5 Lakhs on repayment of home
loan for affordable housing (up-to Rs. 45 Lakhs)
Budget 2019-20 highlights: Others
1. Dedicated payment platform for MSMEs for getting fast payment of bills
from the government agencies
2. 100% Foreign Direct Investment in insurance intermediaries
3. Government to explore possibility of higher FDI in aviation, insurance and
media sectors
4. New National Education Policy (no details given)
5. Government to train youth of India to take up jobs overseas!!!
6. New company named ‘New Space India Ltd.’ to be incorporated for
commercialization of various space products
7. 17 iconic tourism sites to be developed into world class tourist destinations
8. Interchangeability of PAN card and Aadhar card
9. Reduced manual intervention in IT return processing
10. Charges on digital payment reduced
11. Promoter stake in listed companies to be max 65% (current: 75%)
Budget 2019-20 highlights: Taxation
1. No changes in Income Tax slabs. Surcharge of 2% and 7%
respectively on those earning 2 Cr+ and 5 Cr+ respectively
2. Corporate Tax lower slab at 25% up-to companies with turnover of
less than 400 Cr (earlier it was 250 Cr). Now 99.3% companies fall
in this range.
3. Securities Transaction Tax (STT) on options transactions reduced.
Google Chirag Gupta and STT
4. Custom duty on gold and imported books hiked
5. Excise duty on Petrol and Diesel hiked by Rs. 1 per litre
Budget 2019-20 highlights: Verdict
1. More long term focus (Impetus to electric vehicles, Custom duty hiked on
automobile spare parts). If it works, it’s great. Otherwise it’s not so good.
2. Good attempt for building rural infrastructure in terms of roads, housing
and water. Has a potential to boost consumption in the long run.
3. PPP in railways is a good initiative.
4. Specific details not given.
5. No path-breaking provision in the budget (such as changing Rupee from
fixed exchange rate to managed float by Manmohan Singh in 1992,
privatization of insurance by Yashwant Sinha in 1999 or mooting the idea
of Bankruptcy code by Arun Jaitley in 2015).
6. Way forward: Lower the interest rates by reducing fiscal deficit. Mindless
populism (UBI or farm loan waivers) has been avoided.
7. Important achievement of the government: inflation in control.
Budget 2019-20 : Next steps
1. Finance bill has been presented in the parliament.
2. Discussion will be held on the finance bill. If the government deems it
necessary, some changes can be made to the finance bill at this time.
3. The finance bill will be put to vote in parliament.
4. Endorsement of the bill only from Lok Sabha is required. Even if Rajya
Sabha rejects the Finance Bill, that is immaterial. Also, if Rajya Sabha
does not pass or reject the Finance bill in 14 days, the bill is deemed to
be passed by Rajya Sabha.
5. The Finance bill is sent to the President for his approval.
6. Once it is signed by the President, it is notified in the gazette of
Government of India and it becomes law.
Questions
