If Piyush Goyal's Interim Budget of February 2019 was all about the farmer and to an extent the middle class, Nirmala Sitharaman's first Budget revolves around business. One needs to look at both the Budgets together to see the whole picture.
However, coming in the backdrop of a decelerating economy, declining consumption, slowing agriculture, services economy and global trade, Sitharaman had little room to manoeuvre. Hence, Budget 2019 is all about give-and-take. In fact, it may have taken more than it has given.
Sitharaman's debut Budget may not aide the revival of the consumption cycle as it has not added to the consumer's disposable income. As a result, it will defer the economic revival until the public expenditure can turn around the economy by itself. And by focusing on FDI, the Budget appears to be relying on foreign investment to revive growth rather than domestic private investment.
INDUSTRY-CENTRIC
There's a lot in Budget 2019 for the industry to look forward to. First, it benefits from the government's continued infrastructure-building programme, including PPP in railways and rural road modernisation. It's another question how the government will spend Rs 20 lakh crore per annum on infrastructure alone when its annual earning is around Rs 20 lakh crore.
At least some of the industry's demand was addressed by the FM with the decision to reduce corporate tax from 30% to 25% for all companies with revenue of up to Rs 400 crore. It will be a Rs 4,000-crore setback to the government and hence implies companies will have at least this amount of investible surplus to put in capacity expansion and new capacity creation.
Several industry bodies' representations to the FM also bore fruit with the government deciding to hike import duties on newsprint and books, split ACs, auto parts, optic fibre, stainless steel products, plastic, paper, gold and silver. The hike in import duty allows them to raise prices, adding 2.5 to 10% of revenue to their profits, but raises cost for the consumer.
Start-ups have been protected from IT scrutiny against angel tax. So, angel investors and start-ups who file IT returns will not be subjected to scrutiny. Sitharaman also drew a roadmap for GST simplification and resolution of litigation worth Rs 3.75 lakh crore.
At a time when the Indian promoters and domestic market are refusing to bring private investments, India is now looking at foreign investment. Mega manufacturing plants (semi-conductor plant, solar PV cells, lithium battery plant, servers and laptops facilities) with various direct and indirect tax exemptions. This is clearly an outreach to all foreign investors looking for an alternative to avoiding the cross-fire of the US-China trade war.
Centre will also examine making India more attractive for FDI in aviation, media (animation and graphics) and insurance and insurance intermediaries while local sourcing norms for single brand retail will be eased.
The government has reiterated its intent to push the disinvestment programme by consolidating banking PSUs and disinvesting CPSEs though it hasn't quite played out as planned in the past.
But before you give into the murmur of 'suit-boot ka Budget', consider the outreach to the common man.
COMMON MAN
Those buying houses up to Rs 45 lakh can now avail an additional deduction of Rs 1.5 lakh on interest paid over and above the Rs 2 lakh existing benefit for loans taken on or before March 31, 2020 -- taking the total benefit to Rs 3.5 lakh.
In its push for green mobility, the FM announced a pleasant surprise with a Rs 1.5 lakh deduction on interest paid on loans taken for electric vehicles.
Entire withdrawal from the NPS on retirement has been made tax exempt.
Pension benefits have been extended to three crore retail traders and shopkeepers with annual revenue of Rs 1.5 crore with simple enrolment and self-declaration.
The Budget also focused on 'ease of living', with initiatives such as one nation, one card for seamless mobility and interchangeability of PAN and Aadhaar. Housing for all is on course with 1.95 crore houses proposed by 2022 for eligible beneficiaries with toilets, LPG and electricity.
Also, 1.25 lakh km of rural road are being upgraded at Rs 80,200cr in five years to improve connectivity in rural areas and improve their economy.
A new National Educational Policy for youth is aimed at transforming India's higher education system. And the government intends to introduce zero budget farming to protect the farmer against the deadly impact of loans and rising cost of agriculture.
CONSUMER & INDUSTRY TO PAY MORE
'Tax' was mentioned the most, 53 times, in Sitharaman's speech, according to the India Today TV data cloud. So if FM gave with one hand, she took some with the other.
The biggest blow is in the form of an additional Re 1 per litre road and infrastructure cess and another Re 1 per litre special additional excise duty on both petrol and diesel which has resulted in a Rs 2.60 per litre hike in petrol and Rs 2.30 in diesel. This impacts every individual and also has a direct impact on inflation on goods transported.
High-income individuals will now pay a higher surcharge of 3% for income between Rs 2-5 crore and 7% on income of Rs 5 crore and above.
The hike in import duty on gold from 10% to 12.5% will raise gold prices for the consumer, hitting the world's biggest gold market domestically.
In its effort to encourage digital transaction, government will now tax all cash withdrawals exceeding Rs 1 crore a year with a 2% TDS. Excise duty hike on cigarettes and tobacco will hurt the cigarette industry.
The give-and-take may not have addressed everyone, but it has surely balanced the government's accounting.