Financial News Analysis – 6th July’19 | PDF Download

Financial News Analysis – 6th July’19 | PDF Download

 

Union Budget 2019-20 Highlights

 

  • Finance minister Nirmala Sitharaman’s first budget.
  • Unexciting and incremental: providing no fiscal boost to accelerate GDP growth to the 8% target
  •  Inward looking: seeking to reduce import dependence rather than increasing exports.
  • Is it just a supplementary than a full budget.
  • Nifty crashed 135.60 points

 

Interim budget

 

  • It had dramatic features like the PM-KISAN scheme
  • Rs 6,000 annually to small and marginal farmers.
  • It had also waived income tax for individuals earning up to Rs 5 lakh per annum.
  • Fiscal deficit came down marginally to 3.3% of GDP
  • 1. With the help of Rs 90,000 crore of excess capital to be transferred from the Reserve Bank of India
  • 2. Plus higher cesses on petrol and diesel
  • Sitharaman pledged bank recapitalisation of Rs 70,000 crore, which should revive lending in a big way.
  •  The FM says the recapitalisation may be spread over three years, not in one big bang.
  • Sitharaman seeks to help MSMEs in every way, including loans of up to Rs 1 crore within 59 minutes through a dedicated online portal, and faster clearance of government dues to suppliers.
  •  A paradigm shift is the decision to move part of government borrowings to foreign markets.
  • Excess liquidity in foreign markets has created negative bond rates in countries such as Germany, so there will never be a better time to borrow abroad cheaply, despite currency risks, to finance domestic investments.
  • The budget assumes 12% nominal GDP growth, presumably 8% real growth and 4% inflation. But the Economic Survey had projected real GDP growth of only 7%.
  • Former FM Arun Jaitley had promised that India would become competitive vis-à-vis Asian peers in direct tax rates. That has not happened.
  • The promised cut in corporate tax rates to 25% will apply only to companies with a turnover of up to Rs 400 crore, stranding the large companies that are the biggest exporters.
  • Asian countries have reduced their effective corporate tax rates to below 20%, rendering us uncompetitive.
  • Soaking the rich may be good socialism, but worsens India’s competitiveness in tax rates.
  • For the second year in a row, import duties have been raised on a wide range of items — from vinyl flooring and tiles to cameras, optical fibre and books.
  • The FM views this as promoting ‘Make in India’ .
  • But this is a vision of uncompetitive production behind high tariffs, not worldclass competitive production.
  • The budget seeks import substitution — the very opposite philosophy that was followed in the first three decades after Independence with disastrous results.
  • Noting that FDI had risen to $64.4 billion in 2018-19, the FM proposed further opening up of FDI in civil aviation and insurance.
  • FDI of 100% will be allowed in insurance intermediaries.
  • Also, local sourcing norms will be eased for single-brand retail.
  • Disinvestment aims to mop up Rs 1,05,000 crore, an exceedingly ambitious target.
  • The FM said the government would consider bringing down its shareholding to below 51% in public sector enterprises.
  • This is highly desirable, as it will free companies from the travails of the CVC, CBI and CAG.
  • Startups have been given a boost.
  • The angel tax on supposedly excess share valuation is going to be virtually abolished, ending an extraordinary irritant.
  • The identity and source of funds by investors will be resolved by e-verification, to check laundering of black money through this route.
  • Non banking financial companies (NBFCs) have also been given a lifeline.
  • The government will provide credit guarantee to banks to purchase Rs 1 lakh crore worth of pooled assets of highly rated NBFCs.
  • This will greatly ease the liquidity problems of the sector, and revive their lending to MSMEs.
  • Regulation of NBFCs by the RBI will be strengthened simultaneously to check loose lending practices.
  • Faceless income tax assessments should reduce corruption in tax offices, and promote compliance.
  • Tax scrutiny will be on a completely random basis to check tax harassment. These are welcome steps.
  • Interchangeability of PAN and Aadhaar for ITR for those who don’t have PAN cards.
  • Advises GST Council to reduce tax rate on EVs from 12 per cent to 5 per cent.
  • Rental laws to be reformed. Modern tenancy laws will be shared with states to promote house renting.
  • Additional Rs 1.5 lakh tax relief on home loan for purchase of a house up to Rs 45 lakh.
  • 2% TDS on withdrawals of Rs 1 crore in a year from your bank account for business payments.
  • No charge on digital payments: MDR charges waived on cashless payment.
  • Aadhaar card for NRIs on arrival in India.
  • Rs 3,000 pension per month for workers from the informal sector.
  • Inter-operable One Nation One transport card: ATM-like Transport card for universal travel on various modes of transport (metro, road, railways etc).
  • Government envisions using rivers for cargo transport to decongest roads and railways.

 

Women empowerment

 

  • Nari tu Narayani: Women SHG Interest Subvention Programme to be expanded to all districts in India.
  • Rs 1 lakh loan to be provided for SHG women members under Mudra Scheme.
  • Every verified woman SHG member having a Jan Dhan account can avail Rs 5,000 rupees overdraft facility.
  • Govt to launch ‘Study in India’ programme to attract foreign students in higher education.
  • Allocate Rs 400 crore for world-class higher education institutions in FY 20 .
  • To unveil a new education policy.
  • New Higher Education Commission with focus on higher autonomy.
  • New Jal Shakti ministry will work with states to ensure Har Ghar Jal for all rural houses by 2024.
  • Pradhan Mantri Gram Sadak Yojana phase 3 is envisaged to upgrade 1,25,000 km of road length over the next 5 years.
  • A public sector enterprise, New Space India Limited (NSIL) has been incorporated to tap benefits of ISRO. ‘
  • Gandhipedia‘ is being developed to sensitize the youth about positive Gandhian values.

 

 

 

 

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Updated on 08 Jul 2019  |  by admin