Budget 2019 – Populism within Limits



While last year’s theme was pro Rural, pro Agriculture and pro Woman budget and there was no significant takeaways for middle class. The election mode is ON and it was clear that the government wanted to use this opportunity which is one of the last opportunities before them to send positive messages to its core voters. 

The tax sops given to the middle class and salaried employees makes it a friendly budget.  Fiscal prudence prevailed as the fiscal deficit was stated to be contained at 3.4%.

Unarguably there were two main themes:


Key Numbers

  • ·       India’s Economic Size: $ 2.6 trillion (India to become $5 trillion economy in 5 years)
  • ·       Total expenditure of this year’s Budget: 27.84 lakh crore
  • ·       GDP Expected (2018-19): 7.2%
  • ·       Fiscal Deficit: 3.4% of GDP
  • ·       Current Account Deficit: 2.5% of GDP
  • ·       CPI: 2.18%
  • ·       WPI: 3.8%
  • ·       Repo Rate: 6.5%
  • ·       Forex Reserve: $ 398 Billion

India is the fastest-growing trillion-dollar economy in the world and the sixth-largest with a nominal GDP of $2.6 trillion. India is poised to become $5 trillian economy in 5 years.

INDIVIDUAL TAXES

Individual taxpayers with taxable income not exceeding INR 5 lakh no longer need to pay any tax. This benefit has been proposed by raising Section 87A rebate limit to INR 12,500. Note that there is no change in tax slab. Only those with income up to Rs 5 lakh to pay no tax, rates remain same for all others i.e taxpayers with taxable income greater than Rs 5 lakh continue to pay on the 5% tax slab. Mutual funds can also expect more inflows because the salaried class can use the extra disposable income for investments.

RURAL/FARM/AGRICULTURE

The government will transfer a sum of Rs 6,000 per year to farmers who own up to two hectares of land. If implemented in the time bound manner, announcement towards farm and rural sector would help ignite rural consumption which otherwise is muted. Good news for FMCG sector. Two percent interest subvention will be given to farmers who are engaged in animal husbandry and fisheries when loans taken through Kisan Credit Card.

DEFENCE

India’s defence allocation this year (2019-2020) is Rs 3.05 Lakh crore which is the highest ever allocation ever and accounts for 11% of India’s overall expenditures.

REAL ESTATE

Some good news for real estate. First Individuals who own up to two self-occupied properties do not have to pay any notional rent tax on them. Second Earlier, if you had earned capital gains from sale of house property , you could use it for the construction or purchase of another house and save on capital gains tax. In the Budget 2019, it has been proposed that the benefit of rollover of capital gains tax could be used to buy up to two house if the capital gains is up to Rs 2 crore.

MSME SECTOR

A scheme of sanctioning loans upto 'Rs 1 crore in 59 minutes' has been launched. GST-registered MSME units will get 2 percent interest rebate on incremental loan of Rs 1 Crore.

REFORMS IN INDIAN STAMP ACT, 1899 (STAMP ACT)

The government proposed to bring in a single stamp duty rate for all financial securities transactions and its collection at one place through stock exchanges. Finance Bill 2019 seeks to amend the Stamp Act for levy and administration of stamp duty. This should result in rationalising the costs as well as streamline the process of paying stamp duty.

In this budget, government has tried to cover all the people, especially farmers who were in a lot of distress and discontent, so by announcing an assured income for farmers would help to take a sting. The vision to create a tech enabled taxpayer friendly tax department is a welcome initiative. In a nut-shell, it was a balanced budget, partially populist but phenomenally pragmatic as it did not significantly disturb the FRBM(Fiscal Responsibility and Budget Management) mandated fiscal deficit targets.

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