Amid a slowing economy and concerns over high levels of employment, India’s Finance Minister Nirmala Sitharaman presented her second Union Budget in the Parliament today, stating that the budget is woven around three prominent themes - 1) Aspirational India, 2) Economic development, and 3) A caring society. The FM introduced 16 action plans under this theme, to boost the fifth largest economy of the world.
In a major move, the government has also earmarked Rs 3,000 Cr for skill development.
How did the Budget 2020 fare? Did it build confidence that the government is serious about tackling the unemployment challenge?And is the country on track to becoming a $5Tn economy by 2025?
Here are the key highlights for the Budget 2020:
Rural India and Agriculture
Under the first theme, ‘Aspirational India’, Sitharaman is focused on skills, education, and agriculture. 'The government is set to double farmer income by 2022. Farmers with barren land can set up solar power units so that they can get a living out of it, she stated, presenting a 16-point action plan for this purpose.
Education and Skilling
By 2030, India will have the largest working-age population, and there is a need for a new education policy. In this respect, the FM unveiled a plan to open 150 higher institutes to start apprentice training for general category students by 2021.
The FM added that dialogue with states has been initiated about the education policy of NEP, which is expected to be announced soon. Given the need for greater finance in the education sector, FDI in the education sector will be encouraged.
As part of skilling efforts, urban local bodies will provide fresh engineers job opportunities for one year which will help engineers learn on-the-job. These internships will help engineers learn and the urban bodies to plan better.
The FM also noted that there is a huge demand for teachers, nurses, paramedical staff and caregivers abroad. However, their skill sets do not match standards and needs to be improved. Therefore, to address this gap, a total of Rs 3,000 crore will be alloted for skill development.
The FM Sitharaman has proposed an allocation of Rs 99,300 crore for education. She says the government will work to promote 'Study in India'.
The government has proposed an online education policy to ensure education accessibility for everyone. To ensure education reaches everyone, degree-level full-fledged online education programs will be offered by institutes ranked in the top 100. IN-SAT exam will be held in African and Asian countries to benchmark foreign students.
The government also proposes to set up a National Recruitment Agency for non-gazetted posts. A common online test will be held for all non-gazetted posts across the country, especially in the aspiration districts.
The FM added that entrepreneurship is the spirit of India and has been its strength. The government plans to further create more opportunities for startup owners. Investment clearance cell will be set up for entrepreneurs and individuals will be offered assistance in funding as well and a portal will be set up for this purpose.
The government will also set up a digital platform for seamless registration and capturing IPRs.
In order to give a boost to startup ecosystems, tax on ESPOs will be deferred by five years.
Adding that there is a cost advantage for electronics manufacturing in India but that it needs much more investment, the FM proposed a scheme to encourage manufacturing of mobile phones, semiconductor packaging and electronic equipment, which can be used for manufacture of medical devices as well. A detailed scheme with details will be released soon.
Data Centre Parks
FM Nirmala Sitharaman noted that India has adapted to the sharing economy with aggregators displacing regular businesses. As analytics, IoT and AI are changing the world, a policy will be implemented to set up to build data centre parks throughout the country.
All public institutions at the Gram Panchayat level will be enabled with digital connectivity. Fibre to home through BharatNet is expected to link 100,000 Gram Panchayats in FY21. An allocation of Rs 6,000 crore will be provided for BharatNet.
In addition, the Minister proposed Rs 8,000 crore outlay over 5-years for the National Mission of Quantum Technology and Application.
Women-centric Development Schemes
The Minister said that the gross enrollment of girls is higher than boys. She added that the gross enrollment of girls is 94.32 percent in elementary levels, 81.32 percent in secondary level and 59.7 percent in higher secondary level.
Pregnant and lactating women are a priority for the government. More than 6 lakh anganwadi workers are equipped with smartphones to upload the status of more than 10 crore households.
Overall, the Minister said that there are imperatives to lower maternal mortality rates, FM has proposed a task-force for six months on this matter. There’s an allocation of Rs 35,600 Cr for nutrition-related programmes in FY21 and a further Rs 28,600 Cr allocated in FY21 by the government for women-linked programmes.
Tourism and Jobs
Proposing a hefty amount of 2500 cr allocated for the tourism promotion, she said, “Growth of tourism is directly linked to growth of employment.” To boost tourism, 100 more airports will be developed under UDAN by 2024.
Income and Taxation
Stating that businesses need to inspire confidence, the government will enshrine taxpayers' charter in the statutes to boost confidence. The Government also proposed amendments in the Companies Act to decriminalise civil offences.
Announcing the new tax regime the FM said that the tax proposals would bring ease of compliance and reduce litigation. A new personal income tax regime would be reduced who forego deductions and exemptions. Tax of only 10 percent will be charged to Rs 5 lakh-7.5 lakh income as against prevailing 20 percent rate. From Rs 7.5 lakh-10 lakh income, a tax rate of 15 percent against 20 percent prevailing rate. For income Rs 10-12.5 lakh, a rate of 20 percent as against 30 percent earlier. For income between Rs 12.5 lakh-15 lakh will be taxed at 25 percent as against 30 percent. For those at Rs 15 lakh plus income, tax will be 30 percent. There will be a significant reduction in tax paid even by those having Rs 15 lakh. But the new tax regime will be optional.
The government also proposes to remove Dividend Distribution Tax to boost investment.
Also, the corporate tax cut will be available for power generation companies as well. Government will grant exemptions for sovereign wealth funds in infrastructure and other notified sectors with a minimum lock-in of three years.
Touching on the burning topic of climate change, the FM reiterated India's commitment under the Paris Agreement, which will kick-in from January 1, 2021. Power plants with higher emissions will have to be closed and this land will be used for other purposes.
The Government will encourage plans to have clean air by the state governments with an allocation of Rs 4,400 Cr.
Ease of Doing Business
Leading Chief Human Resource Officers in the country were expecting the FM to take steps to further improve ease of doing business. Nirmala Sitharaman mentioned that a stable and predictable business environment is key for the government. Contracts Act will be strengthened to ensure that all contracts are honoured.
Micro, Small and Medium Enterprises (MSMEs)
With a view to boost MSMEs, entrepreneurs will be provided subordinate debt, which will be treated as quasi equity. The govt has also asked the RBI to consider extending the window of debt restructuring by one year until March 2021. The govt has also announced an app based invoicing platform for MSMEs.
Previously, MSMEs with turnover with a turnover of over 1 crore were required to have their accounts audited. In order to reduce the compliance burden, the govt has increased the turnover threshold to 5 crore to audit books of accounts.
What did you think about some of the key announcements made in the Budget 2020? Let us know in the comments section below.