Dinesh Kamath's Editorial 'The Union Budget 2019-20 to spur the economy?' that was published in Newsband

The Union Budget 2019-20 to spur the economy?

The Union Budget 2019-20 is focusing a lot on the financial sector. Finance Minister Nirmala Sitharaman has chosen to be fiscally conservative, opting to play the long-term game, though it could lead to pain in the short term. Her big ₹70,000 crore capital infusion in banks might give tremendous boost to the economy.

The budget has sought to address the problems that have plagued the non-banking finance companies (NBFC). She has made available ₹1 lakh crore to public sector banks through the Reserve Bank of India to buy pooled assets of NBFC. The housing finance companies, which have been the main villains of the piece, will come under the RBI’s regulatory ambit. There are important reform measures for NBFCs.

The corporate sector has got a minor sop with the turnover limit for the 25% tax bracket being raised to ₹400 crore per annum from ₹250 crore. Real estate companies may have reason to cheer as the generous tax concession for affordable housing may create demand.  

The Finance Minister to push forward two of this government’s pet themes — increasing digitalisation of money and promoting electric mobility. This is a commendable measure, but it could lead to genuine problems for businesses such as construction and real estate that are forced to deal in cash for wage payments.

More interesting ‘nudge’ is towards electric vehicles where those taking loans to buy one will get a tax deduction of up to ₹1.5 lakh on the interest paid by them. This incentive will create a market for e-vehicles and development of the ecosystem.

There will be increase in customs duty on everything from cashew kernels to PVC, newsprint and even auto parts. This is well-intentioned to promote domestic manufacturing.

No budget is appreciated 100%, because of political compulsions. Within the availability of resources, the budget is to be evolved. If larger funds are to be spent, from where do you get the money? We do not want to increase tax rates, at the same time we want everything on earth. Suddenly we cannot change the course of economy, because it causes disruption. It should be gradual over a period of time, with step by step strong base.

On the whole, the Finance Minister has come up with excellent budget. No doubt about it.