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.
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