Union Budget 2019-20 : Key Proposals
The newly elected NDA government presented its first full budget in Parliament on 5th July. The Finance Minister Nirmala Sitharaman introduced Finance Bill 2019-20 in Lok Sabha at 11 am. Let's look at the key proposals introduced by the Finance Minister in Part A of the Union Budget 2019-20.
This year's budget is called 'Bahi Khata' by the Finance Ministry. But the irony is this may be the first budget which does not contain expenditure receipts and revenue receipts. Also the budget speech didn't mention the budgetary allocations to major public welfare schemes like MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act), ICDS (Integrated Child Development Scheme), Food Security, Tribal sub-plan etc
Key Proposals to Make India 5 Trillion USD Economy:-
To boost Electric Vehicles (EVs), the government has allocated 10,000 crore for a period of 3 years to Phase-II of FAME (Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles) Scheme, following approval of the Cabinet. The main objective of the Scheme is to encourage faster adoption of Electric vehicles by way of offering upfront incentive on purchase of Electric vehicles and also by establishing the necessary charging infrastructure for electric vehicles.
After completing the Phase 1 of Bharatmala, in the second Phase, States will be helped to develop State road networks. It is estimated that Railway Infrastructure would need an investment of 50 lakh crores between 2018-2030. Government has proposed to use Public-Private Partnership to unleash faster development and completion of tracks, rolling stock manufacturing and delivery of passenger freight services.
Government will make available blueprint of One Nation, One Grid - to ensure power availability to states at affordable rates. Under the Interest Subvention Scheme for MSMEs, 350 crore has been allocated for FY 2019-20 for 2% interest subvention for all GST registered MSMEs, on fresh or incremental loans. Government will create a payment platform for MSMEs to enable filing of bills and payment thereof on the platform itself. Government of India has decided to extend the pension benefit to about three crore retail traders & small shopkeepers whose annual turnover is less than 1.5 crore under a new Scheme namely Pradhan Mantri Karam Yogi Maandhan Scheme.
To boost the credit for infrastructure financing, a Credit Guarantee Enhancement Corporation will be set up in 2019-20. Also it is proposed to permit investments made by FIIs/FPIs in debt securities issued by Infrastructure Debt Fund – Non-Bank Finance Companies (IDF-NBFCs) to be transferred/sold to any domestic investor within the specified lock-in period. To deepen the Corporate tri-party repo market in Corporate Debt securities, Government will work with regulators RBI/SEBI to enable stock exchanges to allow AA rated bonds as collaterals. Government is in discussion with SEBI to consider the minimum public shareholding in listed companies from 25% to 35%. FM has also proposed to initiate steps towards creating an electronic fund raising platform – a social stock exchange - under the regulatory ambit of Securities and Exchange Board of India (SEBI) for listing social enterprises and voluntary organizations working for the realization of a social welfare objective so that they can raise capital as equity, debt or as units like a mutual fund.
FDI (Foreign Direct Investment):- India’s FDI inflows in 2018-19 remained strong at US$ 64.375 billion marking a 6% growth over the previous year. The Government will examine suggestions of further opening up of FDI in aviation, media (animation, AVGC) and insurance sectors in consultation with all stakeholders. 100% FDI will be permitted for insurance intermediaries. Local sourcing norms will be eased for FDI in Single Brand Retail sector.
FM further propose to increase the statutory limit for FPI (Foreign Portfolio Investment) investment in a company from 24% to sectoral foreign investment limit with option given to the concerned corporates to limit it to a lower threshold. FPIs will be permitted to subscribe to listed debt securities issued by ReITs and InvITs. To provide NRIs seamless access to Indian equities, FM proposes to merge the NRI-Portfolio Investment Scheme Route with the Foreign Portfolio Investment Route.
A Public Sector Enterprise viz. New Space India Limited (NSIL) has been incorporated as a new commercial arm of Department of Space to tap the benefits of the Research & Development carried out by ISRO. The Company will spearhead commercialization of various space products including production of launch vehicles, transfer to technologies and marketing of space products.
Key Proposals for Rural India:-
Pradhan Mantri Awas Yojana – Gramin (PMAY-G) aims to achieve the objective of “Housing for All” by 2022. Through a focused Scheme – the Pradhan Mantri Matsya Sampada Yojana (PMMSY) – the Department of Fisheries will establish a robust fisheries management framework. PMGSY (Pradhan Mantri Gram Sadak Yojna) - Phase III is envisaged to upgrade 1,25,000 kms of road length over the next five years, with an estimated cost of 80,250 crore.
Scheme of Fund for Upgradation and Regeneration of Traditional Industries (SFURTI) aims to set up more Common Facility Centres (CFCs) to facilitate cluster based development to make the traditional industries more productive, profitable and capable for generating sustained employment opportunities. The focused sectors are Bamboo, Honey and Khadi clusters. To improve the technology of such industries, the Scheme for Promotion of Innovation, Rural Industry and Entrepreneurship (ASPIRE) has been consolidated for setting up of Livelihood Business Incubators (LBIs) and Technology Business Incubators (TBIs).
The new Ministry called Jal Shakti Mantralaya will work with states to ensure Har Ghar Jal (piped water supply) to all rural households by 2024 under the Jal Jeevan Mission. The Government has identified 1592 Blocks which are critical and over exploited, spread across 256 District for the Jal Shakti Abhiyan. FM proposed to expand Swachh Bharat Mission to undertake sustainable solid waste management in every village. Under the Pradhan Mantri Gramin Digital Saksharta Abhiyan, over two crore rural Indians have so far been made digitally literate. To bridge rural-urban digital divide, Bharat-Net is targeting internet connectivity in local bodies in every Panchayat in the country.
Key Proposals for Urban India:-
Under Pradhan Mantri Awas Yojana – Urban (PMAY-Urban), over 81 lakh houses with an investment of about 4.83 lakh crores have been sanctioned. More than 45,000 public and community toilets across 1700 cities have been uploaded on Google maps, covering more than 53% of India’s urban population. On the occasion of 150th birth anniversary of Mahatma Gandhi a Gandhipedia is also being developed by National Council for Science
Museums to sensitize youth and society at large about positive Gandhian values. Railways will be encouraged to invest more in suburban railways through Special Purpose Vehicle (SPV) structures like Rapid Regional Transport System (RRTS) proposed on the Delhi-Meerut route.
Key Proposals for Youth:-
The Government will bring in a New National Education Policy which will proposes major changes in both school and higher education among others, better Governance systems and brings greater focus on research and innovation. Government proposes to establish a National Research Foundation (NRF) to fund, coordinate and promote research in the country. An amount of 400 crore has been provided under the head, “World Class Institutions”, for FY 2019-20. FM further proposes to start a programme, ‘Study in India’, that will focus on bringing foreign students to study in our higher educational institutions. A draft legislation for setting up Higher Education Commission of India (HECI), would be presented in the year ahead to reform the regulatory systems of higher education.
Khelo India scheme would be further expanded. To popularize sports at all levels, a National Sports Education Board for Development of Sports persons would be set up under Khelo India Scheme. To prepare youth to take up jobs overseas, government will increase focus on skill sets needed abroad including language training. Government will also lay focus on new-age skills like Artificial Intelligence (AI), Internet of Things, Big Data, 3D Printing, Virtual Reality and Robotics, which are valued highly both within and outside the country.
The Government is proposing to streamline multiple labour laws into a set of four labour codes. This will ensure that process of registration and filing of returns will get standardized and streamlined. Government proposes to start a television programme within the DD
bouquet of channels exclusively for start-ups. This shall serve as a platform for promoting start-ups, discussing issues affecting their growth, matchmaking with venture capitalists and for funding and tax planning.
Key Proposals for Women:-
FM proposes to expand the Women SHG (Self Help Group) interest subvention programme to all districts. Furthermore, for every verified women SHG member having a Jan Dhan Bank Account, an overdraft of 5,000 shall be allowed. One woman in every SHG will also be made eligible for a loan up to 1 lakh under the MUDRA Scheme.
Key Proposals for Banking & Finance:-
Public Sector Banks are now proposed to be further provided 70,000 crore capital to boost credit for a strong impetus to the economy. To further improve ease of living, they will leverage technology, offering online personal loans and doorstep banking, and enabling customers of one Public Sector Bank to access services across all Public Sector Banks.
For purchase of high-rated pooled assets of financially sound NBFCs, amounting to a total of Rupees one lakh crore during the current financial year, Government will provide one time six months' partial credit guarantee to Public Sector Banks for first loss of up to 10%. To allow NBFCs to raise funds in public issues, the requirement of creating a DRR (Debenture Redemption Reserve) will be done away with.
FM proposes to return the regulation authority over the housing finance sector from NHB (National Housing Bank) to RBI. To facilitate on-shoring of international insurance transactions and to enable opening of branches by foreign reinsurers in the International Financial Services Centre, it is proposed to reduce Net Owned Fund
requirement from 5,000 crore to 1,000 crore.
In case of disinvestment in non financial Public Service Undertakings, government is considering case where the Undertaking is still to be retained in Government control, to go below 51% to an appropriate level on case to case basis. Government has also decided to
modify present policy of retaining 51% Government stake to retaining 51% stake inclusive of the stake of Government controlled institutions. Government is setting an enhanced target of 1,05,000 crore of disinvestment receipts for the financial year 2019-20. Government will offer an investment option in ETFs on the lines of Equity Linked Savings Scheme (ELSS).
The Government would start raising a part of its gross borrowing programme in external markets in external currencies.
Stay tuned for more updates. Feel free to comment.
This blog is now on Telegam. For reports on Economics, Current Affairs and more, subscribe this blog on Telegam.
Interest Rate Cut on Small Saving Schemes
This year's budget is called 'Bahi Khata' by the Finance Ministry. But the irony is this may be the first budget which does not contain expenditure receipts and revenue receipts. Also the budget speech didn't mention the budgetary allocations to major public welfare schemes like MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act), ICDS (Integrated Child Development Scheme), Food Security, Tribal sub-plan etc
Key Proposals to Make India 5 Trillion USD Economy:-
To boost Electric Vehicles (EVs), the government has allocated 10,000 crore for a period of 3 years to Phase-II of FAME (Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles) Scheme, following approval of the Cabinet. The main objective of the Scheme is to encourage faster adoption of Electric vehicles by way of offering upfront incentive on purchase of Electric vehicles and also by establishing the necessary charging infrastructure for electric vehicles.
After completing the Phase 1 of Bharatmala, in the second Phase, States will be helped to develop State road networks. It is estimated that Railway Infrastructure would need an investment of 50 lakh crores between 2018-2030. Government has proposed to use Public-Private Partnership to unleash faster development and completion of tracks, rolling stock manufacturing and delivery of passenger freight services.
Government will make available blueprint of One Nation, One Grid - to ensure power availability to states at affordable rates. Under the Interest Subvention Scheme for MSMEs, 350 crore has been allocated for FY 2019-20 for 2% interest subvention for all GST registered MSMEs, on fresh or incremental loans. Government will create a payment platform for MSMEs to enable filing of bills and payment thereof on the platform itself. Government of India has decided to extend the pension benefit to about three crore retail traders & small shopkeepers whose annual turnover is less than 1.5 crore under a new Scheme namely Pradhan Mantri Karam Yogi Maandhan Scheme.
To boost the credit for infrastructure financing, a Credit Guarantee Enhancement Corporation will be set up in 2019-20. Also it is proposed to permit investments made by FIIs/FPIs in debt securities issued by Infrastructure Debt Fund – Non-Bank Finance Companies (IDF-NBFCs) to be transferred/sold to any domestic investor within the specified lock-in period. To deepen the Corporate tri-party repo market in Corporate Debt securities, Government will work with regulators RBI/SEBI to enable stock exchanges to allow AA rated bonds as collaterals. Government is in discussion with SEBI to consider the minimum public shareholding in listed companies from 25% to 35%. FM has also proposed to initiate steps towards creating an electronic fund raising platform – a social stock exchange - under the regulatory ambit of Securities and Exchange Board of India (SEBI) for listing social enterprises and voluntary organizations working for the realization of a social welfare objective so that they can raise capital as equity, debt or as units like a mutual fund.
FDI (Foreign Direct Investment):- India’s FDI inflows in 2018-19 remained strong at US$ 64.375 billion marking a 6% growth over the previous year. The Government will examine suggestions of further opening up of FDI in aviation, media (animation, AVGC) and insurance sectors in consultation with all stakeholders. 100% FDI will be permitted for insurance intermediaries. Local sourcing norms will be eased for FDI in Single Brand Retail sector.
FM further propose to increase the statutory limit for FPI (Foreign Portfolio Investment) investment in a company from 24% to sectoral foreign investment limit with option given to the concerned corporates to limit it to a lower threshold. FPIs will be permitted to subscribe to listed debt securities issued by ReITs and InvITs. To provide NRIs seamless access to Indian equities, FM proposes to merge the NRI-Portfolio Investment Scheme Route with the Foreign Portfolio Investment Route.
A Public Sector Enterprise viz. New Space India Limited (NSIL) has been incorporated as a new commercial arm of Department of Space to tap the benefits of the Research & Development carried out by ISRO. The Company will spearhead commercialization of various space products including production of launch vehicles, transfer to technologies and marketing of space products.
Key Proposals for Rural India:-
Pradhan Mantri Awas Yojana – Gramin (PMAY-G) aims to achieve the objective of “Housing for All” by 2022. Through a focused Scheme – the Pradhan Mantri Matsya Sampada Yojana (PMMSY) – the Department of Fisheries will establish a robust fisheries management framework. PMGSY (Pradhan Mantri Gram Sadak Yojna) - Phase III is envisaged to upgrade 1,25,000 kms of road length over the next five years, with an estimated cost of 80,250 crore.
Scheme of Fund for Upgradation and Regeneration of Traditional Industries (SFURTI) aims to set up more Common Facility Centres (CFCs) to facilitate cluster based development to make the traditional industries more productive, profitable and capable for generating sustained employment opportunities. The focused sectors are Bamboo, Honey and Khadi clusters. To improve the technology of such industries, the Scheme for Promotion of Innovation, Rural Industry and Entrepreneurship (ASPIRE) has been consolidated for setting up of Livelihood Business Incubators (LBIs) and Technology Business Incubators (TBIs).
The new Ministry called Jal Shakti Mantralaya will work with states to ensure Har Ghar Jal (piped water supply) to all rural households by 2024 under the Jal Jeevan Mission. The Government has identified 1592 Blocks which are critical and over exploited, spread across 256 District for the Jal Shakti Abhiyan. FM proposed to expand Swachh Bharat Mission to undertake sustainable solid waste management in every village. Under the Pradhan Mantri Gramin Digital Saksharta Abhiyan, over two crore rural Indians have so far been made digitally literate. To bridge rural-urban digital divide, Bharat-Net is targeting internet connectivity in local bodies in every Panchayat in the country.
Key Proposals for Urban India:-
Under Pradhan Mantri Awas Yojana – Urban (PMAY-Urban), over 81 lakh houses with an investment of about 4.83 lakh crores have been sanctioned. More than 45,000 public and community toilets across 1700 cities have been uploaded on Google maps, covering more than 53% of India’s urban population. On the occasion of 150th birth anniversary of Mahatma Gandhi a Gandhipedia is also being developed by National Council for Science
Museums to sensitize youth and society at large about positive Gandhian values. Railways will be encouraged to invest more in suburban railways through Special Purpose Vehicle (SPV) structures like Rapid Regional Transport System (RRTS) proposed on the Delhi-Meerut route.
Key Proposals for Youth:-
The Government will bring in a New National Education Policy which will proposes major changes in both school and higher education among others, better Governance systems and brings greater focus on research and innovation. Government proposes to establish a National Research Foundation (NRF) to fund, coordinate and promote research in the country. An amount of 400 crore has been provided under the head, “World Class Institutions”, for FY 2019-20. FM further proposes to start a programme, ‘Study in India’, that will focus on bringing foreign students to study in our higher educational institutions. A draft legislation for setting up Higher Education Commission of India (HECI), would be presented in the year ahead to reform the regulatory systems of higher education.
Khelo India scheme would be further expanded. To popularize sports at all levels, a National Sports Education Board for Development of Sports persons would be set up under Khelo India Scheme. To prepare youth to take up jobs overseas, government will increase focus on skill sets needed abroad including language training. Government will also lay focus on new-age skills like Artificial Intelligence (AI), Internet of Things, Big Data, 3D Printing, Virtual Reality and Robotics, which are valued highly both within and outside the country.
The Government is proposing to streamline multiple labour laws into a set of four labour codes. This will ensure that process of registration and filing of returns will get standardized and streamlined. Government proposes to start a television programme within the DD
bouquet of channels exclusively for start-ups. This shall serve as a platform for promoting start-ups, discussing issues affecting their growth, matchmaking with venture capitalists and for funding and tax planning.
Key Proposals for Women:-
FM proposes to expand the Women SHG (Self Help Group) interest subvention programme to all districts. Furthermore, for every verified women SHG member having a Jan Dhan Bank Account, an overdraft of 5,000 shall be allowed. One woman in every SHG will also be made eligible for a loan up to 1 lakh under the MUDRA Scheme.
Key Proposals for Banking & Finance:-
Public Sector Banks are now proposed to be further provided 70,000 crore capital to boost credit for a strong impetus to the economy. To further improve ease of living, they will leverage technology, offering online personal loans and doorstep banking, and enabling customers of one Public Sector Bank to access services across all Public Sector Banks.
For purchase of high-rated pooled assets of financially sound NBFCs, amounting to a total of Rupees one lakh crore during the current financial year, Government will provide one time six months' partial credit guarantee to Public Sector Banks for first loss of up to 10%. To allow NBFCs to raise funds in public issues, the requirement of creating a DRR (Debenture Redemption Reserve) will be done away with.
FM proposes to return the regulation authority over the housing finance sector from NHB (National Housing Bank) to RBI. To facilitate on-shoring of international insurance transactions and to enable opening of branches by foreign reinsurers in the International Financial Services Centre, it is proposed to reduce Net Owned Fund
requirement from 5,000 crore to 1,000 crore.
In case of disinvestment in non financial Public Service Undertakings, government is considering case where the Undertaking is still to be retained in Government control, to go below 51% to an appropriate level on case to case basis. Government has also decided to
modify present policy of retaining 51% Government stake to retaining 51% stake inclusive of the stake of Government controlled institutions. Government is setting an enhanced target of 1,05,000 crore of disinvestment receipts for the financial year 2019-20. Government will offer an investment option in ETFs on the lines of Equity Linked Savings Scheme (ELSS).
The Government would start raising a part of its gross borrowing programme in external markets in external currencies.
Stay tuned for more updates. Feel free to comment.
This blog is now on Telegam. For reports on Economics, Current Affairs and more, subscribe this blog on Telegam.
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