Budget 2020: The government is set to miss its fiscal deficit target for a third straight year
Highlights
- Nirmala Sitharaman presented longest-ever budget speech
- The government unveiled a budget vowing to boost people's income
- "Tax harassment" would not be tolerated, Nirmala Sitharaman said
Finance Minister Nirmala Sitharaman, in the longest-ever Budget speech, unveiled a new tax regime, abolished dividend tax for companies, announced a 16-point plan to boost agriculture and signalled record spending in agriculture to pull the economy out of its worse slump in more than a decade. Vowing to boost the income and purchasing power of citizens, Ms Sitharaman slashed income tax rates and changed slabs to lower taxes for those earning up to Rs 15 lakh a year and choosing to give up certain exemptions, but the measures fell short of market expectations. In a move seen as protectionist, the Finance Minister raised import duty on a range of products from kitchen appliances to furniture, stationary and toys to boost manufacturing. Ms Sitharaman, 60, did not complete her speech as she reportedly felt unwell after speaking for more than two hours and 30 minutes.
Here are 10 things to know about Budget 2020:
Taxes: With the aim of simplifying the direct taxation structure, Nirmala Sitharaman announced new income tax rates for individuals willing to give up a myriad of tax breaks, a move that she said would bring down the income tax outgo of those earning Rs 15 lakh a year by Rs 78,000 to Rs 1,95,000. She also abolished payment of dividend distribution tax (DDT) by companies to spur investment.
LIC Stake Sale: The government will sell a part of its holding in state-run Life Insurance Corp (LIC), the country's biggest insurance company, which will be listed as part of the government's disinvestment drive. Paring its stake in the insurance giant will help the government meet its divestment target, which has been increased from Rs 1.05 lakh crore in current financial year, to a record Rs 2.1 lakh crore - twice the amount expected - in the next financial year. Without giving a roadmap for listing LIC, Ms Sitharaman said that Rs 90,000 crore will be achieved via stake sales in state-owned banks and financial institutions.
Investors Unenthused: The stock markets suffered sharp losses following the Budget announcements, with benchmark indices S&P BSE Sensex and NSE Nifty 50 sinking to their lowest levels in more than three months amid a selloff across sectors.
Farmer Boost: The government allocated Rs 2.83 lakh crore for agriculture and allied activities, up 5.6 per cent compared with the previous year. The funds will be deployed to help farmers set up solar power generation units as well as establish a national cold storage system to transport perishables.
The government set a target of enhancing the availability of agriculture credit to Rs 15 lakh crore in 2019-20. It also earmarked Rs 2.83 lakh crore for agriculture and rural sectors and Rs 3.6 lakh crore for a water scheme aimed at ensuring piped supply to households.
Fiscal Deficit Target: The government relaxed its fiscal deficit target to 3.8 per cent this fiscal year (revised estimate) and set a goal of containing it at 3.5 per cent in the year starting April (budget estimate). It also expects a nominal GDP growth of 10 per cent for the next financial year.
In the first full-year Budget of Prime Minister Narendra Modi's second term, the government earmarked Rs 69,000 crore for healthcare, Rs 99,300 crore for education, Rs 22,000 crore for power and renewables and Rs 4,400 crore for clean air incentives in cities with over 10 lakh people.
Savings: Assuring the general public that their savings in bank accounts are safe, the Finance Minister proposed to increase the insurance cover on deposits to Rs 5 lakh from the existing Rs 1 lakh, after a banking fraud case spooked the country's depositors and investors last year.
Higher government spending is likely to exert pressure on public finances and prompt caution from rating agencies, but many experts say the proposed spending will not be enough to address the slowdown. The growth projections and the tax moves such as DDT abolishment looked over-optimistic to some.
The Union Budget comes at a time the Indian economy is staring at the worst pace of expansion recorded since the 2008-09 global financial crisis, with falling employment, consumption and investment ratcheting up the pressure to revive growth.
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