Budget 2019: Five trillion economy target is laudable

Startup’s have the ability to become large firms that are not only more productive but also generate significant employment: R. Raghav Swaminathan

By R. Raghav Swaminathan

The target of becoming a USD 5 trillion economy is laudable. A key part of any strategy is to have a compelling goal.

Infrastructure thrust continues. An outlay of ~ INR 100 lakh crores over a 5 year period. Historically, we have been able to secure funding through PPP and TOT, but all this put together has not been able to fulfil the infra needs of the country. With an increase in land prices, the funding problem is expected to get more acute and what will be important is how do we innovatively secure the same.

This is the first time the government has mentioned about creating a conducive eco-system for MRO. This is an important step and one looks forward to see the details on this. Formation of New Space India (NSIL) to tap the benefits of ISRO is a significant statement of intention, which will allow the organization to benchmark itself globally.

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Startup’s have the ability to become large firms that are not only more productive but also generate significant employment. Measures announced for promotion of startup’s are noteworthy such as relaxation in conditions for carrying forward and set off of losses, an extension of exemption of capital gains arising from the sale of residential house for investment in start up’s from March 31, 2019, to March 31, 2021.

Fiscal deficit target has been reduced to 3.3% of the GDP for 2019-20 as against 3.4% in Interim budget. It shows the intention of the government to maintain fiscal prudence while pursuing an ambitious goal of USD 5 trillion. How this actually pans out remains to be seen because historically we have been falling short of our revenue targets. Government’s announcement to borrow from external markets was a major announcement, which is going to allow them to look at additional borrowing avenues.

Various incentives are given to MSMEs to facilitate their growth. This budget has proposed ease of access to credit (processing loan in 59 min) and 2% interest subvention on all fresh and incremental loan up to INR 1 crore to all GST registered MSMEs. For this purpose, the FM has allocated INR 350 crore. The government also plans to open a payment portal for MSMEs. MSMEs will receive a big boost if the delays in payments to SMEs and MSMEs would be eliminated through this portal. To spur investment and create more profitable surplus, the threshold of reduced tax rate of 25% has been increased to INR 400 crore annual turnover.

A big push for electric vehicles has been given through GST cut from 12% to 5%. Further, in order to make electric vehicles affordable for consumers, the government will provide additional income tax deduction of INR 1.5 lakhs on the interest paid on loans taken to buy Electric vehicle.

Due to increase in Customs duty on Furniture fittings from 10% to 15% and withdrawal of 7.5% Customs Duty exemption on Fatty oil, there would be a significant increase in the cost of furniture and soap. Though the final impact is to be fully assessed based on the fine print, there is a possibility that the additional cost may have to be passed on to the consumer.

What will be important now is operationalizing these initiatives at the ground level and building on some of these formative steps.

(The author of this article is the CFO of Wipro Enterprises Limited)