JOIN USNirmala's first Budget shuns populism
Belying hopes of a vast swathe of the middle class that expected more tax relief, the Modi 2.0 government's first Budget sought to give India's stuttering economy a push by targeting foreign investment, savings and exports, a script followed by neighbouring China.
Faced with a fall in its tax kitty, it also sought to mobilise revenue through levying a surcharge on the super-rich and making high-value cash withdrawals costlier.
A Re 1 per litre tax on petrol and diesel and a 2.5 percentage point increase in import duty on gold and other precious metals were the other highlights of Finance Minister Nirmala Sitharaman's first Budget, which appeared to shed all populism after her party’s resounding victory in the recently-concluded parliamentary elections.
There were no giveaways to spur consumption, which has moved into a negative territory for many sectors including automobile sales. Experts said an increase in public spending would have been the easiest way to kick-start economic growth from a five-year low, and to reduce job losses.
“The recent election which brought us to this august House today, was charged with brimming hope and desire for a bright and stable New India.,” she said in her marathon 135-minute Budget speech.
Sitharaman flagged a 10-year vision for economy, which talked of infrastructure, space, exports, digital India and defence but made no mention of removing poverty or creating jobs. In a post-Budget press conference, the minister said it was a Budget for an “overall development” of the economy.
A Rs 70,000-crore recapitalisation plan for India’s public sector banks was unveiled to ease funding problem for non-banking finance companies.
The FM kept the year-end target for the fiscal deficit at 3.3%, lower than the earlier estimated 3.4%, drawing praise from analysts for its financial rectitude and scepticism from others, who said the government's revenue targets were too optimistic.
While the tax payers were devoid of any direct benefit, her Budget gave a few incentives such as an additional deduction of Rs 1.5 lakh on interest paid on loans borrowed up to 31 March 2020, on purchase of a house up to Rs 45 lakh. It also proposed an additional income tax deduction of Rs 1.5 lakh on electric vehicles.
Corporate tax on companies with turnover of up to Rs 400 crore was proposed to be cut to 25% from the current 30%. Tax benefits also came for to mega manufacturing hubs for semi-conductors, photo voltaic cells and lithium batteries, in a push for “Make in India” and exports.
The Budget also sought to raise more money through sale of public sector companies and upped its disinvestment target to Rs 1.05 lakh crore from Rs 90,000 crore in the interim Budget presented in February. The debt-ridden Air India, which failed to attract any bidder in its first round of sale last year, would be brought to the drawing board afresh.
However, the Budget left many disappointed for failing to give a clearer roadmap on how the government planned to raise resources, for raising import duties and cornering the revenue from tax increases.
“This is a retrograde Budget. Make in India is not intended for India’s consumption but for export, so companies should be competitive. And this government raises money through levying cesses because then they don’t need to share the proceeds with the states,” M Govinda Rao, an economist and member of the 14th Finance Commission said.
Import duty on nearly 75 goods including auto parts, digital and video recorder, CCTV cameras, tiles and synthetic rubber were raised.
“What is there in this Budget? There is no reform content,” Rao said.
But measures were announced to enhance the ease of living for the common man, including a proposal to make PAN and Aadhar cards interchangeable and allow those who do not have PAN to file income tax returns. Tax payers will also get a pre-filled return forms to make it simpler.
Measures for a digital push and an ATM-like transport card for universal travel on various modes of transport -- metro, road and railways – were proposed.
The dream to make India a $5 trillion economy centred around foreign investments and exports as the minister promised to examine suggestions for further opening up foreign direct investment in aviation, media and other sectors.
Sitharaman said 100% foreign ownership will be permitted for insurance intermediaries in place of existing 49%. Local sourcing norms will also be eased for FDI in single brand retail from the current 30%.