BUDGET 2019 addresses the macro economic agenda
The newly formed Modi Government 2.0 will become a guide for upcoming reforms and policies in the next 5 years to lead. Nirmala Sitharaman, Finance Minister had presented her first budget, in which the Government has decided to address pressing economic challenges the country is battling with, fall in consumer demand, reduced investment & savings and depleting agriculture incomes. Investors have low expectations about big ticket reforms, considering the crisis in the non-banking financial sector, the slowdown in the economy and a wide fiscal deficit that has shrunk the financial resources of the Government.
It's a budget for all. The impetus on digital payments is encouraging for the entire cashless ecosystem. It has addressed issues which will make 'ease of living' for the poor, the middle class and more tax on rich. The budget gives a concern on the Petrol to get costlier and the housing relief to middle class is a welcome move.
Nirmala has proposed to make PAN and Aadhaar interchangeable, allowing those who do not have PAN to file income tax returns. Furthermore, India’s plans to ease the rules in single brand retail are set to help Apple, Samsung, Xiaomi, Oppo and OnePlus. They want to open their own stores in India. The FDI inflows into India have remained robust despite global headwinds.
The Economic Survey is tabled by the Finance Minister in the Parliament every year a day before the budget. This year's Survey is different as it is based on 'blue sky thinking' or unrestricted ideas to boost economy, focuses on behavioural changes to address issues like gender inequality, savings & health and use of data to unlock growth potential.
According to Sudhindra Holla, Sales Director - Axis Communications India & SAARC, the Union Budget 2019 depicts the milestone set towards reaching USD 5 trillion economy by investing on infrastructure, digital economy and job creation. “We welcome the government’s focus on the construction and development of highways under the National Highways Programme, to ensure creation of National Highways Grid of desirable capacity. We also look forward to the focus on improving skills of our youth in areas such as Artificial Intelligence, Big Data, and Robotics. This in turn will ensure more stability of jobs both in India and abroad. Furthermore, doubling allocation to Digital India will empower the semi-urban geographies and provide businesses to upscale and help in the country’s vision to a digital-first economy.”
Rajiv Kapoor, Vice President, India & SAARC, Cambium Networks said, “The Union Budget takes forward the positive momentum set by the earlier announced Interim Budget particularly on areas involving Digital Villages and taking broadband to masses. The thrust on digital economy is a welcome move as well. With the government increasing basic customs duty on optical fibre, the focus seems to now shift to Make in India. Overall, the budget has set the right tone to enable connecting the unconnected and also scaling the country to be able to develop global best solutions for high speed wireless connectivity.”
Swetang Vin, Corporate Vice President and Regional CFO – AMD too applauded that the Corporate tax rate of 25% for companies with turnover of Rs. 400 crore is a welcome move as 99.3% of the companies will benefit from this lower tax rate. “This will help companies to deploy the surplus funds for investment in capex and R&D for future growth. At the same time it is disappointing that 25% rate was not extended to the remaining 0.7% corporates. This was an expectation from last 5 years. The move to raise Income Tax Surcharge in highest tax bracket could have been avoided by increasing the tax net instead of charging the same tax payers.”
Sriram S, Co-Founder - iValue InfoSolutions said that with limited options, the government did try to send positive signals for reviving business growth and enhance consumer spending. “It is good to see focus and thrust on basic needs like water, electricity, clean cooking medium in rural areas. INR 70,000 Cr capital infusion into government owned banks this year to boost credit along with boosting capex on Digital initiatives Pension benefits to INR 3 Cr retail traders and shopkeepers whose annual turnover is upto Rs. 1.5 Cr is another good move.”
Deepak Maheshwari, Director of Government Affairs, India, ASEAN & China – Symantec opined, “Within just four years since its launch, the impact of the Prime Minister Modi’s visionary program Digital India is visible everywhere, from accelerated growth in digital payments to increasing simplification of tax returns. In addition, the focus on fostering and supporting technological innovation is loud and clear whether one looks at Artificial Intelligence and Robotics or 3D printing and Virtual Reality.
“However, if not protected well against vulnerabilities and malicious actors, crippling of digital systems or data breaches can have far-reaching and devastating impact, especially in critical information infrastructure sectors. Hence, the government must set aside ten percent of technology budgets exclusively towards cyber security,” he warned.
The government’s focus on positioning India as the top destination for research and innovation augurs well with the interests of the ER&D industry. “It is now for the value chain players to come together and replicate the success achieved by Indian ER&D players for global auto majors on the EV front. Lastly, earmarking Rs.10, 000 crore over a three year period towards building a wider ecosystem of electric vehicles is a welcome move,” said Keshab Panda, CEO & MD - L&T Technology Services.
Siddharth Viswanath, Partner and Leader, Cybersecurity - PwC India said, “It is good to see the finance minister Nirmala Sitharaman promote Digital India in her maiden Budget speech. The focus on BharatNet program which aims to connect every village block via high-speed broadband and on creating a pool of skilled professionals in areas such as AI, robotics, VR, 3D, etc, is commendable. For India to be truly digital and fit for future economy, we also need to nurture and build cyber skills and technologies.”
Abhishek Jain, Tax Partner - Ernst and Young commented, “The budget from an indirect tax perspective was mostly aligned to the Government's Make in India, cleaner India and ease of business agenda. Proposal of Legacy Dispute Resolution Scheme was much sought for by industry players as most of them wanted to settle litigations of the past after stepping into the new tax era. Also, rate rationalizations for strategic goods like defence equipment, etc are welcome for the nation as a whole.”
Dr. Jaijit Bhattacharya, President - Centre for Digital Economy Policy Research said, "Very comprehensive budget with deep structural reforms laid out, that is the need of the hour. Heartening to see continued focus on social safety net in both urban and rural areas and new focus on extending pension to small shopkeepers. The continued focus on public spending, including on infrastructure and housing, would help get the economy on track to become a USD 5 trillion economy in 5 years."
Impetus to the MSME sector
The MSMEs, an integral part of India's economy, has witnessed a better allotment of funds. Loans up to INR 1 Cr for GST registered MSMEs on fresh or incremental loans @2% interest will help in growing business at affordable costs.
"SMEs and MSMEs will play the most significant role in achieving India's ambitious target of becoming a $5 trillion economy by 2025,” said Sudhir Singh, Managing Director - Marg ERP Ltd. “To give a positive push and create a productive environment for this segment to flourish, there is a need for perfect ease of doing business environment, nurturing a demand based skilled manpower and wide adoption of technological advancements in SME and MSME sector. Allotment of Rs 350 Crore for 2 per cent interest subvention for all GST-registered MSMEs under the interest subvention scheme is a step in the right direction.”
According to Rajarshi Bhattacharyya, Country Manager - SUSE India, the upcoming generation will be a driving force of the economy, knowledge of deep technologies will help make them employable and bridge the gap between demand and supply of talent. “Open source companies like SUSE can be benefited from this talent pool, and be encouraged to work and support the nation and enterprises towards becoming globally competitive."
“With India poised to become a USD 5 trillion economy in the next five years, the proposal of ensuring the growth of SMEs through various initiatives including establishment of an online portal for MSMEs for filing of bills or the government’s efforts at improving the cybersecurity skills of our youth in next generation technology areas such as Artificial Intelligence, Big Data and Robotics, aims at meeting the huge demand of skills required in IT and cybersecurity while we look at strengthening the digital transformation wave,” said Sunil Sharma, managing director sales - Sophos India & SAARC. “With cyber threats being detected on servers (39%), network (35%), endpoints (8%) and mobile (18%) and 89% of IT managers believing cybersecurity recruitment is a challenge, there still remains a pressing need for further investment in technologies for data protection and IT Security, both from the Government and organization’s standpoint.”
The Budget has also given a boost to Nation’s entrepreneurial spirit by extending Standup India scheme till 2025, setup of 80 Livelihood business incubators and 20 technology business incubators to develop 75,000 skilled entrepreneurs in agro-rural industries, encouraging women entrepreneurs and several other measures to streamline labour laws, education, and rental housing segment which will have a direct impact on start-ups in the country.
Rajiv Bhalla, Managing Director - Barco India said that for India to be on the path to being the 3rd largest economy by 2030, the budget’s rightfully emphasizes that robust improvements are required in social infrastructure and education. “The plan to set up 20 technology incubators to push rural development opens the stage for new initiatives that will enable India to become a $5 trillion economy in the years ahead. Additionally, the budget has emphasized on 17 ‘iconic sites’ which will be transformed into world-class destinations to provide an impetus to the tourism sector.”
Dr. Omkar Rai, Director General, Software Technology Parks of India (STPI) praised the Budget as well as the government for having taken so many remarkable reforms with this budget for boosting the economy. “We are on the path of achieving a sustainable GDP growth rate of 8% in becoming a $5 trillion economy by 2024-25. The Government focus on aggregating the services of key sectors such as infrastructure, energy, developing model for public-private partnership intending towards lot of collaborations by way of leveraging emerging technologies, FDI, ease of doing business, focus on R&D and digital economy shall definitely change the functioning of industry verticals and increase their productivity, which, in turn, will help in creating massive job opportunities and ensure all-inclusive growth of the countrymen. This development will eventually bring less-privileged people into the mainstream of the society.”
CP Gurnani, MD & CEO - Tech Mahindra said, “We completely hail the government's vision of a New India that will thrive on the confluence of new age digital technologies, quality education and apt skilling. We look forward to partnering with the industry and academia to nurture the start-up ecosystem, and to fuel a culture of research and innovation that will help travel the road to India becoming a five trillion dollar economy.”
Sumeer Chandra, MD, HP Inc. India said, “It is great to see the focus on making India a $5 trillion economy by 2025, through investments in infrastructure, digital economy and job creation. In the short term, the Rs. 70,000 crore capital boost for PSU banks will help improve business confidence and overall liquidity situation. The government’s intent in driving job creation across sectors by reskilling and upskilling the youth is a strong positive. Initiatives to prepare 75,000 skilled entrepreneurs in agro-rural industries through 100 new incubators under ASPIRE scheme and training 10 million youth under the Kaushal Vikas Yojana with new-age skills in areas like artificial intelligence, Internet of Things, big data, 3-D printing, virtual reality and robotics, will help create a large pool of skilled manpower in India.”
The comments of Nikhil Arora, Vice President and Managing Director, GoDaddy India also echoed similar sentiments. “The Budget offers big slew of reforms for the MSME sector such as creation of payment platform for filing bills, easy access to loans up to INR 1 crore within 59 minutes and credit boost through INR 350 crore interest subvention - all of which will encourage more people to start their business journeys. With India poised to become a $3 trillion economy this year, we at GoDaddy are committed to continue working with the government and our partner ecosystem, helping entrepreneurs and small businesses to successfully grow their ventures online, with our easy-to-use and affordable tools and solutions.”
Key Highlights from the Finance Minister’s speech
• The budget has been presented with a 10-year vision in mind. The start-ups are being given a whole set of tax benefits.
• The budget is for a New India with a roadmap to transform the agriculture sector of the country.
• Fully automated GST Refund module shall be implemented; multiple tax ledgers to be replaced by one; invoice details to be captured in a central system
• Basic customs duty on certain items to be increased to promote the cherished goal of Make in India. Import of defence equipment not manufactured in India is being exempted from basic customs duty.
• The government increased customs duty on gold. According to the Budget proposals, import duty to be hiked on gold and precious metals to 12.5%, from current level of 10%.
• Increase special additional excise duty and road and infrastructure cess each one by 1 rupee a litre on petrol and diesel.
• Nirmala Sitharaman kept the income tax slab rates unchanged but announced a slew of new income tax proposals
• To provide further impetus to affordable housing, additional deduction of 1.5 lakh rupees on interest paid on loans borrowed upto 31 March 2020 for purchase of house up to ₹45 lakh.
• Additional income tax deduction of 1.5 lakh rupees on the interest paid on the loans taken to purchase electric vehicles.
• To discourage the practice of making business payments in cash, the government proposes to levy TDS of 2% on cash withdrawal exceeding ₹1 crore in a year from a bank account.
• More than 120 crore Indians now have Aadhar card, therefore for ease of tax payers, henceforth PAN card and Aadhar card are now interchangeable and allow those who don't have PAN to file returns by simply quoting Aadhar number and use it wherever they require to use PAN.
• Public sector banks to be provided 70,000 crore rupees to boost capital and improve credit.
• For purchase of high-rated pooled assets of financially sound Non Banking Finance Companies amounting to 1 lakh crore rupees during 2019-20, one-time six-month partial credit guarantee to be given to public sector banks (PSBs).
• India's sovereign external debt to GDP is among the lowest globally at less than 5%. Govt will start raising a part of its gross borrowing program in external markets in external currencies.
• A new series of coins of Re 1, ₹2, ₹5, ₹10, ₹20 easily identifiable to the visually impaired released by the PM on 7th March 2019 will be made available for public use shortly.
• Four new embassies to be opened in 2019-20, to improve footprint of India's overseas presence and to provide better public services to local Indian communities.
• Regulation authority over housing finance sector to be returned from National Housing Bank to RBI.
• To further encourage women entrepreneurship, Women Self Help Group (SHG) Interest Subvention Programme to be expanded to all districts in India.
• Non-performing asset (NPAs) recovery of ₹4 lakh crore over the last four years, NPAs down by ₹1 lakh crore in the last one year.
• To popularize sports at all levels, National Sports Education Board for development of sportspersons to be set up under Khelo India.
• Exclusive TV programme exclusively for start-ups to be started, channel will be designed and executed by start-ups themselves.
• Issue of Aadhaar Card for Non Resident Indians (NRIs) with Indian passports after their arrival in India without waiting for the mandatory 180 days.
• New National Educational Policy to be brought in to transform Indian educational system; major changes in higher as well as school system to be brought in.
• India will be made open defecation free on 2 October 2019, as per the dream of Prime Minister Narendra Modi.
• Jal Shakti Ministry will look at the management of water resources and water supply in an integrated and holistic manner and will work with states to ensure 'Har Ghar Jal', to all rural households by 2024 under 'Jal Jeevan Mission'.
• The government will invest widely in agricultural infrastructure and support private entrepreneurship in driving value addition to farmers produce and those from allied activities too, like bamboo, timber and also for generating renewable energy.
• 9.6 crore toilets have been constructed since 2 October 2014. More than 5.6 lakh villages have become open defecation free. I propose to expand the Swachh Bharat mission to undertake sustainable solid waste management in every village.
• The government will bring out a policy framework for making India a global hub of aircraft financing and leasing activities. The idea is to encourage new industries to come up, leveraging India’s existing capabilities that will add more quality jobs.
• India has emerged as a major space power. To harness India's space ability commercially, a public sector enterprise, New Space India Limited (NSIL) has been incorporated to tap the benefits of ISRO
• Every rural family, except those who are unwilling to take the connection will have electricity and clean cooking gas.
• Government will invite suggestions for further opening up of FDI in aviation sector, media, animation AVGC and insurance sectors in consultation with all stakeholders. 100% FDI will be permitted for insurance intermediaries.
• Credit Guarantee Enhancement Corporation will be set up in 2019-20, action plan to deepen markets for long-term bonds with specific focus on infrastructure sector to be put in place.