Union Budget 2020

On 1st February, Saturday 2020 the Finance Minister Nirmala Sitharaman while delivering her second union budget speech, FM spoke for more than two hours and 20 minutes, the longest any Indian finance minister has done. The budget speech stayed in line with the government's long term growth vision pillared on three themes viz. an aspirational India, holistic economic development, and a healthy society. The finance minister also imposed health cess on import of medical equipment.

It shows she want to convince the parliament, but it was not shown if the finance minister had any clear roadmap to offer to extricate India out of the economic crisis . However, there is notable developments in infrastructure, rural logistics, education and healthcare sectors will create opportunities in the Indian real estate space. The policy on data centres was a key highlight and will make it a sunrise sector in India.

FM went big on agriculture and rural infrastructure. She set aside Rs 2.83 trillion towards agriculture and allied sectors, and unveiled a mammoth Rs 3.6 trillion scheme to address issues of water shortages. Major announcements for the housing sector were expected, and barring the extension on both the tax holidays and the time period for availing interest deductions in affordable housing, the highlights were relatively mute. All in all, the budget was balanced and the relaxation cascaded across tax slabs will spur consumption in the economy.

Experts speaks on, India’s GDP is not decreasing Continuously. Its Growth Rate is reducing continuously. In fact, the government had no choice but to ease the deficit target, as a slowdown in economic growth to an estimated 5% for 2019-20 crimped tax revenue. Its inability to garner enough money from disinvestment made matters worse, and it had to depend on higher dividends from the Reserve Bank of India to bridge the gap.

The fact sheet is in 2020-21, the FM and PM Narendra Modi, are banking on an extremely ambitious disinvestment target to bail them out and keep the fiscal deficit in check. In the last budget, the government had set itself a disinvestment target of Rs 1.05 trillion. The target has now been scaled down to Rs 65,000 crore; so far, however, the government has raised just Rs 18,100 crore. The reason being the taxation structure for the start-ups and disinvestment policy are not prudent.

The biggest question is on, if disinvestment was one big theme this year, the other major policy was on taxation as the finance minister sought to rationalise income tax slabs for individual taxpayers and put more money in their hands in the hope of kick-starting consumption. FM has introduced a dual taxation mechanism for individual taxpayers in which those opting out of tax exemptions will get taxed at a lower rate.

The most important is ,FM sought to lay the red carpet out for a section of foreign investors as it granted a tax exemption to sovereign wealth funds for investments in India’s infrastructure sector by specifically mentioned ADIA, the sovereign wealth fund of the Gulf emirate, as a beneficiary of the budget proposal though she didn’t explain the reason for doing so.

ADIA, the world’s third-largest sovereign wealth fund, has emerged as an active investor in India’s infrastructure sector in recent years. It invests in both publicly listed and privately held companies.

Sitharaman proposed full tax exemption to interest, dividend and capital gains income on investment made in the infrastructure and other notified sectors. The investments must be made before March 31, 2024 and have a minimum lock-in period of three years, she said in her budget speech. This will encourage investments in priority sectors by sovereign wealth funds of foreign governments, she said. Initial reactions from the industry were positive. “This is a big step to boost infrastructure investments in the short term,” said Vivek Gupta, partner and national head, M&A and private equity, tax, KPMG in India.

At the post-Budget press conference, Finance Minister Nirmala Sitharaman exuded confidence in being able to reduce the fiscal deficit via increased revenue generation.

Indian markets fell sharply today as Budget 2020 announcements failed to live up to the expectations of the Street. The Sensex tumbled 987 points or 2.4% to 39,735. On the NSE, the broader Nifty50 index slumped 2.6% to 11,643. Among the Sensex stocks, ITC fell 7% after the government proposed an increase in excise duty on tobacco. Other top losers in the Sensex pack included L&T, HDFC, SBI, ONGC, ICICI Bank and IndusInd Bank that fell between 4% and 6%.

Finance Minister Nirmala Sitharaman today revised the country's fiscal deficit target to 3.8% for the current fiscal year, from an earlier target of 3.3%. The finance minister also pegged the fiscal deficit target for the year 2020/21 at 3.5% of the GDP. Sensex crashes 1000 points after Budget, investors lose ₹3.6 lakh crore. 

Fiscal Management
The government expects to revert to the consolidation path by budgeting a lower fiscal deficit target of 3.5% in FY21, while the FY20 fiscal deficit is seen at 3.8% (vs. earlier target of 3.3%)

The attainment of FY21 fiscal deficit target hinges on realizing record high disinvestment target along with substantially higher telecom revenue

Key Focus Areas
The Budget takes forward the thrust on reviving rural demand and supplements it with sectoral incentives for Electronics, Exporters, Textiles, MSMEs, Start-Ups, and Affordable Housing

The divestment target for FY21 has been set at INR 2.1 lakh crores as against the FY20 target of INR 0.65 lakh crores

The government has proposed to sell a part of its holding in LIC by way of Initial Public Offer (IPO)

For Individuals
Relaxed tax slabs proposed for those earning up to INR 15 lakhs a year (optional)

Assurance on safety of deposits in Scheduled Commercial Banks and increase in Insurance Coverage for Bank deposits from the existing INR 1 lakh to INR 5 lakhs per depositor

For Corporate
FPI limit for corporate bonds to be increased to 15% from the existing 9%

Dividend Distribution Tax (DTT) to be abolished

Eligibility limit for NBFCs for debt recovery under SARFAESI Act to be reduced from INR 500 crores to INR 100 crores, and the loan size eligibility (for SARFAESI Act) to be reduced from INR 1 crore to INR 50 lakhs

From slashing tax under an optional new regime to boosting infrastructure spending, the government tried addressing most of the issues dwindling growth. However, in an attempt to accommodate multiple themes, the budget missed out on the most important expectation ie; boosting demand.

Under the new income tax structure, those earning income of over Rs 5 to 7.5 lakh will attract a 10 per cent rate; those earning over Rs 7.5 lakh to Rs 10 lakh will pay 15 per cent tax. People earning over Rs 10 lakh to Rs 12.5 lakh will pay 20 per cent tax while individuals earning over Rs 12.5 lakh to Rs 15 lakh will pay Rs 25 per cent as tax. However, the 30 per cent tax bracket remains same for those earning over Rs 15 lakh.

 

Industry reactions on 
the Union Budget 2020-21

 

Vijay Sekhar Sharma 
Founder- PayTM
 
Very happy and thankful to ESOP related changes done by the Finance Minister madam, she has beautifully defined and sorts out many issues.

Dr. Jaijit Bhattacharya 
President, Centre for Digital Economy Policy Research
 
The budget has very large outlays for traditional infrastructure such as roads, ports, digital infrastructure, social infrastructure, waterways, airports, agriculture etc. But what is unique is significant outlays for preserving and studying culture and history, including large number of museums and a national institute of excellence for study of culture and history. Also, the focus brought in on new technologies such as quantum computing, is much welcome. Introducing a taxpayer's statute is also most welcome. However, more was expected in terms of tackling the continued credit squeeze and slowing of the economy.

Dr. Deepak Kumar Sahu
Editor-in-Chief- VARINDIA
 
India’s plan to invest Rs 8,000 crore (~$1.12 billion) over the next five years in the National Mission on Quantum Technologies (NMQT) is a step in the right direction which will augment the industries dependent on these future technologies. India’s plan to come up with five new smart cities further solidifies its stance of a sustainable and citizen centric future which I am sure will elevate the quality of life. It had many good things. Would have given it a 8/10 on a regular year. But this is not a regular year. The liquidity crunch and kick starting of economy should have been focused on and reversal of extra tax on super rich should have been reversed.

Rajan S Mathews
DG, COAI
 
We welcome the Government’s overarching positive theme for the Budget 2020-21, that includes enabling an aspirational India, through major fundamental structural reforms targeted at fostering healthcare, education, skill development, ensuring economic development for all and further a caring, humane and compassionate society. The Hon’ble Finance Minister Smt. Nirmala Sitharaman, emphasised on country’s growth and Digital inclusion will hinge on advanced technologies such AI, Robotics, Machine Learning, analytics, among others, which essentially relies on telecom infrastructure. However, while the Union Budget laid major emphasis on boosting domestic manufacturing of network products, mobile phones, electronic equipment, semi-conductors and healthcare products and has allocated INR 27,300 crore for the development of industry and commerce by 2021, it is disappointing that there were no announcements made regarding the rationalisation of levies and taxes currently imposed on the severely distressed telecom sector and telecom infrastructure is not taken into consideration that is going to build out the country. The Budget proposed that the New India will be driven by innovations, AI and computing where data will be the new oil and other significant initiatives such as linking of 1 lakh gram panchayat to the Bharat Net program by this year and an allocation of INR 6,000 crore in this regard, none of our key recommendation appear to have been taken into consideration. A financially healthy and robust telecom sector is imperative to support all these future forward initiatives. It is also disappointing to note that telecom was not given an infrastructure status even though a slew of crucial reforms has been announced on infrastructure. The telecom sector, which is the backbone of the country’s economy, did not receive significant support.
 
CP Gurnani
MD & CEO, Tech Mahindra
 
With a thrust on talent, technology and entrepreneurship, Budget 2020-21 is a promising budget in support of making India’s $5 trillion economy dream come true. It is heartening to see initiatives that are aimed at enhancing digital penetration in the country by making Fibre to the home (FTTH) accessible to 100,000 Gram Panchayats via Bharat Net, which will go a long way in bridging the digital divide. Also, the decision to build data centre parks for the private sector is another step towards making India a data economy superpower. Furthermore, strategic initiatives aimed at leveraging new-age technologies like the Internet-of-Things, machine learning, robotics, bioinformatics, quantum computing and artificial intelligence across sectors will further help in laying the foundation of a robust, digital economy.
 
Dr. Keshab Panda 
CEO & MD, L&T Technology Services
 
From a perspective of the engineering and technology services industry that thrives on innovation, the government’s move to re-revitalize the IP filing and protection process is a welcome step. Additionally the thrust on quantum computing as a key focus promises to further consolidate India’s position in the global digital transformation landscape. The announcement of proposal to set-up Data Centers is also a step in the right direction in terms of acknowledging the importance of data and data analytics. Overall, the budget puts the role of technology in limelight spanning across all the three focus areas as announced by the government namely aspirational India, economic development and a caring society.
 
P K Gupta
Chancellor, Sharda University
 
With umpteen focused initiatives like – FDI, emphasis on new skill development and entrepreneurship, launch of new online degree courses /apprenticeship programmes and allocation of Rs 99,300 crore for world-class education, Budget2020 will help position India as a global educational hub. We appreciate the launch of the ‘Study in India’ programme which will enable foreign students to apply for scholarships to study in India. Overall, we believe that this renewed push on providing quality education and enhancing the skills of our youth, will help India play a lead role in shaping the global economy in the future.

Takayuki Inaba
MD --NEC Technologies India Pvt ltd
 
The current budget proposals exhibit a determined approach of government to make India ready for new technologies. Rs.6000 crore allocation for the proliferation of technology to the lowest level of society by connecting 1 lakh gram panchayats through Fibre to Home connections for supporting basic social infrastructure is a welcome step. The vision of providing panchayat level public institutions with digital connectivity will help streamline the integrated development work and open big opportunities for several stakeholders in the country. Proposal to develop Data Center Parks throughout the country is another major step towards digitization and capitalizing data resource available with government agencies. This step will help analyze the data better and make a well informed decision regarding resource allocation for social development of a specific geography and demography. Allocation of Rs.8000 crore over 5 years for National Mission on Quantum Technology is another positive step towards taking the country to the digital era. All these efforts will promote the use of technology and digitization and play an important role in the overall development of the economy.

Sharad Sanghi
MD & CEO, NTT-Netmagic
 
As India's leading data center services provider, we welcome the government's proposal to roll out a policy enabling the private sector to build data center parks throughout the country. This move rightly acknowledges how integral data is to every sector of the economy at a very opportune time. Government initiatives like Smart Cities and Digital India, policies around data localization and the digitization of various industries such as financial services, e-commerce, media, and the manufacturing sector have fuelled the demand for the data center industry in India. We at NTT - Netmagic currently operate nine data centers in the country and have plans to double our data centre capacity in the coming months to meet the growing demand. The budget has also given a massive push to the digital economy recognizing how AI, IoT, 3D printing, drones, data storage, and quantum computing, etc., are all re-writing the world economic order. Overall, the budget is pro-startups and forward-looking in terms of growth across technology sectors

Nitin Kunkolienker
President-MAIT
 
The emphasis on Mobiles, the largest import bill in electronics and ATMP is welcome. The government needs to include IT, Datacom, Medical and other sub-sectors of electronics. While the scheme is still in the works this will result in rise in exports from India.

Rajiv Bhalla
Managing Director, Barco India
 
The 2020 Budget has been drafted around the key themes of talent, technology, entrepreneurship and sustainability and we applaud the Centre’s efforts at boosting the economy. The Hon’ble Finance Minister has maintained focus on tourism by announcing that iconic destinations will be connected by “corporate” trains like Tejas and with the plan to develop 5 archaeological sites into iconic sites. Five new smart cities have also been proposed and Barco looks forward to partnering with the Government in this direction.

Rajiv Kapoor
Vice President, India & SAARC, Cambium Networks
 
The Union Budget provides a major boost to the interests of broadband services enablers and aligned stakeholders as one of the major takeaways that evidently emerged was the fact of connectivity being at the core of all key pursuits planned by the government. Towards this, initiatives announced such as providing push to smart metering, setting up five new smart cities, establishing new data centres across the country and more importantly the allocation of Rs.6000 crore towards BharatNet to provide connectivity to 100,000 gram panchayats within this year itself, augers well for the telecom industry.

Mr. Dipesh Kaura
General Manager, Kaspersky (South Asia)
 
Government's growing interest in the use of Advanced technologies such as Artificial intelligence, quantum computing, etc was definitely seen as the base of the IT budget for 2020 and an interesting move for Digital India. In today's budget we saw the government allocating funds to make data centers across India which will also support their upcoming Data Protection Act. However we do hope that this budget will be majorly focused on protecting the stored data especially of sectors like BFSI and large enterprises that consists major quantity of critical data. As it was rightly said that Data is the new oil, it becomes increasingly important for a country like India to protect and secure their data moving forward and also invest in securing other vulnerabilities that may target India's critical infrastructures, banking and finance institutions and government bodies against the ever evolving cyber threat landscape.

Sandeep Bhambure
VP and MD, India & SAARC, Veeam Software
 
The government’s announcement of setting up a policy to build data centre parks throughout India for digital connectivity and the allocation of Rs 6,000 crores for BharatNet is a big step towards a successful Digital India initiative. This will increase the adoption of technologies such as IoT, Analytics and AI; leading to an unprecedented amount of data generation. Data management and protection will play a key role to safeguard the citizen’s data from cyber-breaches. Additionally, the implementation of intelligent data management platforms will help achieve positive outcomes from the data.

Sunil Sharma
Managing Director – sales, Sophos India & SAARC
 
“The Government’s Union Budget 2020 is built on the bedrock of emerging technologies including Artifical Intelligence (AI), Machine Learning (ML), Internet of Things (IoT) and more. Initiatives such as building data center parks across India aiming to safeguard ‘data’, the most critical asset of organisations along with the digitisation of 100,000 Gram panchayat through its Bharatnet initiative will strengthen the digital fabric of the country. However, increased digital penetration brings along with it cybersecurity risks. As per a recent report, Indian IT managers detected 39% of threats on servers, 35% on the network, 8% on endpoints and 18% on mobile. Additionally, 90% of IT managers believe cybersecurity awareness and education among employees is a major challenge for organisations. That said, while we welcome the Governments proposed steps in strengthening the MSMEs that provide employment to millions of people, we need more impetus on building skilled cybersecurity professionals in the country. The government’s allocation of Rs. 3,000 crore towards skill development is a step in the right direction towards building India’s youth and economy.

Chandrahas Panigrahi
CMO and Consumer Business Head, Acer India
 
This is positive budget overall from the technology focus point of view. We are pleased that the Government is allocating Rs. 8,000 crore for the National Mission on Quantum Computing and Technology. The government’s move on encouraging manufacturing of electronic equipment in India is also a big step as this would provide much needed impetus to technology and manufacturing sector, which has been developing capacities and generating employment opportunities. Also, more focus on technology such as Machine Learning, Robotics, AI will support the industry to grow and establish India as a robust ecosystem for technology and innovation.

Prakash Mallya
VP, and MD – Sales and Marketing Group, Intel India.
 
The Union Budget highlights the role technology-enabled innovation can play in leapfrogging the nation. From integration in priority sectors like agriculture and healthcare to a continued focus on smart cities, the first budget of the new decade clearly outlines the significance of a digital-first India in realizing the country’s potential. I am especially encouraged by the efforts to use artificial intelligence (AI) and machine learning (ML) to improve disease detection and pre-emption as part of the PM Jan Arogya Yojana. Such applications of emerging technologies combined with the focus on increasing the penetration of fibre connectivity in the nation have the potential to fundamentally impact the lives of millions in the coming years.
 
With the government’s target of a $5 trillion economy by 2024, Intel believes that technologies like AI, Internet of Things (IoT), and ML will continue to play a pivotal part in this journey. We look forward to further strengthening our work with the local ecosystem and with the government in enabling technology innovation and skilling India’s workforce to power the next wave of India’s digital revolution”

Venkatraman Swaminathan
Vice President & Country General Manager at Schneider Electric IT Business India
 
The government’s focus on promoting disruptive technologies like AI and IoT is critical for the supply chain and logistics industry. It’s important for enterprises to leverage these technologies to improve operational efficiencies and keep margins wider. The government’s plan to bring out a policy for data center parks throughout the country will definitely empower the IT-services industry.
 
“The government’s intent to rollout a policy to enable private sector to build data center parks throughout the country is a welcome move. We believe this is in view of government’s efforts to push data localization as data will be one of the key drivers of economy. Localized data centers which can be accessed and controlled from a centralized system will significantly improve data privacy and security allowing free flow of data within borders. We at Schneider Electric shall be happy to partner with the government in furthering this initiative.”

Nikhil Arora
VP and MD, GoDaddy India
 
The Union Budget 2020 is a reflection of the Government of India’s vision and commitment towards delivering an inclusive growth. The proposed reforms especially those focused towards MSMEs and startups such as provision of seed funding for early-stage startups and setting up of a portal based investment clearing cell, will further help to bolster growth of independent ventures in India. Big announcements like deferred payment of ESOPs, as well as the creation of an e-market place for MSMEs, are also laudable steps by the Government towards uplifting the overall entrepreneurial spirit in the country. We also believe that the proposed allocation of INR 99,300 for education and the allocation of INR 3000 for skilling initiatives, can be instrumental in delivering better educational infrastructure and innovation. As India gears up to chart the next chapter in its strong growth story, we at GoDaddy continue to work in collaboration with the Government and our partner ecosystem, to help entrepreneurs and small businesses grow their ventures online, with our easy-to-use and affordable tools and solutions.

Supria Dhanda
Vice President and Country Manager, Western Digital India
 
“With the announcement of the Budget 2020, it is motivating to see the initiatives to further advance the technology sector. We look forward to collaborate with the Government and industry to fuel the vision for data-centric innovations. The government’s plan to enable the private sector to build data center parks across the country highlights the huge potential of data. Addressing the need for technology and stressing on the importance of AI, Analytics and IoT will enable the country to embrace the technological advancements required to succeed today. We are happy to see the Government’s efforts to drive a positive change and position India as a technology leader.

Dr. Omkar Rai
Director General, Software Technology Parks of India (STPI)
 
"Union Budget 2020 is a defining moment for the Indian IT industry by bringing in proactive policy measures on emerging technologies such as AI, ML, Data Analytics and Quantum Computing. In addition to this, the policy on establishing data centers across the country will strengthen the necessary IT-grade infrastructure required for discharging services to the remotest part of the country while bridging the digital divide, revolutionize the digital economy and significantly play a catalytic role in securing data sovereignty of the nation, and eventually it will also bring enormous FDI into this sector. Further incentivizing the startups will fuel their growth and build momentum in transforming the country into a software product nation. These policy measures and reforms will holistically create humongous opportunities for startups and IT companies in providing cost-effective solutions to the masses for their betterment in all walks of life."

Ashis Guha
CEO at RAH Infotech
“All in all the Union Budget 2020 is a welcoming step towards enhancing India's Digital Ecosystem. Significant investments in the space of cybersecurity, electronics manufacturing, and promotion of IT and IT- enabled services is indeed a great move. The corporate tax cut and benefits derived by new companies, along with improved GST collections, will increase the revenue generation. Initiatives like data center parks across the country, increased focus on BharatNet and National Mission on quantum technologies will boost employment, address skill shortage issue and definitely attract global investments to boost the overall economy. Overall the budget has fulfilled the aspirations of all, from common man to a business tycoon."

The finance minister said that, Life Insurance Corporation of India (LIC) will be listed as part of the government disinvestment initiative. There are mixed reactions on this topic. While some have called it a bold move.She further said that the listing brings in more financial discipline among the entities. Currently, the government owns the entire 100 per cent stake in LIC.

India just got real about its data-localisation plans,where it'll allow private companies to build data-centre parks.The Indian tech ecosystem has welcomed Sitharaman’s announcement. Emphasis on Quantum Computing and Technology, and Data Center Park is a great way forward. Since, Data centres are key in “allowing to create incredible content and streamline and automate processes". The move may also benefit India’s startup community.