The Invest Ninja

The Union Budget 2020 Part-A

Nirmala Sitharaman, the Finance Minister of India, introduced the Union Budget 2020 on 1st Feb 2020. People had a lot of expectations from this budget as India is experiencing many issues like falling GDP growth rate, slowdown in automobiles, and real estate, ailing banking sector, declining productivity in Agriculture. But has the budget produced any economic reforms to tackle those issues? In this article, we’ll discuss the Part-A of the budget, which deals with broad outlays of money in different sectors. Part-A of the budget mainly comprises the introduction of new schemes, priorities of the government, and focus areas.

In the case of Agricultural and rural, the government has approved a new scheme called Pradhan Mantri Kisan Urja Suraksha Evam Utthaan Mahabhiyan or PM-KUSUM, which will help in the installation of solar pumps to increase farmer’s income. To avoid distress selling of small farmers, new projects to build warehouses for storing agriculture produce to be undertaken through Public-Private-Partnership (PPP). New hospitals to be set-up in Tier-2 and Tier-3 areas under Ayushman Bharat Yojana. Sitharaman proposed to expand Jan Aushadhi Kendras to all districts of the country to provide medicines at affordable rates. The government approves Rs 11,500 Cr for Jal Jeevan Mission, aiming to provide piped water supply to all households.

Infrastructural reforms were arguably the hero of this budget. A new investment plan called the National Infrastructure Plan has been unveiled. It consists of 6500 projects involving Rs. 102 Lakh Cr investment over the next 5 years. The government is planning to build 100 airports over the next 5 years. National gas grid to be expanded to 27,000 km from existing 16,200 km. The government has allocated Rs 1.7 Lakh Cr. for the transport infrastructure.

In terms of Education, Sitharaman announced a new education policy will be introduced soon. FDI (Foreign Direct Investment) and External Commercial Borrowing to be encouraged in the education sector to finance infrastructure. New full-fledged online degree courses will be offered by top Indian Institutes (based on NIRF) to promote online education. A new exam called Ind-SAT exam will be held in Asian and African countries to study in India. Medical Colleges attached to district hospitals to be built through PPP. In total, the government has allocated Rs 99,300 Cr in the Education sector.

Some proposals catering to different subjects like MSME (Micro, Small and Medium Enterprises) , Banking, etc. were also introduced in this Budget. Debt restructuring window for MSMEs extended by 1 year. Audit requirement limit for businesses hiked from Rs 1 Cr to Rs 5 Cr if less than 5% of the business transactions are done in cash. Deposit Insurance and Credit Guarantee Corporation (DICGC), which was unchanged right from its introduction in 1992, is increased from Rs 1 Lakh to Rs 5 Lakhs. E-commerce companies will have to deduct 1% TDS to sellers, though not applicable if the total sale in the previous year was less than 5 Lakhs. The government is planning to make IDBI Bank completely privatized and also announced part divestment of LIC, which, as Sitharaman said, could be our own Aramco moment.

Overall, Budget 2020 was designed with a long term focus. It has produced some major push for infrastructure, which is a big positive as it can prove critical for the economy in the long run. In agriculture and rural area sector as well there are some steps taken. There wasn’t any populist reform like farm loan waiver, which doesn’t really benefit any party. Though there should have been some measures to reduce the influence of middlemen in agriculture and increase the profit margin of farmers. Also, there wasn’t any concrete proposal for addressing the concerns of automobiles and real estate sectors.

The other part of the budget, Part-B, which talks about Taxation, will be discussed in the next article. Till then… stay tuned!

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