Union Budget of a year as defined in the Constitution of India under Article 112 is also known as annual financial statement, is a statement of the estimated receipts and expenditures of the government for that particular year. It is also classified as Revenue Budget and Classical Budget. Revenue budget includes the government’s revenue receipts and expenditure. There are two kinds of revenue receipts – tax and non-tax revenue. Revenue expenditure is the expenditure incurred on day to day functioning of the government and various services offered to citizens. Capital Budget includes capital receipts and payments of the government. Loans from the public, foreign governments, and RBI form a major part of the government’s capital receipts. Capital expenditure is the expenditure on the development of machinery, equipment, building, health facilities, education, and many more.
The Union budget that was presented by the Finance Minister of India, Dr. Nirmala Sitharaman on 1st of February, 2020 could have many facets but she came up with three themed budget namely, aspirational India, economic development and caring society, we need to acknowledge all of them in order to thrive for a better and efficient economy. Some of the key features of the Union Budget are,
- Moving ahead with aspiration
- Laying a roadmap for economic development
- Incentivising clear air
- Key tax proposals
Economic Growth Projected at 5% for Financial Year 2020
The Union Budget 2020-21 has been presented amid an economic slowdown, coupled with rising food inflation. Economic activity has been losing momentum for the past five quarters, with questions on whether the current economic headwinds have bottomed out or will stay longer. Three out of four Private consumption, private and private investments have slowed down significantly. Several structural factors, such as low rural wages and tightening lending conditions, have weakened growth. This slowdown has affected several core sectors like the auto, rear, and manufacturing sectors. Geopolitical tensions leading to oil price fluctuations may add to economic woes.
GDP – the expected growth of the GDP for the year 2020-2021 was around 6-6.5%, whereas compared to the GDP of 2019-2020 where it slowed down to 5% lowest in the last seven years. Further economic survey 2020 has revealed the sign of bottoming out of the decline in the global trade and manufacturing sector.
Foreign Direct Investment – it was estimated to be 21.3US$ Billion in 2020-2021 in just half a year and in the year 2018-2019 it was 30.7US4 Billion for the full year.
Agricultural and Allied Sectors – shares of this sector in the Gross Value Added has been decreased from 18.2% in 2014-2015 to 16.5% in 2019-2020. This decline is noted since the non-agricultural sectors have performed very well.
Aspirational India – by 2030 India is set to have the largest working-age population in the world. External Commercial Borrowing and Foreign Direct Investment would also be enabled so that the inflow of finance for higher quality in the education system prevails.
Not only these things but there is a person for a full-fledged online education programme which is to be provided by the institution that is ranked within the top 100 in the National Institutional Ranking framework. Similarly, there are undertakings by NABARD wherein they will proceed with mapping and geotagging to the estimated capacity of 162 million MT of Agri – warehousing, cold, storage facility refer van facilities. Another addition to the list is the PM – FASAL BIMA YOJNA too is on the list. Elimination of foot and mouth diseases in cattle and [peste des petits] ruminants [PPR] in sheep and goat by 2025.
Industry, Commerce, and Investment – the government has proposed new smart cities in by way of PPP and state. A greater concern and dedication have been portrayed towards the electronic industry to boost the manufacturing of mobile phones.
Government e-Marketplace [GeM] shall be set up for the procurement of goods at a single platform.
New Economy– this new economy is based on innovations that disrupt established, business models. Artificial Intelligence, the internet of things, analytic are changing the way we dealt with our lives. Out of which the government looks keen to increase the connectivity of public – institutions at all levels, such as Anganwadi, health, and wellness center. It is proposed to provide Rupees six thousand crores to Bharatnet Programme.
Women and Child Social Welfare- women empowerment is the quintessential criteria which are carried forward in this sector. The government plans to enrol a higher number of girls in elementary, secondary, and senior secondary levels. For healthcare, she allocated rupees 69,000 crores which is more than the last year’s allocation.
Section115BAD to be inserted to the effect that Resident cooperative society can opt for concessional tax rate at 2% In this bit we shall be discussing the various concerns related to -Fiscal space, inflation, and currency valuation causing concerns.
The fiscal deficit – It crossed 114.8 percent of the annual budget target in the first eight months, indicating stress on government finances. The fiscal deficit for FY 2020 was revised to 3.8 percent of the GDP, up from the earlier budget target of 3.3 percent. The government used the escape clause provided under the FRBM Act to allow the relaxation of the target. The FY 2021 fiscal deficit target is pegged at 3.5 percent of GDP.
Government security yield rates – It has come down markedly to 6.6 percent in January 2020 from its peak (above 8 percent) in September 2018. However, yield rates have seen an uptick in the past two months over concerns regarding the economic slowdown. This may raise financing costs for private-sector borrowers. Sectors with high capital market borrowing, such as power and Telecom, may get affected. Coming down to the department of direct taxes there have been changes that have been made in terms of individual taxes. In it, they have assured there will be simplified tax regimes as per section 115BAC which means the taxpayer will have options. Further, under section 6 there has been an introduction in a change in residency rules.
Sitharaman said 5 new Smart cities would be set up via the public-private partnership model. There would be faster development of highways with the Delhi-Mumbai expressway and two other projects aimed to be completed by 2023. A total of INR 100 lakh crore would be spent on infrastructure over the next five years, she said.
Tax Relief for Affordable Housing (Section 84EEA). Homebuyers (not owning any other property at the time of sanction of the loan) can claim a deduction for interest on a home loan up to INR 150,000 subject to fulfilment of prescribed conditions. In the Banking and Finance Sector, there have been guidelines for the “on-tap” licensing for small finance banks in the private sector issued by RBI.
Bifurcation of powers between the Government and RBI
We see a greater emphasis is laid on thrusting power in the hands of the government that is why Foreign Exchange Management Rules were notified accordingly. Power to regulate debt instruments will continue under the RBI’s domain and will be governed by FEMA (debt instrument)2019. Next, we shall be looking into the various policy updates:
In the banking and finance -Foreign Regulation Act 2011 to be amended to give room to NBFC’s in order to extend financing to MSME. Debt recovery under SARFAESI will now also be available to NBFC. Governance reforms to be carried out in PSU banks to make them more competitive. Other policy updates include Company Act, 2013, and other acts to do away with criminal liability for acts that are civil in nature.
Budget Transparency and Accountability
To say that this budget is honey or sweet poison we need to see if they are working on the implementation of the same or not. It has been laid down by International Budget Partnership (IBP) wherein it provides for budget transparency in terms of public access to budget information and opportunities to participate in the budget process. For this, there are certain norms that are available to cross-check if it is following up its actual work or not. In this list, the first measure in the form of key document available to the public at large is: –
- Pre-budget statement: a document that provides an overview of the macroeconomic framework, proposed fiscal measures, and key assumptions that will inform the annual budget.
- Executive budget proposal: the draft budget for the forthcoming year that is tabled before parliament.
- Audit report: a report showing findings from the audit of the government budget.
- Citizen budget: a simplified and popular version of the approved budget. It is only a few pages long.
It is heartening to see a budget that focuses on improving standards of living as well as economic development and as far as the goals set by the minister are concerned, they talk about covering all the band length of issues that our country presently faces. This seems like honey but if its end is not meant in the allotted term then it might turn its way towards being a sweet poison.
 Constitution of India
 International Budget Partnership (IBP) (2010–11) ‘About the Open Budget Initiative’ (online). Available at http://internationalbudget.org/what-we-do/major-ibpinitiatives/open-budget-initiative/