Union Budget

Agriculture, infra push to spur growth

Approximately Rs 3 lakh crore for farm and allied sectors

    New Delhi, February 1

    Union Finance Minister Nirmala Sitharaman today announced a major restructuring of personal income tax rates to spur consumption despite an empty treasury that has led to a major slippage in the fiscal deficit target.

    The restructuring of the income tax rate slabs is modelled on the reduction in corporate taxes — the scheme is optional and available only if the payee does not avail 70 out of the currently available 100 exemptions. Later, Sitharaman told the media that the government intended scrapping the remaining exemptions in the next couple of years. As a result, the government exchequer will take a hit of Rs 40,000 crore annually.

    Sensex slid 1,000 points on the apprehension that many tax savings would become less attractive, but Sitharaman expected it to rebound on Monday when it takes into account much of what has been announced. The Budget proposes a hike in deposit cover in banks from the present Rs 1 lakh to 5 lakh to give investors greater peace of mind in view of the fragility in the banking sector.

    In a speech that lasted 160 minutes, Sitharaman adopted a novel approach by dividing the Budget into three parts — Aspirational India, Economic Development and Caring Society — leading to restlessness in Opposition ranks as the all-important taxation proposals took long in arriving. “These three themes underline the government’s desire to provide ease of living to its citizens,” she explained.

    To provide for a scatter-shot of initiatives covering nearly every sector, the government plans to list LIC and IDBI as well as disinvest to raise Rs 2 lakh crore besides borrowing heavily from external as well as domestic sources – Rs 5.6 lakh crore in 20-21 as against Rs. 4.99 lakh crore this fiscal — leading to a slippage in the fiscal deficit target. “There is substantial enhancement in capital expenditure and all flagship schemes are fully provided for,’’ she said.

    While the allocation for MNREGA has been slashed by Rs 10,000 crore – Sitharaman claiming that it is demand-driven – the outlay for rural roads has risen by Rs 7, 000 crore. Despite both direct and indirect tax collection missing the targets by wide margins, Sitharaman was confident that the significant reforms undertaken so far, including the corporate rate tax cut, would lead to tax buoyancy in due course.

    In another pro-corporate gesture, companies will not be required to pay dividend distribution tax which will be taxed only at the hands of recipients.

    A major part of the speech was devoted to spelling out a 16-point action plan to boost agriculture and farmers ‘welfare’ that included priority movement of produce by rail and plane, viability gap funding for warehouses, focus on one horticulture crop in each district on cluster basis, raising fish and milk production and self-help groups of women.These will be undergirded by an agriculture loan target of Rs 15 lakh crore to supplement the Rs 2.83 lakh crore allocated for agriculture and allied activities, irrigation and rural development.

    Besides allocating Rs 12,300 crore for Swachh Bharat to sustain ODF (open defecation-free), Rs 3.6 lakh crore for water conservation and Rs 35,600 crore for nutritional programmes, the government retained its focus on the health sector, proposing to expand the number of affordable drug centers as well as bringing more hospitals under Ayushman Bharat in smaller towns.

    In the provision for the industry, the most eye-catching was the provision of Rs 8,000 crore over five years in the frontier area of quantum technology and a new credit scheme for exporters with a higher insurance cover, reduced premium and simplified claim settlement. To regain the edge, the government has announced a Rs 1,480-crore National Technical Textiles Mission with a four-year implementation period.

    In employment generation, urban local bodies across the country would be asked to provide internship to young engineers for a year.

    Disinvestment plan

    • Govt to sell part of stake in LIC through IPO
    • Proposal to sell the balance govt holding in IDBI through stock exchanges
    • Disinvestment proceeds pegged at Rs1.20 lakh cr for 2020-21
    • Amendments proposed to companies law
    • Lower tax rate for cooperatives at 22% with 10% surcharge and 4% cess proposed

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