Budget 2020: One more step towards the $5-trillion economy dream

During the first  term of the NDA government, there was a major focus on formalisation of the economy, on improving the delivery of welfare programmes and on addressing some of the legacy issues that had stressed the balance sheets of banks and corporates. Even as the fruits of those initiatives are gradually becoming evident, the economy has been caught more recently in a sharp slowdown — stemming from a confluence of global and local factors. 

Budget 2020 takes on the current growth challenges, while maintaining a continuity in the broad direction of the government policies. To boost the economy’s growth in the near-term, there are measures on both the consumption and investment sides. The relief on personal income tax rates for taxpayers earning up to Rs 15 lakh and opting for the non-exemption route will provide the much-needed trigger for revival of consumption. 

On the investment side, the government itself will be increasing its capital expenditure by a healthy 21 per cent. Additionally, there are provisions for kick-starting the National Infrastructure Pipeline through seeding equity infusion in the infrastructure finance companies and by encouraging foreign investments in corporate bonds and sovereign wealth funds’ investment in infrastructure sectors. 

The bold corporate tax cut of September for new manufacturing companies has been extended to the power generation companies. Removal of incidence of dividend distribution tax (DDT) will increase the attractiveness of the Indian Equity Market and provide relief to a large segment of foreign investors. Dividend will now be taxed only in the hands of the recipients at their applicable rate. The finance minister has also provided attention to the new economy. The tax holiday for start-ups has been extended and the tax payment on employee stock options has been deferred. 

By 2030, India will be having the largest working-age population in the world. This bulge in the young population will need better skilling and more facilities for higher education. Recognising this need, the Budget enables higher education institutes to tap foreign capital through external borrowings or foreign direct investment (FDI). Also, it promises more avenues for partnership with the industry and aligning the skilling programs to the needs of the employers. 

The budget reiterates focus on rural India and on incentivising the agricultural sector. Apart from addressing the farm issues of APMC Act reforms, balanced use of fertilisers and warehousing investments, the 16-point agriculture/rural strategy of the budget also emphasises the activities allied to farming – such as incentivising solar generation on fallow lands, doubling of the milk processing capacity and growing the fishery output. 

The Economic Survey had talked about creating a conducive environment for wealth generators and improving the element of trust. One sees many echoes of this overarching theme in the Budget. Incorporation of the taxpayer charter in the statute and the facility of faceless appeals will reduce the scope for harassment. The Contracts Act is going to be strengthened. Simplified Goods and Services Tax returns are going to be introduced soon. These initiatives build upon the earlier measures for improving ease of doing business. 

The finance minister has rightly acknowledged the issues that have been hampering the competitiveness of Indian manufacturers in certain areas – including the rising trend in imports from FTA (free trade agreement) partners. 

The review of rules of origins requirements under the FTAs, strengthening of the provisions related to safeguard duty and the provisions against dumping are welcome steps to ensure a level playing field for Indian companies. 
Overall, this is an inclusive Budget — with a comprehensive approach towards tackling the short-term issues as well as building the economy’s long-term capability to grow at its potential. It is one more step, on our journey to a $5 trillion economy!

The author is Chaiman of the Aditya Birla Group.

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