Budget 2019-20: The full-year budget for 2019-20 sets a vision for the country’s socio-economic development and makes each citizen a stakeholder in it. Finance minister Nirmala Sitharaman in her maiden Budget speech, has highlighted the need to promote sustainable growth in the economy, addressing social areas such as environment, water and education, while at the same time, intending to promote growth through continuing focus on building infrastructure, mainly digital and transportation infrastructure including roads, railways, inland waterways and airports.
The best part of the Budget was the keen focus on the enablers of an investment-led recovery. Conscious efforts to ensure accessibility of capital to various parts of the economy, at a lower cost and augmenting the sources of capital is the key to a sustained recovery in investments. This is likely to drive job creation, raising incomes and hence higher demand, leading to a virtuous cycle.
There was a visible effort to kick-off recovery in the private sector, mainly micro, small and medium enterprises (MSMEs), by ensuring availability of capital at a lower cost. The launch of a digital platform to ensure that government departments pay their suppliers (mainly MSMEs) on time will reduce their working capital costs. Loans up to `1 crore in 59 minutes to goods and services tax (GST)-paying MSMEs coupled with an subvention of 2% on interest on loans is a right step in that direction.
The Budget seems to have disappointed the individual taxpayer, particularly the few thousands with annual income of `2 crore or more. A rich individual will have to fork out more tax. However, the corporate tax rate for his business with annual turnover up to `400 crore) has been reduced to 25%. Clearly, the government wants people to create value in their businesses, boost investment and job creation, and not just accumulate wealth in their personal capacity.
Interchangeability of PAN and Aadhaar to help taxpayers file returns and also ease the know-your-customer (KYC) process, the improvements suggested in GST operations, exempting startups from income tax scrutiny, listing of social enterprises and NGOs, allowing retail investors to invest in T-Bills and G-Secs, simplifying KYC norms for foreign portfolio investors (FPIs) and allowing them to invest in real estate investment trusts (REITs) and infrastructure investment trusts (InvITs), will promote transparency and efficiency.
Equity markets cheered the `70,000 crore recapitalisation of PSU banks, whereas the `1 trillion refinance window to financially-sound NBFCs for their highly rated pooled assets through PSU banks with a partial credit guarantee from the government, was a lifeline for beleaguered NBFCs. Also dilution of additional equity up to 35% by blue chips may bring back several investors to primary markets.
(The author is Chairman & Managing Director, Bajaj Capital)
