Union Budget 2019 India: Finance Minister Nirmala Sitharaman’s maiden budget may not have announced big bang reforms, it definitely had something for everyone.
Union Budget 2019 India: Finance Minister Nirmala Sitharaman’s maiden budget may not have announced any big bang reforms, it definitely had something for everyone. The budget, as expected, was focussed on reviving the different sectors of economy, which is currently seeing a slowdown. However, reviving economy was only one of the many challenges of the finance minister, as she was also expected to deal with issue of bad assets and NBFC crisis, among others. Overall, her measures are expected to provide the much needed boost to the Indian economy going ahead, experts said.
Finance Minister laid down a medium term road map for jump starting the Indian economy towards the goal of reaching $5 trillion in the next coming years, said Sudhir Kapadia, National Tax Leader, EY India. “Towards this objective, there have been some far reaching policy announcements including proposals for developing rental housing while leveraging public sector and government land assets through the Public Private Partnership (PPP) model, deepening of long term bonds markets and liberalizing investment norms by Foreign Portfolio Investment (FPI) in certain kinds of bonds, creation of a social stock exchange in social enterprises, further liberalizing of Foreign Direct Investments (FDI) into aviation, media and insurance intermediaries, relaxation of local sourcing rules for foreign companies engaging in single brand retail,” he added.
With not much room for manoeuvring with budgetary allocations, fresh allocations for bank recapitalisation and extension of cut in corporate tax have received thumbs up from the experts. “The announcement for further capital infusion of Rs 70,000 crores in public sector banks and partial credit guarantee by Government of India for purchase of high rated pooled assets of financially sound NBFCs by PSBs for well runs NBFCs are attempts to address some of the financial stress in the economy which has arguably led to lesser private sector investment.” During its first term, the government had infused record amounts of capital into PSU banks post an asset quality review started by the central bank in 2015. The review resulted in rise in reported bad assets and called for a surge in provisions.
“However, India Inc may be disappointed at the relative lack of specific measures to further stimulate demand in the economy,” he added.
Even as budget proposed extension of cut in the corporate tax rate of 25 percent to many more companies with the turnover limit upto Rs 400 cores, the large firms with significant contribution to the economy are still taxed at the higher rate of 30 percent, Sudhir Kapadia noted. “Considering the fact that there has been a fairly steep increase (upto 7 percent) in the maximum marginal rates of taxation at higher income levels, and that no visibly meaningful reduction is proposed in indirect tax rates, it seems that the desired push for consumption may not be seen,” he opined.
Finance Minister, in this budget, proposed to make Pan Card and Aadhaar card interchangeable to file tax returns. Also, the people who do not have PAN can simply quote their Aadhaar number wherever PAN is required. The industry veteran finds it a far reaching step by the finance minister.
“…..The acceptance of Aadhaar as the single identity proof for tax purposes, the transformative introduction of pre filled tax returns with data available with the government, piloting e-assessment for certain taxpayers with absolutely no need of human contact, discouraging cash transactions by introducing TDS on high value cash withdrawals from banks, elimination of transaction fees for digital payments, and further streamlining of electronic filing under the GST law,” he said.
The measures announced in the budget may help in boosting the economy in the long term, he said. “However, in the short term till such policies get fully implemented, there is relative lack of demand stimulus which India Inc was hoping for to accelerate economic growth,” he noted.