Budget 2019 India: All reforms considered, this Budget has been a valiant effort by Nirmala Sitharaman
By TV Mohandas Pai
Union Budget 2019 India: In keeping with Modi government’s focus on upgrading the quality of life for Aam Aadmi, the Budget has continued its programmes to ensure all have access to the bare necessities by 2022. There has been significant spending on improving social living conditions, with a focus on housing, water, power, health, gas stove, sanitation, etc. There will further be investments to the tune of `100 lakh crore to improve infra over the next five years. These are crucial endeavours for ‘Reform, Perform, and Transform India’ vision.
Higher education has received particular focus , which is good to see. The proposed National Education Policy will help groom and retain top talent. The creation of the National Research Foundation is timely. The quality of higher education has not taken enough strides in the past years, due to lack of quality research output. Higher Education Commission will provide greater autonomy to institutes, and will increase focus on better academic outcomes.
Amongst the widespread reforms, the most prominent are in the financial sector. In a sluggish growth environment with international overhang, Public Sector Banks (PSBs) have been given a capital boost of `70,000 crore. For the purchase of high-rated pooled assets of NBFCs up to Rs 1,00,000 crore, the government will provide a one-time six months’ partial credit guarantee to PSBs for first loss of up to 10%, easing the credit chokehold on small businesses post the NBFC crisis last year. Building a larger corporate bond market will increase access to low-cost capital, helping drive investment-led growth.
In a bold and impressive step, Sitharaman will initiate a sovereign borrowing programme from external markets in external currencies, which will bring much-needed liquidity, and buoy consumption. Easing norms for FDI in aviation, media, and insurance sectors, and simplifying the KYC process for FPIs were much needed, propping up disinvestment opportunities and inflow of external capital.
Digitisation continues to be a priority, with an effort to curb off-the-books cash payments in business transactions. There is a stark contrast in the way the government focuses on detracting dishonesty in tax payments while also penalising honest taxpayers with incomes over Rs 2 and Rs 5 crore with surcharges of 10% and 15%, respectively.
An important topic that needed more focus was creation of quality jobs. While creating jobs and improving farmers’ incomes is certainly important, it is equally important to understand India’s demographic trends, well-outlined in the Economic Survey. Good quality long-term jobs will be developed in sectors showing healthy growth. The focus should be more on growing India’s large companies and promoting new-age technology start-ups.
The angel tax was harassment; the FM has committed to remove this from AIF Category I & II investors. However, this cannot be a benefit. To promote investments and growth, investors must be incentivised. Such high-risk, low-liquidity investors cannot be taxed the same way as stock market investors, who leverage low–risk, high-liquidity conditions. Bringing down capital gains for such investors from 20% to 10% will promote the growth of a healthy ecosystem and create better paying long-term jobs. This has been overlooked.
There is overhaul of complications arising from the 44 labour laws by consolidating them into four labour codes. This will bring down compliance costs for businesses and improve the formalisation of labour, helping bring wage parity.
All reforms considered, this Budget has been a valiant effort by Sitharaman; she has addressed most issues India faces today.
The author is Chairman, Aarin Capital Partners. Co-authored with Yash Baid, Head of Research, 3one4 Capital