Budget 2020-21: The Budget aims at strengthening governance, streamlining tax rates and reducing administration, but steps needed to restart growth are missing.
By Mohit Malhotra
Budget 2020 India: Given the current fiscal situation, finance minister Nirmala Sitharaman has done a balancing act with her Budget FY21. It can be termed as an incremental Budget that continues the government’s focus on doubling farmers’ incomes, offers significant sops at the lower end of the spectrum and enhances the purchasing power of the consuming class. However, the big bold steps needed to restart economic growth are missing. That said, the fact is the government had little room to manoeuvre.
The big positive takeaways are the income-tax relief offered to lower income groups by slashing rates and rejigging income tax slabs to reduce total tax payable. This will put more disposable income in the hands of the consuming class, which may help push demand for consumer staples. However, individuals opting for taxation under new rates will not be entitled to exemption/deductions including under Section 80C and 80D, LTC, house rent allowance, deduction for entertainment allowance, professional tax, and interest on self-occupied/vacant property. The other positive step is raising the deposit insurance coverage to `5 lakh from the current Rs 1 lakh.
The abolishing of DDT is another welcome move. However, as dividends become taxable in the hands of shareholders, their taxable income may increase. The proposed scheme to bring down litigation in direct taxation scheme is a right move.
It’s heartening to see the government continuing its focus on Bharat, with the 16-point plan for farmers, which would go a long way in boosting the agricultural sector. Some key measures include increasing target for agricultural credit to Ra 15 lakh crore from Rs 12 lakh crore; Rs 2.83 lakh crore allotment for agriculture and irrigation in 2020-21; and liberalisation of farm markets and refrigerated coaches for transporting perishable goods. The government has allocated more money for roads and highways this time, which would help improve connectivity with the hinterland. These long-term initiatives are expected to help improve overall consumer sentiments in the hinterland and also help improve their standards of living. In addition, the increased investment in infrastructure development is expected give a boost to employment generation in the country.
It’s a Budget that is aimed more at strengthening governance, streamlining tax rates and minimising administration.
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The government has set an ambitious target of growing India into a $5-trillion economy by 2024-25, and that would call for some big, bold structural reforms. While this Budget gives a hint of the government’s intent, it has fallen short of laying down the blueprint for creating an enabling framework that would promote growth. Overall, I would call it a mixed Budget.
The writer is Chief executive officer, Dabur India