CURRENT AFFAIRS
BUDGET 2019 : IS IT INDEED PRECISION OVER PACE ?
The 2019 annual budget was supposed to be a
googly for the presenter because of the
character of the 2019 interim budget that was
published before the elections.
Having said that, the debutant Nirmala Sitharaman
managed to nick the ball and run a couple. Even
though fans want to see the ball sail over the
boundary line, all we need right now is to pick those
safe runs and maintain the required run rate. But
what is the required run rate is a huge element of
debate all together.
There were expectations of a big growth push
through either tax cuts or large expenditure
programmes even if it meant a rise in the fiscal
deficit. But our finance minister has chosen to be
conservative and play the long-term game, which
might be of some pain in the short term as well. One
of the biggest highlights of the budget is the RS
70,000 crore capital infusion in banks which would
increase the loan giving abilities and in turn increase
the money flow in the economy. One sector where
constructive policy changes is required and was
delivered was non-banking financial companies
(NBFCs). Especially post IL&FS crisis, investors have
lost confidence in the sector. Government in this
budget did address the issues of solvency, liquidity
and bad governance in NBFCs. The budget has
made available a liquidity window of RS 1 lakh crore
to public sector banks through the Reserve Bank of
India to buy pooled assets of NBFCs and offered a
one-time credit guarantee for first loss of up to 10%.
To enable better supervision of the sector, housing
finance companies, will come under the RBI's
regulatory ambit. NBFCs fund a lot of infrastructure
projects and such projects are mostly long term. In
this lies the biggest problem, NBFCs borrow short
term funds to lend to long term projects thus creating
a asset-liability mismatch. There has been a proposal
to study this issue in details as well.
Businesses such as real estate and construction
would prefer paying wages in cash as there will now
be a 2% tax deducted at source when withdrawals
from bank accounts exceed RS 1 crore in a year.
Under the new tax regime, those with income
between RS 2 crore and RS 5 crore will have to pay
tax at rate of 39%. And those earning more than RS
5 crore have to pay a rocketing 42.74% of their
income as tax. This is more than USA where the
maximum rate is 37%. Though the tax slabs have not
changed officially, the rates have with the help of a
respective surcharge as per bracket. The government
also appears to be sliding into a protectionist mode,
going by the increase in customs duty on almost
everything. While some of it may be well-intentioned
to promote domestic manufacturing but it could also
have a marginal effect on trade relations at global
level. But marginal effects on world forum could have
a cascading impact on common individuals of this
country.
One of the most interesting announcements has
been about electric vehicles. Those taking loans to
buy one, will get a tax deduction of up to RS 1.5 lakh
on the interest paid by them. True curiosity lies in
finding out how many people would take an
advantage of this scheme because the fact of the
matter is that, there are very few electric vehicles in
the market and absolutely no infrastructural support
for those.
Overall the budget failed to make necessary
provisions for increasing educational infrastructure
and skill development while it did push in enough
money into 'Jan dhan' account which seemed
necessary and finally, did this budget give 'Make in
India' initiative an impetus? Does the very ethos of
this budget resonate with the core concepts of
inclusive growth? Well, only time would tell us that.
article by Advait Nambiar