News Excerpt
The Finance Minister recently presented the Union Budget 2020-21 in the Lok Sabha.

The Constitution refers to the budget as the ‘annual financial statement’ that has been dealt with in Article 112 of the Constitution.
In addition to the estimates of receipts and expenditure, the budget contains the following:  
1.    Estimates of revenue and capital receipts;
2.    Ways and means to raise the revenue;
3.    Estimates of expenditure;
4.    Details of the actual receipts and expenditure of the closing financial year and the reasons for any deficit or surplus in that year; and
5.    Economic and financial policy of the coming year, that is, taxation proposals, prospects of revenue, spending programme and introduction of new schemes/projects.

Three prominent themes of the Budget 2020-21
●    Aspirational India - better standards of living with access to health, education and better jobs for all sections of the society
●    Economic Development for all - “Sabka Saath, Sabka Vikas, Sabka Vishwas”.
●    Caring Society - both humane and compassionate; Antyodaya as an article of faith.  
The Key Highlights of Union Budget 2020-21

Action Points  
⮚    Blue Economy: Rs. 1 lakh crore fisheries exports to be achieved by 2024-25, 200 lakh tonnes fish production targeted by 2022-23. 3477 Sagar Mitras and 500 Fish Farmer Producer Organisations to involve youth in fisheries extension. Growing of algae, sea-weed and cage culture to be promoted.
⮚    Kisan Rail to be set up by Indian Railways through PPP to build a seamless national cold supply chain for perishables milk, meat, fish, etc.
⮚    Krishi Udaan to be launched by the Ministry of Civil Aviation on both international and national routes. This will immensely help improve value realization (on agricultural products), especially in the north-east and tribal districts.
⮚    One-Product One-District for better marketing and export in the Horticulture sector.
⮚    Measures for organic, natural, and integrated farming and the online national organic products market (Jaivik Kheti Portal) need to be strengthened.
⮚    Zero-Budget Naturalto be included. Integrated Farming Systems in rain-fed areas to be expanded.
⮚    PM-KUSUM, scheme to enable farmers to set up solar power generation capacity on their fallow/barren lands and to sell it to the grid, to be expanded; 20 lakh farmers to be provided for setting up stand-alone solar pumps.
⮚    NABARD to map and geo-tag agri-warehouses, cold storages, reefer van facilities, etc. Warehousing will be made in line with Warehouse Development and Regulatory Authority (WDRA) norms. Food Corporation of India (FCI) and Central Warehousing Corporation (CWC) to undertake such warehouse building.
⮚    In livestock, the budget set a target of doubling milk processing capacity to 108 million MT from 53.5 million MT by 2025. Artificial insemination to be increased to 70% from the present 30%.
⮚    Under Deen Dayal Antyodaya Yojana, 0.5 crore households will be mobilized with 58 lakh SHGs for poverty alleviation.
⮚    Wellness, Water and Sanitation- budget proposed to set up a viability gap funding to allow empanelment of hospitals through a public-private-partnership (PPP) model. To widen the scope of PM Jan Arogya Yojana (PMJAY). Aspirational Districts with no Ayushman empanelled hospitals to be covered in the first phase.
⮚    Education and Skills-
o    Rs. 99,300 crores for education sector and Rs. 3000 crores for skill development is allocated in 2020-21.
o    National Police University and National Forensic Science University are proposed for policing science, forensic science, and cyber-forensics.
o    External Commercial Borrowings and FDI to be enabled for the education sector.
o    Ind-SAT is proposed for Asian and African countries as a part of Study in India program.
⮚    Economic Development
o    To achieve higher export credit disbursement, a new scheme NIRVIK (Niryat Rin Vikas Yojana) is being launched which provides for high insurance cover, reduction in premium for small exporters and simplified procedures for claim settlement.
o    To position India as a global leader in Technical Textiles, a National Technical Textiles Mission has been proposed with a four-year implementation period from 2020-21 to 2023-24.
o    All Ministries to issue quality standard orders as per PM’s vision of “Zero Defect-Zero Effect” manufacturing.
⮚    Ports & Water-ways: Corporatizing at least one major port and its listing on stock exchanges to be considered. Economic activity along river banks to be energised as per Prime Minister’s Arth Ganga concept.  
⮚    Airports: 100 more airports to be developed by 2024 to support Udaan scheme.
⮚    Electricity: “Smart” metering to be promoted. More measures to reform DISCOMs to be taken.
⮚    Culture & Tourism:5 archaeological sites to be developed as iconic sites with on-site Museums: Rakhigarhi (Haryana), Hastinapur (Uttar Pradesh), Shivsagar (Assam), Dholavira (Gujarat), Adichanallur (Tamil Nadu).
⮚    Environment & Climate Change: PM launched Coalition for Disaster Resilient Infrastructure (CDRI) with Secretariat in Delhi. It is the second such international initiative after International Solar Alliance.
⮚    Governance: Taxpayer Charter to be enshrined in the Statute will bring fairness and efficiency in tax administration. New National Policy on Official Statistics to promote the use of latest technologies including AI. Lay down a road-map towards modernised data collection, integrated information portal and timely dissemination of information.
⮚    Financial Sector: Factor Regulation Act, 2011 to be amended to enable NBFCs to extend invoice financing to the MSMEs through TReDS (Trade Receivables Electronic Discounting System) . Cooperative Banks to be strengthened by amending Banking Regulation Act for increasing professionalism & enabling access to capital.
⮚    Infrastructure Financing: The budget proposed to set up an international bullion exchange at IFSC in GIFT City, which will lead to better price discovery of gold, create more jobs and enhance India's position in such market.  
⮚    Direct Tax-
o    Corporate Tax: Tax rate of 15% extended to new electricity generation companies. Indian corporate tax rates now amongst the lowest in the world.
o    Dividend Distribution Tax (DDT) is abolished, making India a more attractive investment destination.
o    Start-ups- with turnover up to Rs. 100 crores to enjoy 100% deduction for 3 consecutive assessment years out of 10 years.
o    Cooperatives: Cooperative societies exempted from Alternate Minimum Tax (AMT) just like Companies are exempted from the Minimum Alternate Tax (MAT).
o    Tax concession for foreign investments: 100% tax exemption to the interest, dividend and capital gains income on investment made in infrastructure and priority sectors before 31st March, 2024 with a minimum lock-in period of 3 years by the Sovereign Wealth Fund of foreign governments.
o    MSMEs to boost less-cash economy: Turnover threshold for audit increased to Rs. 5 crores from Rs. 1 crore for businesses carrying out less than 5% business transactions in cash.

How will the Budget Impact Indian Economy?
    The big bet of the government to boost growth is push for investments in its industrial sector and push for India’s participation in the global value chains. This is borne by further changes announced in the dividend distribution tax (DDT), moving its incidence from the company to the recipient. The Abolition of DDT would encourage companies to pay more dividends. This follows the corporate tax cuts announced in 2019, and will boost India’s attractiveness to investments especially by foreign companies.
    Across a range of sectors, from toys, footwear, furniture, to electronics, machinery, and other items, custom duties have been raised along with greater scrutiny of imports from Free trade agreements. The government seems to be betting that greater protection from imports will help the domestic industry. However, there is a risk that higher custom duties dilute India’s efforts to integrate with global value chains.
    The impact of the union budget on industries like information technology could be positive. There has been an allocation of Rs. 8,000 crores for a National Mission on Quantum Computing and Technology.
    The agriculture sector plays a significant role in boosting the economy of the country. The budget has proposed numerous reforms that aim to uplift agriculture economy (e.g. provision of agricultural credit has increased to Rs. 15 lakh crores (2020-21). The budget emphasized its goal to achieve the objective of doubling farmer’s income by 2022 and rolled out, inter alia, a 16-point agenda to ensure a quick agriculture-led rural economic growth, allocating resources to important livelihood and rural infrastructure initiatives.  

Way Forward
▪    Over the years, there has been a thrust on improving technology and capacity in the sectors like railways, rail, road, air and water. The outcome of these is projects like Dedicated Freight Corridor, High-Speed Rail, expressways, electric vehicles, PPPs in airports, etc. While the budget has appropriate announcements but  execution needs attention.
▪    Fiscal deficit can be reduced to its desired level only by reducing the revenue deficit, not the capital expenditure. This can be possible through revenue augmentation and expenditure rationalization. Efficient management of expenditure is the key to fiscal consolidation; that is why Expenditure Reform Commission has been formed to reprioritize and rationalize non-plan revenue expenditure.  
▪    The Budget continues a process of improving the design and implementation of the GST, which was initially too complicated and cumbersome. The GST will ultimately be a crucial component in improving India’s relatively low tax-to-GDP ratio.
Thus, the Union Budget has managed to pull off a fine balancing act; finding equilibrium between economic growth and fiscal prudence. The budget tries to address various areas of the economy and focuses towards inclusive and sustainable development.  

Fifteenth Finance Commission, FRBM Act.

Increase in Insurance Cover for Bank Deposits
    Deposit insurance is offered by Deposit Insurance and Credit Guarantee Corporation (DICGC), a wholly owned subsidiary of the RBI.
    RBI recently increased the bank deposit insurance cover to Rs 5 lakh from Rs 1 lakh.
    Deposit insurance is a protection cover against losses accruing to bank deposits if a bank fails financially and has no money to pay its depositors.
    The move will help boost the confidence of people in the banking system after a scam last year in Punjab and Maharashtra Cooperative Bank (PMC Bank) which left lakhs of customers stranded.