(GIST OF YOJANA) Union Budget
2020-21: A Fine Balancing Act
Union Budget 2020-21: A Fine Balancing
Budget this year's budget is woven into three major themes; Aspirational
India, Economic Development And a Caring Society.
In line with thePrime Minister’s dream of ‘SabkaSaath, Sabka Vikas,
Sabka Vishwas’;addressing the aspirations of India;
It aims to provide a better standard of living through improved access
to health and education.
Furthering Sustainable growth and economic development, it aims to
promote the private sector and ensures we develop a harmonious and caring
society,which looks after each individual's needs and benefits.
The agriculture and allied activities sector, in the recent past,has
been going through several ups and downs. However, the government remains
committed towards the target of doubling farmer’s income by 2022.
The budget highlights 16-action points which cover almost all aspects of
the agriculture and allied activities sector.
There remains a high disconnect between the agricultural output and low
farmer income due to supply bottlenecks.
The budget aims to provide support for an end-to-end value chain and
puts emphasis on warehouse storage and development. Significant Attention
has been given to the development of the blue economy and through that,
India’s coastal regions.
The move to create a cold supply chain, and launching refrigerated
coaches with the help of Indian Railways is a welcome move towards improving
the shelf-life of perishable produce.
This budget recognizes the need to keep pace with frontier technologies.
Service sectors constitute a major share of the economy and these steps
are sure to boost growth in these areas, especially the IT services.
Scope for India:
It is estimated that within the next decade, India would have the
largest working age population.
We can only reap the benefits of this demographic dividend if we take
the necessary steps now.
It is important to note that while having a large labour force is
advantageous, appropriate skilling is crucial for improving productivity
through New Education Policy.
Measures taken by the government:
The Prime Minister has strongly advocated entrepreneurship and start-ups
for driving growth and India has emerged as a major start-up ecosystem
To further encourage this movement, the budget has made provisions to
provide tax relief in ESOPs (Employee Stock Ownership Plan) held by
employees in start-ups.
The Government's decision to set up a seed fund to support start-ups in
their early stages should provide immense boost to budding entrepreneurs.
The government has introduced several measures for the financial sector.
An important step is opening up the bond markets to foreign investors and
extending the investment limit in outstanding corporate bonds by FPIs to 15%
from the current 9%.
The Government also plans to launch a new Debt-ETF, composed primarily
of Government securities. The Benchmark 10-year bond would be a great place
to start given its high liquidity.
These Steps will help to; increase the depth of the bond market and
provide financial intermediaries viable options for funding thereby reducing
their dependence onScheduled Commercial Banks.
Role of MSMEs in GDP contribution:
Micro, Medium, and SmallEnterprises (MSMEs) contribute nearly 29% to the
This Budget provides sufficient financing relief to the sector.
As the major lenders in this sector, finances fromNBFCs (Non-Banking
FinancialCorporations)will now be facilitated through theTReDs platform to
facilitate the strained working capital.
Moreover, in lieu of the on- goingstruggle faced by NBFCs, the budget
proposes to move their eligibility limit for debt recovery under SARFAESIAct
to an asset size of Rs. 100crore or loan sizeof Rs. 50 lakhs.
Improve the functioning of PSUs:
The government remains committed to improving the functioning of PSUs.
The move to float LIC publicly will not only bring in additional
revenues for the government, but also increase transparency in the
functioning of the organisation.
The government’s steps to increase the decades old deposit insurance
coverage of Rs. 1 lakh toRs. 5 lakh.
The government has proposed to sell holding of Government in IDBI Bank.
The government has also proposed the recovery eligibility limit for
NBFCs reduced to asset size of 100 crore or loan size of 50 lakh.
An important step towards long-term sustainable growth and employment is
the government's announcement of the National Infrastructure Pipeline (NIP).
The Budget provides adequate funding to the tune of Rs. 22,000 crore
equity support to infrastructure finance companies, which could be leveraged
further and create long-term debt finance for projects.
The government has taken several steps to increase transparency and
improve the credibility of its data. Through the budget, it has been decided
for the first time, to report extra budgetary items, in terms of bonds and
Towards completing economic challenges:
Much like the overall economy, which has undergone various structural
reforms, the budget also makes an important shift from the past by
encouraging wealth creation.
The Move towards gradually simplifying the corporate and personal tax
regimes is an important step to restore confidence back in the economy.
The taxpayers’ charter will also help to enhance the trust of investors
and corporations in the government. It is quite unfounded that the markets
registered a loss right after the budget.
The markets were probably expecting some demand mobilizing policies or
major personal tax cuts however, once the market realized the long-term
structural reforms, it recovered all its losses in the next two days.
This budget realizes and recognizes challenges towards achieving higher
growth. In the last six months, since the formation of the new government
and the announcement of budget(FY20) with it, the government has taken
numerous steps which would allow the economy to reap benefits in the medium
The fine balancing act by the government, using the escape clause’ under
the FRBM Act, is a statement enough. Even with the challenging revenue
collection scenario, the government continues to commit to adequate
expenditure levels while maintaining fiscal prudence.
The budget is sound, rational and ticks all the boxes. Keeping in mind
the challenges to economic growth, it strives to address short, medium and
long-term growth prospects equally, without shocking the system.
The Budget goes a long way towards our goals of building an aspirational
India. The steps taken over the recent past will drive us towards the target
of becoming a USD 5 trillion economy.