The Budget 2020 brought cheer for the middle class on Saturday as Finance Minister Nirmala Sitharaman announced an optional income tax rate cut. Sitharaman listed three core themes – aspirational India, economic development for all, and a caring society.
The Budget speech, which went on for over 2 hours and 30 minutes, is by far the longest till date. Sitharaman had more to say but cut short her speech as she was feeling unwell.
Here is the gist of her speech:
Sitharaman announced significant cuts for individual taxpayers. The finance minister said the new tax regime “will be optional for taxpayers”.
“Those earning upto Rs 5 lakh shall not pay any tax either in the old regime or in the new regime,” Sitharaman told Parliament. “New tax regime will be optional for taxpayers. Those who want to be in the old regime, can continue to be in it...in the old rates, in the old sets of exemptions and deductions. Those who wish to come into the new one are welcome to do so.”
Those earning between Rs 5 lakh and Rs 7.5 lakh will now be taxed 10%, down from the existing rate of 20%, the finance minister announced. Taxpayers in the Rs 7.5 lakh-Rs 10 lakh bracket will pay 15% tax, down from the current 20% rate, and those earning between Rs 10 lakh and Rs 12.5 lakh will have to pay 20% tax. Earlier they were charged 30%.
Taxpayers earning between Rs 12.5 lakh and Rs 15 lakh will be charged 25% tax, down from the current 30% rate. Those earning more than Rs 15 lakh will continue to pay 30% tax.
In a bid to simplify the tax system and lower tax rates, around 70 of more than 100 income tax deductions and exemptions were removed, the minister said. The proposed tax structure would provide significant relief to taxpayers and especially for the middle class, Sitharaman claimed.
Push for agricultural sector
Sitharaman proposed to increase the agricultural credit availability to Rs 15 lakh crore. The minister announced a budget of Rs 2.83 lakh crore for agriculture and allied activities for the 2020-’21 financial year.
“Our government is committed to the goal of doubling farmers’ income by 2022,” Sitharaman said. For farming to be competitive, farm markets need to be liberalised, she added.
The finance minister enumerated 16 action points for the agriculture sector. “We propose to encourage those state governments which undertake implementation of following model laws which have been passed by the central government,” she added.
Sitharaman proposed to expand the PM-KUSUM scheme to help 20 lakh farmers set up standalone solar firms. “Further, we shall also help another 15 lakh farmers solarise their grid connected from sets,” she added. If farmers have fallow or barren lands, they will receive help to set up solar power generation units so that they can make money from sending solar power to grids, she added.
The finance minister said the National Bank for Agriculture and Rural Development, or NABARD, would map and geo-tag warehouses. “Our government will provide viability gap funding for setting up efficient warehouses in the block or taluka level,” Sitharaman added. The minister said the Food Corporation of India would construct the warehouses on its land.
She said the Indian Railways would set up Kisan Rail through Public Private Partnership. The trains will be equipped with cold-storage facilities so that perishable goods can be transported easily throughout India. The finance minister also announced a Kisan Udan scheme on both national and international routes. The Ministry of Civil Aviation will set it up.
The integrated farming system in rain-fed areas shall be expanded, Sitharaman said. Zero-budget natural farming shall also be included in the plan, and online agricultural markets will be strengthened. Sitharaman announced that the Mahatma Gandhi National Rural Employment Guarantee Act scheme would be dovetailed to develop fodder farms. She also proposed to increase the milk processing capacity from 53.5 million metric tonnes to 108 million metric tonnes by 2025.
Sitharaman said the government was planning to put in place a framework for development, management and preservation of marine fisheries. She proposed to raise fish production to 200 lakh tonnes by 2022-’23, and said growing algae and seaweed would also be promoted. She added that fish farmer producer organisations, or FFPOs, would be set up.
GDP and fiscal deficit
The finance minister said the Narendra Modi government would miss its fiscal deficit target for the 2019-’20 financial year by 0.5 percentage point. A fiscal deficit is the shortfall in the government’s income compared to its expenditure. She pegged the fiscal deficit at 3.8% for 2019-’20 and 3.5% for 2020-’21. The nominal GDP growth for 2020-’21 is estimated to be 10%.
Last year, the fiscal deficit had exceeded the government’s estimate for 2018-’19. During the Interim Budget in 2019, then Finance Minister Piyush Goyal had pegged the deficit at 3.4% of the Gross Domestic Product for 2018-’19, compared to the 3.3% target the government had set in 2018. The higher fiscal deficit was due to the “need for income support for farmers”.
In the July 2019 Budget, the government again set a 3.3% target for 2019-’20. Sitharaman had then claimed the target was realistic.
Before her speech, Sitharaman said the budget was for every woman wanting to stand up and be counted.
She announced a task force would be formed to recommend marriageable age for women in six months to reduce maternal mortality ratio. “Women’s age of marriage was increased from 15 years to 18 years in 1978 by amending erstwhile Sharda Act of 1929,” said the finance minister. “As India progresses further opportunities open up for women to pursue higher educational careers. There are imperatives of lowering maternal mortality rate as well as improvement of nutritional levels.”
Women self-help groups can seek Mudra and NABARD assistance in agriculture. “Women in the villages would keep the seed in the village and now it’s time for them to once again become Daanya Lakshmis,” said Sitharaman. She also announced incentives for women in beekeeping.
Sitharaman lauded the government’s “Beti Padhao, Beti Bachao” scheme. Gross enrolment ratio of girls across all levels of education is now higher than boys, the finance minister told Parliament. At elementary level, it is 94.32% for girls as against 89.28% for boys. In higher secondary schools, the gross enrolment ratio for girls is 59% plus while it is 57% for boys.
Sitharaman said the government had harnessed new technologies to enable financial inclusion on “a scale never imagined before”.
She urged private companies to build data centre parks across India. “It will enable our firms to skilfully incorporate data in every step of their value chains,” the minister added.
The government also announced Rs 6,000 crore for the Bharatnet programme in 2020-’21. It aims to provide fibre to the home connections to one lakh gram panchayats this year.
Sitharaman also proposed to provide an outlay of Rs 8,000 crore over five years for the National Mission on Quantum Technologies and Applications. “Quantum technology is opening up new frontiers in computing, communications, cyber security with widespread applications,” the minister added. “It is expected that lots of commercial applications would emerge from theoretical constructs which are developing in this area.”