"Everything that the Government does and aims to do is for this pyaara vatan (beloved country)."
I think our “pyaara vatan” has gotten a habit of pulled back by the government every time it falls into a pit dug on its own, which is why our finance minister’s not so luring fiscal act couldn’t help in stimulating the market and economy all together. A few of the major key highlights are mentioned below:
Taxation:
- A new tax slab has been introduced which can opt only by giving up all the exemptions and deductions, for which around 70 deductions and exemptions of income tax has been removed out of 100, which is clearly one and the same thing for the common people but a great advantage for huge businesses in India.
- The abolition of DDT(dividend distribution tax) for the company has also been a major change, which again might not be directly passed on to the consumer section but a huge advantage to major companies.
- Cooperative societies tax has been reduced to 22% from 30%, “vivaad se vishwaas” scheme has been launched as new direct tax dispute settlement scheme, adhaar based verification of taxpayers will be introduced and online allotment of PAN on the basis of ADHAAR is also being introduced to ease the process.
Investment & Insurance:
- One of the major decisions of selling LIC(Life Insurance Corporations) government holdings through initial public offer also comes as a disappointment to people.
- The corporate bond limit for FPIs has been raised to 15% from 9% which might be a bit helpful for FPIs to invest which has been made difficult since the last budget.
- The government also doubles the disinvestment target by Rs 2.1 lakh crore for the next fiscal year
- The insurance coverage deposit has been increased to Rs 5lakhs from Rs 1lakh.
Indirect tax
- Footwear and furniture goods custom duty has been raised to 35% and 25% respectively from 25% and 20%, excise duty on cigarettes and tobacco products too has been proposed to be raised.
Telecom, tourism, and Infrastructure
- BharatNet program has been allotted 6000crore to digitalize rural India, five archaeological sites in Haryana, UP, Assam, Gujarat, Tamil Nadu are to be developed for the world-class museum. Five more smart cities are to be set by the PPP model, a target of setting up 100 airports by 2024.
Healthcare& Sanitisation
- The Healthcare sector has been allocated around Rs 69000 crore which is 1% of the total GDP, viability gap funding window to be opened to cover hospitals especially for the places which do not have hospitals already impaneled under Ayushman Bharat.
- Water sanitization and pipeline projects have been allotted Rs 3.6 lakh crore and Rs 12300crore for Swachh Bharat.
Agriculture
- Agriculture which contributes 70% of our economy has not been rewarded with many incentives except expanding PM KUSUM scheme to 20 lakh farmers, railways too to be set up for transportation of goods for farmers via PPP model.
What we expected mostly played out – no fiscal stimulus due to constrained fiscal space, relatively higher focus on infra, nothing for real estate, no incremental gains for rural, reliance on strategic disinvestment /lesser on ETF, bond CPSE to include G-secs, nominal income tax sops. Continuity was seen across policies – attracting foreign capital, deepening of bond markets, and raising tax compliance.
Government spending has been key growth support for many years and is likely to remain as such in FY21 too. The equity market was disappointed with a lack of substantial income tax cuts and fear of lower financial savings in case of exemption removal in the long run.
