Indianeconomy.net Budget 2020...Indianeconomy.net Budget 2020 Indianeconomy.net 8 • Youth will be encouraged to participate in fishery extension through 3477 SagarMitras and 500

Indianeconomy.net Budget 2020

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Budget 2020

The government will open up vistas for vibrant and dynamic economy with the use

of new technology. It will be a caring society which shall attend the weak, the old and the

vulnerable among its citizens.

During 2014-19, there is a paradigm shift in governance featured by twin focus:

1. Fundamental structural reform and

2. Inclusive growth.

Structural reforms – the GST

Goods and Services Tax (GST) – is one historical

structural reform -the progress of GST:

• GST has been maturing as a tax that is

integrating the country.

• GST consolidated numerous taxes and cesses to one tax

• It facilitated formalisation.

• It enhanced efficiency in logistic and transport sectors

• Turnaround time for trucks reduced by 20% due to abolition of check posts

• the dreaded Inspector-Raj has also vanished.

• GST led to significant benefits to MSME from enhanced threshold and composition

limits.

• Effective tax incidence on almost every commodity came down substantially.

• Tax reductions provided an annual tax relief of Rs 1 lakh crores to consumers.

• An average household can save 4% on its monthly spending due to low GST rates.

Challenges of GST in its transition

GST Council made proactive measures to handle the

GST system: In the last two years:

• more than 60 lakh new taxpayers were added

• about 40 crore returns were filed,

• 800 crore invoices were uploaded, and

• 105 crore e-way bills were generated.

A simplified new return system is being introduced from

April 1, 2020.

Economic Fundamentals

are strong >There is macroeconomic stability. >Inflation has been contained >Banks are in the cleaning up process of accumulated

loans >IBC process provides exit routes to companies >Several formalisation processes were initiated.

Budget’s background – two cross cutting developments (a) Proliferation of technologies like analytics,

machine learning, robotics, bioinformatics and Artificial Intelligence; and

(b) The number of people in the productive age group i.e. 15-65 years in India, being at

its highest.


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SabkaSaath, SabkaVikas, SabkaVishwas

Welfare schemes are now reaching the beneficiaries at the right time. The government has

speeded up and scaled up the implementation of schemes and programmes. Some of the

steps taken to improve the inclusiveness and efficiency are the following:

• welfare schemes are connected with Direct Benefit Transfer (DBT).

• sanitation and water were provided as basic needs for preventive healthcare.

• healthcare, through Ayushman Bharat.

• clean energy through Ujjwala and solar power.

• financial inclusion, credit support, insurance protection to vulnerable sections and

pension scheme.

• digital penetration with broadband and UPI.

• Affordable Housing for all through PMAY.

Milestones:

India achieved several milestones that are globally recognised and benchmarked

• India achieved average growth of 7.4% with an average inflation rate of 4.5%.

• Between 2006-16, India was able to raise 271 million people out of poverty.

• India is now the fifth largest economy of the world. .

• FDI into the country increased to US$ 284billion during 2014-19.

• Debt of the central government reduced to 48.7% of GDP.

Digital revolution places India in a unique

leadership position

In this digital revolution, India shall aim:

• To achieve seamless delivery of services through

Digital governance

• To improve physical quality of life through National Infrastructure Pipeline

• Risk mitigation through Disaster Resilience

• Social security through Pension and Insurance

penetration.

Each one of these initiatives and their components

would be bench-marked to international standards and

the indices would be announced soon.

A combination that makes special for contemporary

India: 1. Shrinking Globalisation

and 2. Debate on the efficacy of monetary policy.

Three themes of the Budget – the three flowers in the bouquet

(1) Aspirational India,

(2) Economic Development and

(3) Caring society


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Budget’s three Prominent Themes

The three themes – Aspirational India, Economic Development and Caring society are the

flowers in the bouquet of Ease of Living envisaged by the Prime Minister.

1. Aspirational India: all sections of the society seek better standards of living, with access

to health, education and better jobs.

2. Economic development:

• Development for all, as envisaged under “SabkaSaath, SabkaVikas, SabkaVishwas”.

• This necessitates reforms across different areas of the economy.

• Similarly, there should be more space for the private sector.

• Besides, there would be higher productivity and greater efficiency.

3. The Caring Society that is both humane and compassionate. Antyodaya is an article of

faith.

1. Aspirational India

Aspirational India covers programmes and plans related to three socio-economic areas:

(1) Agriculture, Irrigation and Rural Development

(2) Wellness, Water and Sanitation and

(3) Education and Skills

(1) Agriculture, Irrigation and Rural Development (First element of Aspirational

India)

Government is committed to the goal of doubling farmers’ incomes by 2022. Following

efforts have helped to realise this goal.

• Energy sovereignty through KUSUM

• Input sovereignty through Paramparagat Krishi Vikas Yojana.

• Insurance cover has been given to 6.11 crore farmers through PM Fasal Bima Yojana

• Pulse cultivation and micro irrigation through Krishi Sinchai Yojana

• Supplementary income through PM KISAN

• Connectivity through PMGSY

Farmer’s prosperity by making farming competitive- following actions are needed on this

regard:

• Liberalization of farm markets

• Removal of distortions in farm and livestock markets


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• Higher investment to purchase farm produce, expansion of logistics and provision

of agri-services.

• Support for farm-based activities like livestock, apiary, and fisheries

• Integrated solutions covering storage, financing, processing and marketing should

be made.

• Adoption of sustainable cropping patterns and

bringing in more technology.

The 16-point action plan for agricultural sector

development

Budget proposes a 16-point action plan to promote

agricultural production and welfare.

1. Encouraging State governments who

implements model laws issued by the Centre.

The model laws are:

(a) Model Agricultural Land Leasing Act, 2016

(b) Model Agricultural Produce and Livestock

Marketing (Promotion and Facilitation) Act,

2017.

(c)Model Agricultural Produce and Livestock Contract Farming and Services

(Promotion and Facilitation) Act, 2018.

2. Water Stress: Government will undertake comprehensive measures for one hundred

water stressed districts.

3. Solar pump sets to farmers: PM KUSUM (Pradhan Mantri Kisan Urja Suraksha

Utthan Mahabhiyan)

The scheme removed farmers’ dependence on diesel and kerosene and linked pump sets

to solar energy. The scheme will be expanded to provide:

• 20 lakh farmers for setting up stand-alone solar pumps.

• 15 lakh farmers will be helped to solarise their grid-connected pump sets.

• farmers to set up solar power generation capacity on their fallow/barren lands and

to sell it to the grid would be operationalized.

4. Balanced use of fertilisers: Government will encourage balanced use of all kinds of

fertilizers including the traditional organic and other innovative fertilizers.

The 16-point Action Plan for Agriculture: Areas

1. Encouraging States to adopt model laws issued by the Centre 2. Water Stress 3. Solar pump sets to farmers – PM KUSUM 4. Balanced fertiliser use: 5. Agricultural Warehousing 6. Village Storage Scheme by SHGs: 7. Kisan Rail 8. Krishi Udaan 9. Horticulture: One product one district scheme 10. Integrating Farming System 11. e-NWR integration with e-NAM 12. Agricultural credit 13. Animal Husbandry 14. Blue Economy: Marine Fisheries 15. Fisheries 16. Deen Dayal Antyodaya Yojana


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5. Agricultural Warehousing: India has an estimated capacity of 162 million MT of agri-

warehousing, cold storage, reefer van facilities etc. Budget proposals:

• NABARD will map and geo-tag

them.

• More warehousing will be

constructed abiding with

Warehouse Development and

Regulatory Authority (WDRA)

norms.

• Viability Gap Funding will be

provided for setting up of efficient

warehouses at the block/taluk level.

• States should provide land for

constructing new warehouses on

PPP mode.

• Food Corporation of India (FCI) and Central Warehousing Corporation (CWC) shall

undertake such warehouse building on their land.

6. Village Storage Scheme by SHGs

• Village Storage scheme to be run by the SHGs will act as a backward linkage for

storing agricultural produce.

• Doing so, women, SHGs shall regain their position as “Dhaanya Lakshmi”.

7. Kisan Rail – national cold supply chain by Indian Railways:

Indian Railways will set up a “Kisan Rail as a national cold supply chain for perishables,

including milk, meat and fish.

This will be done on PPP mode.

North East and tribal districts will get benefit from such a logistic support.

8. Krishi Udaan: will be launched by the Ministry of Civil Aviation on international and

national routes. This will immensely help to improve value realisation especially in North-

East and tribal districts.

9. Horticulture: One product one district scheme

• Horticulture sector with an output of 311million MT exceeds production of food

grains.


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• For better marketing and export, States will be encouraged to follow a cluster

approach to focus on “one product one district”.

10. Integrating farming system

• Integrated farming systems in rainfed areas shall be expanded.

• Multi-tier cropping, beekeeping, solar pumps, solar energy production in non-

cropping season will be added.

• Zero-Budget Natural Farming (July 2019 budget) shall also be included.

• The portal on “jaivikkheti” – online national organic products market will also be

strengthened.

11. e-NWR will be integrated with e-NAM

• Financing on Negotiable Warehousing Receipts (e-NWR) has crossed Rs 6000 crore.

• E-NWR will be integrated with e-NAM.

12. Agricultural credit

• NBFCs and cooperatives are active in the agriculture credit space.

• NABARD re-finance scheme will be further expanded.

• Agriculture credit target for 2020-21 has been set at Rs 15 lakh crore.

• All eligible beneficiaries of PM-KISAN will be covered under the KCC scheme.

13. Animal Husbandry

• Major livestock diseases like Foot and Mouth disease, brucellosis in cattle, peste des

petits ruminants (PPR) in sheep and goat will be eliminated by 2025.

• Coverage of artificial insemination shall be increased from the present 30% to 70%.

• MNREGS would be dovetailed to develop fodder farms.

• Milk processing capacity will be doubled from 53.5 million MT to 108 million MT by

2025.

14. Blue Economy: Marine Fisheries

• A framework for development,

management and conservation of

marine fishery resources will be

designed.

15. Fisheries

• Fish production will be to 200 lakh tonnes by 2022-23,

• Growing of algae, sea-weed and cage Culture will also be promoted.

Fund allocation for 16-point Action Plan

Agriculture, Irrigation & allied activities

Rs 1.60 lakh crore

Rural development &Panchayati Raj

Rs 1.23 lakh crores


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• Youth will be encouraged to participate in fishery extension through 3477

SagarMitras and 500 Fish Farmer Producer Organisations.

• Fishery exports will be enhanced to Rs 1 lakh crore by 2024-25.

16. Deen Dayal Antyodaya Yojana

• Under the scheme, for alleviation of poverty, 58 lakh SHGs have been mobilised.

• More SHGs will be participated.

(2) Wellness, Water and Sanitation (second element of Aspirational India)

The Government has a holistic vision of

healthcare that translates into wellness of the

citizen.

• Mission Indradhanush has been expanded to cover 12 such diseases, including

five new vaccines.

• FIT India movement is a vital part of fight against Non communicable diseases

coming out of lifestyle issues

• Jal Jeevan Mission is a very focused safe water

• Swachch Bharat Mission is a comprehensive sanitation program

• PM Jan Arogya Yojana (PMJAY) networks more than 20000 empanelled

hospitals and more Tier-2 and Tier-3 cities are to be covered under this

scheme.

Hospitals through PPP with viability gap funding

• More hospitals to be created through PPP mode with Viability Gap Funding

• In the first phase, Aspirational Districts where presently there are no Ayushman

empanelled hospitals will be selected.

• This would also provide large scale employment

opportunities to youth.

• Proceeds from taxes (for VG funding) on medical devices would be used to build

hospitals.

Use of AI and Machine learning in Ayushman Bharat

• Using machine learning and AI; Ayushman Bharat scheme can target disease with

supportive Preventive regime.

Three Elements of Aspirational India (1) Agriculture, Irrigation and Rural Development (2) Wellness, Water and Sanitation (3) Education and Skills

Budgets’ health sector allocation Allocation to the health sector is Rs 69,000 crores including Rs 6400 crores for Prime Minister Jan Arogya Yojana (PMJAY)


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TB Harega Desh Jeetega campaign: Commitment to end Tuberculosis by 2025 will be

strengthened.

Jan Aushadhi Kendra Scheme: will be expanded to all districts offering 2000 medicines

and 300 surgicals by 2024.

ODF Plus

• Government is committed to ODF Plus to sustain ODF behaviour.

• Efforts will be made for liquid and grey water management.

• Focus would also be on Solid waste collection, source segregation and processing.

Jal Jeevan Mission

• The scheme aims to provide piped water supply to all households

• Government has approved Rs 3.60 lakh crore for this Mission.

• The scheme also places emphasis on augmenting local water sources, recharging

existing sources and will promote water harvesting and de-salination.

• Cities with over a million population will be encouraged to meeting this objective

during the current year itself.

• For 2020-21, Rs 11,500 crore is allocated for this scheme.

3. Education and Skills (Third element of Aspirational India)

Education and Skills is the third element of

Aspirational India.

New Education Policy

• By 2030, India is set to have the largest working-age population in the world.

• Not just literacy but they need both job and life skills.

• Discussions were conducted with State Education Ministries, Members of Parliament

and other stakeholders about Education policy.

• The New Education Policy will be announced soon.

FDI and ECBs will be utilised in the education sector

• Our education system needs greater inflow of finance to attract talented teachers,

innovate and build better labs.

• Fund sources like External Commercial Borrowings and FDI will be utilised to deliver

higher quality education.

Three Elements of Aspirational India (1) Agriculture, Irrigation and Rural Development (2) Wellness, Water and Sanitation (3) Education and Skills


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Apprenticeship to be embedded with degree and diploma courses of 150 educational

institutions

• Employability of general stream students (vis-à-vis services or technology stream)

should be improved.

• About 150 higher educational institutions will start apprenticeship embedded

degree/diploma courses by March 2021.

Internship for fresh engineers

• Urban local bodies across the country would provide internship opportunities to

fresh engineers for a period up to one year.

Online education programme for degree level students

• To provide quality education to students of deprived sections and those who do not

have access to higher education, full-fledged online education programme will be

started at the degree level.

• This shall be offered only by institutions who are ranked within top 100 in the

National Institutional Ranking framework.

• Initially, only a few such institutions would be asked to offer such programmes.

Ind-SAT

• This initiative is to make India as a preferred destination for higher education.

• For this under the “Study in India” programme, Ind-SAT is proposed to be held in

Asian and African countries.

• It shall be used for benchmarking foreign candidates who receive scholarships for

studying in Indian higher education centres.

National Police University and National Forensic

Science University

• A National Police University and a National

Forensic Science University are proposed in

the domain of policing science, forensic

science, cyber-forensics etc.

There is shortage of qualified medical doctors and to solve this:

(a) A medical college will be attached to an existing district hospital in PPP mode.

States that fully allow the facilities of the hospital to the medical college and wish to

provide land at a concession, will receive Viability Gap Funding.

Allocation for Education and Skill

development

Education Rs 99,300 crore

Skill

Development

Rs 3000 crores



(b) The Government will, encourage large hospitals with sufficient capacity to offer

resident doctors Diploma and fellow of National Board (DNB/FNB) courses under the

National Board of Examinations.

Improving the standards of professionals seeking jobs abroad

• There is huge demand for teachers, nurses, para-medical staff and care-givers

abroad.

• However, their skill sets, often do not match the employer’s standards and therefore

need to be improved.

• The Budget propose for special bridge courses be designed by the Ministries of

Health, Skill Development together with professional bodies to bring in equivalence.

• Language requirements of various countries need also to be included.

• All these should be achieved through special training packages.

2. Economic Development

(a) Industry, Commerce and Investment

Promotion of entrepreneurship: Entrepreneurship was a strength of India. The

government recognise the knowledge, skills and risk-taking capabilities of the youth. “He is

no longer the job seeker. He is creator of jobs. Now we wish to create more opportunities

and remove road-blocks from his path.”

Creation of an Investment Clearance Cell: Investment Clearance Cell that will provide “end

to end” facilitation and support, including pre-investment advisory, information related to

land banks and facilitate clearances at Centre and State level. It will work through a portal.

Creation of five smart cities: the budget proposes to create five new smart cities in

collaboration with States in PPP mode. Sites will be selected on the basis of principles.

Networked products

Specialisation in the production of networked products will make it a part of global value

chains. Similarly, more investment and employment for the youth will also come.

Scheme for Electronics manufacturing industry:

• The industry is very competitive, and India has its cost advantages.

• The potential of this industry in job creation is immense.

• India needs to boost domestic manufacturing and attract large investments in the

electronics value chain.



• The budget proposes a scheme focussed on encouraging manufacture of mobile

phones, electronic equipment and semi-conductor packaging.

Scheme for the manufacture of medical devices: A scheme for the promotion of medical

devices will be made akin to the electronic manufacturing support measures.

National Technical Textiles Mission:

• India imports significant quantity of technical textiles worth US$ 16 billion every

year.

• To reverse this trend and to position India as a global leader in Technical Textiles, a

National Technical Textiles Mission is proposed with a four-year implementation

period from 2020-21 to 2023-24 at an estimated outlay of Rs 1480 crore.

Enhancing quality in manufacturing - “Zero Defect-Zero Effect” manufacturing

Prime Minister referred about “Zero Defect-Zero Effect”

(Production mechanisms wherein products have no defects.

Production process which has zero adverse environmental

and ecological effects) manufacturing on the quality of

manufacturing.

Towards these zero defect-zero effect goals, the government

has called for a time-bound adoption by industry of all

necessary, mandatory technical standards and their effective enforcement. All Ministries,

during the course of this year, would be issuing quality standard orders.

NIRVIK- for higher export disbursement: To achieve higher export credit disbursement,

a new scheme, NIRVIK is being launched. It facilitates higher insurance coverage, reduction

in premium for small exporters and simplified procedure for claim settlements.

Digital refund to exporters:

• The Scheme for Reversion of duties and taxes on exported products will be launched

this year.

• Under the scheme, duty refunds to exporters - which are not getting exempted or

refunded under any other existing mechanism will be digitally refunded. Here, duties

and taxes levied at the Central, State and local levels, such as electricity duties and

VAT on fuel used for transportation will be refunded.

Each district should be developed as an export hub:

• Vision of the Prime Minister is that each District should develop as an export hub.

Zero Defect-Zero Effect (ZED) manufacturing

Zero Defect-Zero Effect manufacturing was first mentioned by Prime Minister Narendra Modi in his 2014 Independence Day speech. It means zero defect ie, high quality and zero adverse effect on environment. Main effort is to raise quality levels in the unregulated micro small and medium enterprises (MSME) sector.



• Towards this, efforts of the Centre and State governments are being synergised and

institutional mechanisms are being created.

GeM:

• Government e-Marketplace (GeM) is trying to create a Unified Procurement System

in the country for providing a single platform for procurement of goods, services and

works.

• It offers a great opportunity for Medium, Small and micro Enterprises (MSMEs).

• Nearly 3.24 lakh vendors are already on this platform. Its proposed to take its

turnover to Rs 3lakh crores.

(b) Infrastructure (second component of Economic Development)

National Infrastructure Pipeline

• Prime Minister had highlighted that Rs 100 lakh crore would be invested on

infrastructure over the next 5 years.

• As a follow up the National Infrastructure Pipeline was launched by the Ministry on

31st December 2019 of Rs 103 lakh crore.

• It consists of more than 6500 projects across sectors and are classified as per their

size and stage of development.

• The projects will include housing, safe drinking water, access to clean and affordable

energy, healthcare for all, world-class educational institutes, modern railway

stations, airports, bus terminals, metro and railway transportation, logistics and

warehousing, irrigation projects, etc.

• The National Infrastructure Pipeline aims at improving the ease of living for each

individual citizen in the country.

• It also will bring reforms in development, operation and maintenance of these

infrastructure projects.

National Skill Development Agency will skill youth in infrastructure and related areas.

• National Skill Development Agency will give special thrust to infrastructure-focused

skill development opportunities for the youth.

• This will give opportunities to the youth in construction, operation and maintenance

of infrastructure.

• The government will set up a project preparation facility for infrastructure projects.

This programme would actively involve young engineers, management graduates and

economists from our Universities.



• Government will direct all infrastructure agencies of the government to involve youth-

power in start-ups. They will help in rolling out value added services in quality public

infrastructure for citizens.

National Logistics Policy: A National Logistics Policy will be launched soon.

• It will clarify the roles of the Union Government, State Governments and key

regulators.

• It will create a single window e-logistics market and focus on generation of

employment, skills and making MSMEs competitive.

Highway development: Accelerated development of highways will be undertaken.

• This will include development of 2500 Km access control highways, 9000 Km of

economic corridors, 2000 Km of coastal and land port roads and 2000 Km of strategic

highways.

• Delhi-Mumbai Expressway and two other packages would be completed by 2023.

Chennai-Bengaluru Expressway would also be started.

FASTag mechanism encourages greater commercialisation of our highways so that NHAI

can raise more resources. The budget proposes to monetise at least twelve lots of highway

bundles of over 6000 Km before 2024.

Railways

a) The government has commissioned 550 wi-fi facilities in as many stations.

b) Eliminated unmanned crossings

c) Government also aims to achieve electrification of 27000 Km of tracks.

Five measures to be highlighted on railways:

• Setting up a large solar power capacity alongside the rail tracks, on the land owned

by the railways.

• Four station re-development projects and operation of 150 passenger trains would

be done through PPP mode. The process of inviting private participation is underway.

• More Tejas type trains will connect iconic tourist destinations.

• High speed train between Mumbai to Ahmedabad would be actively pursued.

• 148 km long Bengaluru Suburban transport project at a cost of

Rs 18600 crore, would have fares on metro model. Central Government would

provide 20% of equity and facilitate external assistance up to 60% of the project cost.



Seaports: Corporatizing at least one major port: This government would consider

corporatizing at least one major port and subsequently its listing on the stock exchanges.

Technology has to used in ports to improve performance.

A governance framework keeping with global benchmarks

needs to be put in place.

Inland Waterways: received a boost in the last five years

• The Jal Vikas Marg on National Waterway-1 will be completed.

• The 890 Km Dhubri-Sadiya connectivity will be done by 2022.

• Developing waterways has its impact on the eco-system on both the banks of the

river. Prime Minister has conceptualised “Arth Ganga”. Plans are afoot to energise

economic activity along riverbanks.

Aviation: One hundred more airports would be developed by 2024 to support Udaan

scheme. It is expected that the air fleet number shall go up from the present 600 to 1200

during this time.

DISCOM Reforms

• Taking electricity to every household has been a major achievement.

• At the same time, the distribution sector, particularly the DISCOMS are under

financial stress.

• The Ministry intends to promote “smart” metering.

• States and Union Territories are urged to replace conventional energy meters by

prepaid smart meters in the next 3 years.

• Also, this would give consumers the freedom to choose the supplier and rate as per

their requirements.

• Further measure to reform DISCOMs would be taken.

Oil and gas

• In the upstream sector of oil and gas, the Open Acreage Licensing Policy (OALP) is a

success having awarded 1,37,000 sq km for exploration to private sector and to the

CPSEs.

• City gas distribution rights are also awarded.

• Government targeted to expand the national gas grid from the present 16200 km

to 27000 km.

• To deepen gas markets in India, further reforms will be undertaken to facilitate

transparent price discovery and ease of transactions.

Arth Ganga 'Arth Ganga' has been conceptualised by Prime Minister Narendra Modi and it envisages a sustainable development model with a focus on economic activities related to Ganga.



New Economy: is based on innovations that disrupt established business models.

• Artificial intelligence, Internet-of-Things (IoT), 3D printing, drones, DNA data storage,

quantum computing, etc., are re-writing the world economic order.

• India has already embraced new paradigms such as the sharing economy with

aggregator platforms displacing conventional businesses.

• Government has harnessed new technologies to enable direct benefit transfers and

financial inclusion on a scale never imagined before.

Data is the new oil now and to utilise Analytics, Fintech and Internet of Things (IOT) are

changing the way we deal with our lives. To utilise the opportunity following steps will be

taken:

• A policy to enable private sector to build Data Centre parks throughout the country. It

will help our firms to skilfully incorporate data in every step of their value chains.

• Digital connectivity to public institutions – the Bharatnet: All “public institutions” at

Gram Panchayat level such as Anganwadis, health and wellness centres, government

schools, PDS outlets, post offices and police stations will be provided with digital

connectivity. So, Fibre to the Home (FTTH) connections through Bharatnet will link

100,000-gram panchayats this year.

• The budget proposes to provide Rs 6000 crore to Bharatnet programme in 2020-21.

Intellectual Property Rights (IPRs): Protection and promotion

The base of the knowledge-driven enterprises has to be expanded. Intellectual property

creation and protection will play an important role. Several measures are proposed in this

regard, which will benefit the Start-ups.

1) Establishing a platform and a centre for Intellectual Property: A digital platform would

be promoted that would facilitate seamless application and capture of IPRs.

A Centre which would work on the complexity and innovation in the field of

Intellectual Property will be established in an Institute of Excellence.

2) Knowledge Translation Clusters would be set up across different technology sectors

including new and emerging areas.

3) Creation of test beds and small-scale manufacturing facilities: For designing,

fabrication and validation of proof of concept, and further scaling up Technology

Clusters, harbouring such test beds and small-scale manufacturing facilities would

be established.

4) Genetic Mapping: Mapping of India’s genetic landscape is critical for next generation

medicine, agriculture and for bio-diversity management. To support this



development, government will initiate two new national level Science Schemes for the

creation of a comprehensive database.

5) Funding to start-ups: The government proposes to provide early life funding, including

a seed fund to support ideation and development of early stage Start-ups.

Quantum technology: Quantum technology is opening up new frontiers in computing,

communications, cyber security with wide-spread applications. It is expected that lots of

commercial applications would emerge from theoretical constructs which are developing in

this area.

An outlay of Rs 8000 crore over a period five years will be given for the National Mission on

Quantum Technologies and Applications.

3. Caring Society

Caring society focus on:

(a) Women &Child, Social Welfare.

(b) Culture and Tourism

(c) Environment and Climate Change.

(a) Women & Child, Social Welfare

Mother and childcare: Health of mother and child are

closely corelated. An allocation of Rs 28,600crore is

provided for programs that are specific to women.

(a) POSHAN Abhiyan: To improve the nutritional status of children (0-6 years), adolescent

girls, pregnant women and lactating mothers,

Prime Minister launched a “Poshan Abhiyan” in

2017-18.

More than six lakh anganwadi workers are

equipped with smart phones to upload the

nutritional status of more than 10 crore

households.

(b) Task force on raising women’s age at marriage:

Women’s age of marriage was increased from

fifteen years to eighteen years in 1978, by amending erstwhile Sharda Act of 1929.

Success of ‘Beti Bachao Beti Padhao’ Gross enrolment ratio of girls across all levels of education is now higher than boys.

Enrolment ratio of girls and boys

Education level

Girls % Boys%

Elementary level

94.32 89.28

Secondary level

81.32 78

Higher secondary level

59.70

57.54

POSHAN Abhiyaan The Prime Minister’s Overarching Scheme for Holistic Nutrition or POSHAN Abhiyaan or National Nutrition Mission, is a flagship programme to improve nutritional outcomes for children, pregnant women and lactating mothers. Launched by the Prime Minister on the occasion of the International Women’s Day on 8 March 2018 from Jhunjhunu in Rajasthan, the POSHAN Abhiyaan directs the attention of the country towards the problem of malnutrition and address it in a mission-mode.



Now, there are more opportunities for women to pursue higher education and careers. MMR

is decreasing due to improvement of nutrition levels. Thus, the entire issue about age of a

girl entering motherhood needs to be seen in this light. Hence, a Task force will be appointed

on raising women’s age at marriage that will submit its recommendations in six months.

(c) Allocation to nutrition related programmes: The budget provides Rs 35600 crore for

nutrition-related programmes for the financial year

2020-21.

Adoption of technologies for cleaning sewer systems:

• Government is determined that there shall be

no manual cleaning of sewer systems or

septic tanks.

• Suitable technologies for such tasks have

been identified by the Ministry of Housing and

Urban Affairs.

• The Ministry is working with urban local bodies for the adoption of these

technologies.

(b) Culture and Tourism

(i) Indian Institute of Heritage and Conservation:

• Government proposes to establish an Indian

Institute of Heritage and Conservation under

Ministry of Culture.

• The Institute shall have the status of a deemed

University to start with.

• Acquisition of knowledge in disciplines such as

museology and archaeology are essential for

collecting and analysing scientific evidence of

such findings and for dissemination through high

quality museums.

• Currently lack of trained manpower is a handicap

for both these disciplines.

(ii) Development of new archaeological sites: Five

archaeological sites would be developed as iconic sites

with on-site Museums. They are:

Budget allocations to various categories (2020-21)

Category Rs crores

Women specific programmes

28,600

Nutrition related programmes

35,600

Scheduled Castes and Other Backward classes

85,000

Scheduled tribes 53,700

Senior citizens 9,500

Creation and re-curation of Museums

Museum Activity

Indian Museum in Kolkata and 4 more museums.

Re-curation

Museum on Numismatics and Trade: Old Mint building Kolkata.

Creation

Tribal Museum – Ranchi.

Creation

Maritime Museum, Lothal, Ahmedabad.

Creation

On-site museums at 4 new archaeological sites: Rakhigarhi, Hastinapur, Shivsagar, Dholavira, Adichanallur.

Creation



• Rakhigarhi (Haryana),

• Hastinapur (Uttar Pradesh)

• Shivsagar (Assam),

• Dholavira (Gujarat)

• Adichanallur (Tamil Nadu).

(iii) Re-curation and creation of museums:

• Recreation of the country’s oldest museum

-the Indian Museum in Kolkata.

• Renovation and re-curation: Four more

museums from across the country shall be

taken up for renovation and re-curation so

that a world class experience can be offered

to visitors.

• Museum on Numismatics and Trade: In

the historic Old Mint building Kolkata, a museum on Numismatics and Trade will be

created.

• Tribal Museum: A Tribal Museum will be established in Ranchi (Jharkhand).

• Maritime Museum: A maritime museum would be set up at Lothal- the Harrapan age

maritime site near Ahmedabad, by Ministry of Shipping.

iv) Allocation to culture: Ministry of Culture will be provided Rs 3,150crore for 2020-21.

(v) India’s performance in travel and tourism sector:

• India has moved up from rank 65 in 2014 to 34 in 2019 in the Travel & Tourism

Competitive Index (World Economic Forum).

• Foreign exchange earnings grew 7.4% to Rs 1.88 lakh crores for the period January

to November 2019 from Rs 1.75 lakh crores

(vi) State governments should prepare roadmap: for certain identified destinations and

formulate financial plans during 2021 and specified grants will be provided to them.

(vii) Budget allocates Rs 2500 crores for tourism promotion.

(c) Environment & Climate Change

(i) Coalition for Disaster Resilient Infrastructure (CDRI):

• Coalition for Disaster Resilient Infrastructure (CDRI) was launched by the the Prime

Minister in September 2019, with its Secretariat in Delhi.



• This global partnership is the second such international initiative after the launch of

International Solar Alliance in 2015.

• The CDRI will help in addressing a number of Sustainable Development Goals

(SDGs), as also the aims of Sendai framework.

• It will enhance climate change adaptation with a focus on disaster resilient

infrastructure.

India’s effort for climate protection:

• India’s naturally determined climate

contribution: India submitted its

Nationally Determined Contribution,

under the Paris Agreement in 2015

on a “best effort” basis, keeping in

mind the development imperative of

the country.

• Climate action coordinating efforts: Its

implementation effectively begins on

1st January 2021. Our commitments

as action will be executed in various

sectors by the

Departments/Ministries concerned

through the normal budgeting

process.

• Action on high emitting thermal power

plants: For power plants, that are old

and with high emission levels, the

utilities running them would be

advised to close them, if their

emission is above the pre-set norms.

The land so vacated can be put to

alternative use.

• Climate action for cities with more than 1 mn population: In large cities having

population above one million, clean air is a matter of concern. The government

proposes to encourage States that are formulating and implementing plans for

ensuring cleaner air in cities above one million. Parameters for the incentives would

Coalition for Disaster Resilient Infrastructure (CDRI)

>The CDRI formed in 2019, is an international coalition of national governments, UN agencies and programmes, multilateral development banks, financing mechanisms, private sector, and knowledge institutions aimed at promoting disaster-resilient infrastructure. >Its objective is to promote the resilience of new and existing infrastructure systems to climate and disaster risks, thereby ensuring sustainable development. >CRDI was developed through consultations with more than 35 countries, and it aims at reduction in infrastructure losses from disasters, including extreme climate events. >The interim secretariat of CDRI is at New Delhi. >CDRI is the second major coalition launched by India outside of the UN; first being the International Solar Alliance. Sendai Framework >The Sendia Framework is an international document, adopted by UN member states during 2015 at the World Conference on Disaster Risk Reduction, held in Sendai, Japan. >The framework is the first major agreement that provides Member States with concrete actions to protect development gains from the risk of disaster. >The framework recognises that the State has the primary role to reduce disaster risk, but that responsibility should be shared with other stakeholders including local government, the private sector and other stakeholders.

https://en.wikipedia.org/wiki/Coalition_for_Disaster_Resilient_Infrastructure

https://en.wikipedia.org/wiki/Coalition_for_Disaster_Resilient_Infrastructure



be notified by the Ministry of Environment, Forests and Climate change. An

allocation of Rs 4400 crore for this purpose will be made for 2020-21.

Governance

The government proposes different schemes and programmes under Aspirational India,

Economic Development and Caring India. They are the flowers in the bouquet. Governance

is the one hand holding this bouquet whereas the financial sector is the other hand.

• But hands are necessary to hold the bouquet. One such hand is Governance – clean,

corruption-free, policy driven and good in intent and most importantly trusting in

faith.

• Trusting every citizen, the aspirational youth, the hard-working women, the risk-

taking entrepreneur, the ever hopeful and untiring farmer or the wise and old senior

citizen. Many among them are taxpayers. Others may not be taxpayers today.

• Prime Minister insisted on Ease of Living as a goal to be achieved on behalf of all

citizens.

• An important aspect of both ease of living and ease of doing business is fairness and

efficiency of tax administration.

• Government wish to enshrine in the statutes a “taxpayer charter” through this

budget.

• The government would like to reassure taxpayers that we remain committed to taking

measures so that our citizens are free from harassment of any kind.

(i) Legislations to support governance standards:

• There has been a debate about building into statutes, criminal liability for acts that

are civil in nature.

• For Companies Act, certain amendments are proposed, and they are to be made that

will correct this.

• Similarly, other laws would also be examined, where such provisions exist, and

attempts would be made to correct them.

(ii) National Recruitment Agency for the recruitment of Non-Gazetted posts

• The Government intends to introduce major reforms in recruitment to Non-Gazetted

posts in governments and public sector banks.

• At present, candidates have to appear for multiple examinations conducted by

multiple agencies at different points of time, for similar posts.

• This place enormous burden on time, effort and cost of young people.



• To mitigate their hardship, it is proposed to set up a National Recruitment Agency

(NRA) as an independent, professional, specialist organisation for conduct of a

computer-based online Common Eligibility Test for recruitment to Non-Gazetted posts.

• A test-centre in every district, particularly in the Aspirational Districts would be set

up.

(iii) Direct recruitment to Tribunals and specialised bodies: For speedy disposal of

commercial and other disputes, Government has constituted various Tribunals and

specialised bodies. It is proposed to evolve a robust mechanism for appointment including

direct recruitment to these bodies to attract best talents and professional experts.

(iv) Strengthening the Contract act to ensure stable and predictable business

environment:

• A stable and predictable business environment is a key objective of this government.

• There is also a strong argument for ensuring that contracts are honoured.

• India has a sound framework related to Contracts Act.

• We shall deliberate upon strengthening it.

(v) National Policy on Official Statistics

• Indian Statistical system should meet the challenges of real time monitoring of our

increasingly complex economy. Data must have strong credibility.

• The proposed new National Policy on Official Statistics would use latest technology

including AI.

• The Policy would lay down a road-map towards modernised data collection,

integrated information portal and timely dissemination of information.

(vi) G-20 Presidency for India

• India will host G 20 presidency in the year 2022.

• For this historic occasion, a sum of Rs 100 crore is allocated to begin the

preparations.

(vii) Development of North Eastern Region

• Government is ensuring smooth access to financial assistance from multilateral and

bilateral funding agencies to help introduce innovative and global best practices for

the development activities in the North-East.

• Central Government has effectively used an online portal to reduce gestation period

of online.

• This has improved the flow of funds to the northeast region.



Jammu and Kashmir and Ladakh

• The Government is fully committed to supporting the all-round development of the

newly formed Union Territories of J&K and the Union Territory of Ladakh.

• Accordingly, an amount of Rs 30,757 crore has been provided for the Financial Year

2020-21.

• An amount of Rs 5,958 crore has been provided for the Union Territory of Ladakh.

Financial Sector

Financial sector is the second hand that holds the bouquet that contains the three flowers

– Aspirational India, Economic Development and Caring India.

To become a USD 5 trillion economy, the financial architecture should keep evolving and

move from strength to strength.

(i) Public Sector Banks:

• The government had earlier approved consolidation of 10 banks into four.

• In the last few years, Government of India has infused about Rs 3,50,000 crore by

way of capital into Public Sector Banks for regulatory and growth purposes.

• Governance reforms would be carried out in these banks, so that they become more

competitive.

• A few of the PSBs will be encouraged to approach capital market to raise additional

capital.

• A robust mechanism is in place to monitor the health of all Scheduled Commercial

Banks and that depositors’ money is safe.

(ii) Enhancing the Deposit Insurance limit: The Deposit Insurance and Credit Guarantee

Corporation (DICGC) has been permitted to increase Deposit Insurance Coverage for a

depositor, from the current level of Rs one lakh to Rs 5 lakh per depositor.

(iii) Strengthening regulation of the cooperative banks: To strengthen the Cooperative

Banks, amendments to the Banking Regulation Act are proposed for increasing

professionalism, enabling access to capital and improving governance and oversight for

sound banking through the RBI.

(iv) NBFC’s asset recovery criterion under SARFAESI -becomes stricter: The limit for

NBFCs to be eligible for debt recovery under the Securitization and Reconstruction of

Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002 is proposed to

be reduced



from Rs 500 crore to asset size of Rs

100 crore or loan size from existing Rs

1 crore to Rs 50 lakh.

(v) Selling of IDBI shares to private

sector: Now, there is a need for greater

private capital in banks. Hence, it is proposed to sell the balance holding of Government of

India IDBI Bank to private, retail and institutional investors through the stock exchange.

(vi) Efforts will be made to inject more transparency and professionalism in PSBs.

(vii) To help easy mobility while in jobs, the government wish to infuse into the Universal

Pension coverage with auto enrolment. Similarly, a mechanism that enable inter-operability

and provide safeguards for the accumulated corpus will also be tried. (Pension schemes are

launched by several firms including insurance companies, banks etc. Hence, auto

enrolment and interoperability help the employee to have more flexibility when he is

switching jobs).

(viii) Separation of NPS trust of government employees from PFRDA:

• Regulatory role of PFRDAI should be strengthened.

• NPS trust for government employees will be separated from PFRDA by amending the

PFRDA Act.

• Hence, a Pension Trust for non-government employees will be established.

(ix) MSMEs: MSMEs are vital to keep the wheels of economy moving. They also create job,

innovate and are risk takers. Following are the main initiatives for MSMEs in the budget.

a. Supporting invoice financing through TReDS

The government will make necessary amendments to the Factor Regulation Act 2011.

This will enable NBFCs to extend invoice financing to the MSMEs through TReDS, thereby

enhancing their economic and financial sustainability.

b. Banks will extend subordinate credit to NBFCs. Working capital credit remains a major

issue for the MSMEs.

• It is proposed to introduce a scheme to provide subordinate debt for entrepreneurs

of MSMEs.

New asset recovery limit norm for the enforcement of SARFAESI in NBFCs

Norm New Earlier

Asset size of the NBFC 100 crores 500 crores

or

Loan size of the asset 50 Lakh 1 crore



• This subordinate debt to be provided by banks

would count as quasi-equity and would be fully

guaranteed through the Credit Guarantee

Trust for Medium and Small Entrepreneurs

(CGTMSE).

• The corpus of the CGTMSE would accordingly

be augmented by the government.

(c) Extension of debt restructuring scheme for

MSMEs: More than five lakh MSMEs have benefitted

from restructuring of debt permitted by RBI in the last

year. The restructuring window was to end on March

31, 2020. Government has asked RBI to consider

extending this window till March 31, 2021.

(d) An app-based invoice financing loans product

will be launched. This will obviate the problem of

delayed payments and consequential cash flows

mismatches for the MSMEs.

(d) Technology upgradation and other supports

the export activities of MSMEs in pharma, auto

components sector etc.

Many mid-size companies are successful domestically

but not in export markets.

For selected sectors such as pharmaceuticals, auto

components and others, the budget propose to extend

handholding support – for technology upgradations,

R&D, business strategy etc.

For this, a scheme of Rs1000 crore will be anchored by EXIM Bank together with SIDBI.

Financial Markets

Deepening of the bond market

Bond market expansion is a work in progress. To achieve faster growth, we would require

flow of capital in our financial system. A lot of work has been done on this in consultation

with the RBI. Following are the main developments in this area.

What is TReDS? The Trade Receivable Discounting System (TreDS) is an online bill discounting platform that helps cash starved MSMEs to raise funds by selling their trade receivables to corporates. Trade receivables are amounts billed by a business to its customers (eg. MSMEs); when the latter delivers goods or services to them. Since its active working in 2017, TReDS platform helped the regular flow of operational funds to MSMEs.

What is Invoice Financing? Invoice Financing is a way mobilising money by a business unit against the amounts due from customers. For example, an MSME may get money through invoice financing by using the invoice that is due from its customer.

What is Factoring? Factoring is a business where an entity (NBFC – Factor) acquire receivables (bills) from others (MSMEs) by extending loans or advances.

What is NBFC factor? NBFC- Factor means a non-banking financial company doing mainly the business of factoring.

What is subordinate debt? Subordinate debt is unsecured loan or bond that ranks below other, more credible loans with respect to claims on assets or earnings. This means that when the entity goes of liquidation, a less priority will be there for such loans for reimbursement.

What is (CGTMSE)? CGTMSE is a trust created by Ministry of MSMEs, GoI and SIDBIT to implement the Credit Guarantee Fund Scheme for Micro and Small Enterprises. Benefit of the scheme is that it guarantees the loans mobilised by MSMEs.



(a). Certain specified categories of Government

securities would be opened fully for non-

resident investors, apart from being available to

domestic investors as well.

(b) The limit for FPI in corporate bonds,

currently at 9% of outstanding stock, will be

increased to 15% of the outstanding stock of

corporate bonds.

(c). To improve investors’ confidence and to

expand the scope of credit default swaps, the

budget proposes to formulate a legislation, to

be placed soon before the House, for laying

down a mechanism for netting of financial

contracts.

The Debt-based Exchange Traded Fund

(ETF) recently floated by the government was a

big success. Government proposes to expand this by floating a new Debt-ETF consisting

primarily of government securities.

In December 2019, the government launched India’s first debt ETF – the Bharat Bond

ETF. Bharat bond ETF is a debt exchange-traded fund (ETF) that will hold bonds issued by

PSEs owned by the Government of India.

(d) Debt based Exchange Traded Funds: The Debt-based Exchange Traded Fund (ETF)

recently floated by the government was a big success. Government proposes to expand this

by floating a new Debt-ETF consisting primarily of government securities.

This will give retail investors access to government securities as much as giving an

attractive investment for pension funds and long-term investors.

(d) Partial Credit Guarantee scheme for NBFCs/HFCs will be continued.

• The scheme was launched Union budget 2019-20.

• To further this support of providing liquidity, a mechanism would be devised.

• Government will offer support by guaranteeing securities so floated.

Infrastructure Financing

(a) National Infrastructure Pipeline

What is credit default swap (CDS)? A credit default swap (CDS) is a contract that allows an investor to "swap" or offset his or her credit risk with that of another investor. For example, if a bank is worried that one of his borrowers is going to default on a loan, it can use a CDS to offset or swap that risk. To swap the credit default, the lender buys a CDS from another investor who agrees to reimburse the lender in the case the borrower defaults. CDS runs on the basis of a premium payment to run the contract, which is like an insurance policy.

What is Exchange Traded Fund (ETF)? An ETF is a basket of securities that are traded on a stock exchange. It is traded just like shares in the stock market. ETFs are listed on a recognized exchange and their units can be bought and sold directly on the exchange through a stockbroker during the trading hours. A debt ETF contains bonds issued by a company or government. In the case of equity ETF, it contains only shares.



• National Infrastructure Pipeline aims to invest Rs 103 lakh crore in infra projects.

• Of this, Rs 22,000 crore has already been provided, as support to Infrastructure

Pipeline.

• This comes as equity support to Infrastructure Finance Companies such as IIFCL

and a subsidiary of NIIF.

• They would leverage it, as permissible, to create financing pipeline of more than Rs

1,00,000 crore. This would create a major source of long-term debt for infrastructure

projects.

(b) IFSC, GIFT

The GIFT city has the potential to become a centre of international finance as well as a

centre for high end data processing:

• GIFT IFSC has an approved Free Trade

zone for housing vaults.

• It already has 19 insurance entities, 40

banking entities.

• It has also provided for setting up of

precious metals testing laboratories and

refining facilities.

• With the approval of the regulator, GIFT City

would set up an International Bullion exchange(s) in GIFT-IFSC as an additional option

for trade by global market participants.

Rising rupee trading volume in offshore

financial markets: In recent years there has been

a surge in trading volumes of Indian rupee in the

offshore financial centres.

• The Government and RBI has taken various measures to permit Rupee derivatives

to be traded in the International Financial Services Centre at GIFT city, Gujarat.

• This will enable India to enhance its position worldwide, create jobs in India and will

lead to better price discovery of gold.

Disinvestment

• Listing of companies on stock exchanges discipline a company and provides access

to financial markets and unlocks its value.

Rupee derivatives-the backgrounder Currency derivatives are exchange-based futures and options contracts that allow one to buy or sell other currencies to hedge against currency movements. In the case of rupee derivatives, one of the currencies will be rupee and it is traded for future date against another currency. In recent years, there is high volume of trade in rupee paired currency trades. Volumes are going up in offshore trading centres like London, Singapore etc. This means that rupee is increasingly internationalised. Hence, a committed under Smt. Usha Thorat suggested to promote rupee derivatives in Indian markets. The Committee recommended a host of measures to curb the rising influence of the offshore rupee markets. The budget has made a follow up on that by promoting rupee derivative trading in the GIFT city.



• It also gives opportunity for retail investors to participate in the wealth so created.

• The government now proposes to sell a part of its holding in LIC by way of Initial

Public Offer (IPO).

Disinvestment targets for 2020-21

Disinvestment nature In Rupees crores

Disinvestment receipts 120000

Disinvestment of Government stake in PSBs and Financial Institutions (LIC).

90000

Total disinvestment receipts 210000

Disinvestment situation during the last few years (Rs crores):

Year Target Realised

2017-18 100000 100056

2018-19 80000 94726

2019-20 105000 65000

2020-21 210000 ----

Fiscal Management

(a) XV Finance Commission has given its first report for the Financial Year 2020-21.

• In the spirit of co-operative federalism, the government in substantial measure,

accepted the recommendations of the Commission.

• The commission would submit its final report to the President during the latter part

of the year, for five years beginning 2021-22.

(b) GST Compensation to states:

• It is decided to transfer to the GST Compensation Fund balances due out of collection

of the years 2016-17 and 2017-18, in two instalments.

• Hereinafter, transfers to the fund would be limited only to collection by way of GST

compensation cess.

(c) A new approach to modity Centrally Sponsored Schemes and Central Sector

Schemes is necessary, to align them with emerging social and economic needs of tomorrow,

and to ensure that scarce public resources are spent optimally.



(d) Transparency in fiscal figures: Recently there has been a debate over transparency

and credibility of the projected fiscal numbers.

• In the budget, the procedure adopted is

compliant with the FRBM Act.

• This is also consistent with the practices

hitherto followed.

• However, for greater clarity, this budget

enumerated those central Government

debts that are not part of market

borrowing and are used to fund the expenditure at the annexes.

• Servicing of interest and repayment of these debts as hitherto, are done out of

Consolidated fund of India.

(e) Total size of the budget: Keeping in mind commitment of the Government towards

various schemes and need for improvement in quality of life, level of expenditure has been

kept at Rs 30.42 lakh crore.

Pat B

Taxation

Direct taxes

(a) Corporate income Tax

• The government with the objective ensuring that India stays globally competitive and

a favoured destination for investment, the corporate tax rate has been reduced for

new companies in the manufacturing and electricity sector to 15%.

• Similarly, for the existing companies, the rate has also been brought down to just

22%.

• As a result, our corporate tax rates are now amongst the lowest in the world.

As part of the last stimulus package, the government had reduced CIT rates substantially.

The budget keeps this rate structure. Minimum Alternative Tax rate also has been reduced

to 15%.

Fiscal deficit figures:

Year Fiscal deficit

as a % of GDP

2020-21 (RE) 3.5

2019-20 (BE) 3.8



What is tax competition? Tax Competition is the process by which countries, states or even local administrations use tax cuts, tax breaks, tax loopholes or tax subsidies to attract investment, hot money and even wealthy individuals. Cutting personal income tax is also a part of the strategy to promote domestic economic activities like consumption. Following figure shows declining tax rates across the globe.

Table: Corporate Income Tax rates in major regions

Region Average Rate

Africa 28.45%

Asia 21.32%

Europe 20.27%

North America 25.85%

Oceania 23.75%

South America 27.63%

G7 27.65%

OECD 23.59%

BRICS 27.40%

EU 21.77%

G20 27.11%

India 25.17%

Recent developments – Trumps’ Tax Cut and Jobs Act Notable tax cuts were made by the Trump administration in corporate and personal income taxes. The Trump administration introduced the Tax Cut and Jobs Act to promote investment and consumption by reducing taxes in 2017. (image courtesy: Tax Foundation)

(b) Personal Income Tax – a simplified tax regime for PIT

To provide significant relief to the individual taxpayers and to simplify the Income-

tax law, the budget propose to bring a new and simplified personal income tax regime



wherein income tax rates will be significantly reduced for the individual taxpayers who forgo

certain deductions and exemptions.

Table: the new PIT structure

Taxable Income

Slab (Rs)

New Tax Rates

0-2.5 Lakh Exempt

2.5-5 Lakh 5%

5-7.5 Lakh 10%

7.5-10 Lakh 15%

10-12.5 Lakh 20%

12.5-15 Lakh 25%

Above 15 Lakh 30%

The above new tax regime will be optional for the taxpayers.

• An individual who is currently availing more deductions & exemption under the

Income Tax Act may choose to avail them and continue to pay tax in the old regime.

• The new personal income tax rates will result in a revenue foregone of Rs 40,000

crore per year.

• An individual who opts for the new regime would need no assistance from an expert

to file his return and pay income tax.

The existing PIT structure that is with exemptions and deductions is as following:

Tax Slab Tax Rate

Upto Rs 250000* Nil

Rs 250001 to Rs 5 lakh 5 per cent

Rs 500001 to Rs 10 lakh 20 per cent

Above Rs 10 lakh 30 per cent

*Rebate of Rs 5 lakh is applicable

PIT structure is crowded with exemptions and deductions

The current income tax regime of the country has more than one hundred exemptions and

deductions of different nature are provided in the Income-tax Act. Under the new PIT

regime, around 70 of them were removed. The government will review and rationalise the



remaining exemptions and deductions in the coming years with a view to simplifying the

tax system and lowering the tax rate.

(c) Dividend Distribution Tax

• At present, companies have to pay Dividend Distribution Tax (DDT) on the dividend

paid to its shareholders at 15% plus surcharges and cess.

• There is a criticism that DDT results in increase in tax burden for as the dividend

income is often included in their income.

• Further, non-availability of credit of DDT to most of the foreign investors in their

home country makes their investment in India less attractive. In order to increase

the attractiveness of the Indian Equity Market and to provide relief to a large class of

investors, the budget propose to remove the DDT. The dividend shall be taxed only

in the hands of the recipients at their applicable rate.

2.5

2.5

1010

0

2

4

6

8

10

12

Exemption limit and highest tax slab (Rs Lakh)

Exemption limit (Rs Lakh Highest slab (Rs lakh)

What is Dividend Distribution Tax?

Dividend Distribution Tax is a tax imposed on dividend distributed by companies to their

investors. DDT is 15 % on the amount of dividend and including surcharge and cess it

comes to 20.56%. Dividend Distribution Tax was introduced in 1997.

Dividend distribution tax is given by the corporate when they are distributing dividend

income to investors. At the same time, individuals have to pay a tax of 10% on dividend

over Rs 10 lakh they received. The task force on Direct Tax Code recommended the abolition

of DDT.



• Similarly, in the case of holding company, the budget proposes to allow deduction

for the dividend received from its subsidiary. The removal of DDT will lead to

estimated annual revenue forgone of Rs 25,000 crore.

(d) Concessional tax rate for Electricity generation companies

• To give boost to the manufacturing sector, earlier, a concessional corporate tax rate

of 15% to the newly incorporated domestic companies in the manufacturing sector

which start manufacturing by 31st March 2023.

• In order to attract investment in power sector, the budget proposes to extend the

concessional corporate tax rate of 15% to new domestic companies engaged in the

generation of electricity.

(e) Tax concession for foreign investments

• Incentivisation to Sovereign Wealth Funds (SWFs): To incentivise the investment

by the Sovereign Wealth Fund of foreign governments in the priority sectors

including infrastructure, the budget proposes to grant 100% tax exemption to their

interest, dividend and capital gains income in respect of investment made in

infrastructure and other notified sectors before 31st March, 2024 and with a

minimum lock-in period of 3 years.

• Extension of the existing concessional tax on various types of foreign

investment (see below table).

Sl

No

Concession and the foreign

investment category

Type of investment and time

period

1. Concessional 5% withholding tax rate

on interest payment to Non-residents

Money borrowed and bonds

issued upto 30TH June 2023

2. Concessional 5% tax on interest

payments to FPIs and QFIs.

Bonds of government and

corporate up to 30th June

2023.

3. Concessional withholding rate of 5%

on interest payment by foreign

investors

Made on the Municipal Bonds.



Concession for bond listing in IFSC: To incentivise listing of bonds at IFSC exchange, the

budget proposes to further reduce the withholding rate from 5% to 4% on interest payment

on the bonds listed on its exchange.

Start-ups

(a) ESOP tax concession:

• Start-ups generally use Employee Stock Option Plan (ESOP) to attract and retain

highly talented employees during the initial years.

• ESOP is a significant component of compensation for these employees.

• Currently, ESOPs are taxable as perquisites at the time of exercise.

• This leads to cash-flow problem for the employees who do not sell the shares

immediately and continue to hold the same for the long-term.

• In order to give a boost to the start-up ecosystem, the budget proposes to ease the

burden of taxation on the employees by deferring the tax payment by five years

or till they leave the company or when they sell their shares, whichever is earliest.

(b) Higher turnover limit to be eligible for tax concession

• Further, an eligible Start-up having turnover up to 25 crores is allowed deduction of

100% of its the profits for three consecutive assessment years out of seven years if

the total turnover does not exceed 25 crore rupees.

• In order to extend this benefit to larger start-ups, the budget proposes to increase

the turnover limit from existing Rs 25 crore to Rs 100 crores.

• Moreover, considering the fact that in the initial years, a start-up may not have

adequate profit to avail this deduction, budget extends the period of eligibility for

claim of deduction from the existing 7 years to 10 years.

Cooperatives: Concessional tax rate to bring parity with corporates:

• Co-operative are currently taxed at a rate of 30% with surcharge and cess. To bring

parity between the co-operative societies and corporates, budget provide an option

to cooperative societies to be taxed at 22% plus 10% surcharge and 4% cess with no

exemption/deductions.

• Further, the budget proposes to exempt these co-operative societies from Alternative

Minimum Tax (AMT).



Medium, Small and Micro Enterprises (MSME): enhancing the turnover limit for audit

five times

• Currently, businesses having turnover of more than Rs 1 crore rupees are required

to get their books of accounts audited by an accountant.

• To reduce the compliance burden on the MSME sector, the budget proposes to raise

this limit for audit from the existing turnover size of Rs1 crore to Rs 5 crore.

• Further, in order to boost less cash economy, the increased limit shall apply only to

those businesses which carry out less than 5% of their business transactions in

cash.

Affordable housing

• In the last budget, a deduction of up to one lakh fifty thousand rupees for interest

paid on loans taken for purchase of an affordable house was allowed for the period

up to March 31st, 2020. This is now extended to one more year.

• A tax holiday on the profits earned by developers of affordable housing project was

given upto 31st March 2020. This tax holiday will be extended by one more year.

Charity institutions

• The income of charitable institutions is fully exempt from taxation. Further, donation

made to these institutions is also allowed as deduction in computing the taxable

income of the donor.

• In order to ease the process of claiming deduction for donation, it is proposed to pre-

fill the donee’s information in taxpayer’s return. This would result in hassle-free

claim of deduction for the donation made by the taxpayer.

• The budget proposes to make the process of registration of all new and existing

charity institutions completely electronic and a unique registration number (URN)

shall be issued.

• Further, to facilitate the registration of the new charity institution, which is yet to

start their charitable activities, the budget proposes to allow them provisional

registration for three years.

Faceless appeals

• To provide greater efficiency, transparency and accountability to the assessment

process, a new faceless assessment scheme has been introduced.



• In order to eliminate human interface, the budget proposes to amend the Income Tax

Act so as to enable Faceless appeal on the lines of Faceless assessment.

No Dispute but Trust Scheme – ‘Vivad Se Vishwas’Scheme

The ‘SabkaVishwas' Scheme

• The scheme brought in the last budget to reduce litigation in indirect taxes settled

over 1,89,000 cases.

• Currently, there are 4,83,000 direct tax cases pending in various appellate forums

i.e. Commissioner (Appeals), ITAT, High Court and Supreme Court.

• This year, the government proposes to bring a scheme similar to the indirect tax

Sabka Vishwas for reducing litigations even in the direct taxes.

‘Vivad Se Vishwas’ scheme

• Under the newly proposed ‘Vivad Se Vishwas’ scheme, a taxpayer would be required

to pay only the amount of the disputed taxes and will get complete waiver of interest

and penalty provided he pays by 31st March, 2020.

• Those who avail this scheme after 31st March, 2020 will have to pay some additional

amount.

• The scheme will remain open till 30thJune, 2020.

• Taxpayers in whose cases appeals are pending at any level can benefit from this

scheme.

Losses of merged banks

• To ensure that the amalgamated PSBs are able to take the benefit of unabsorbed

losses and depreciation of the amalgamating entities, the budget proposes to make

necessary amendments to the provisions of the Income-tax Act.

Taxpayer’s Charter

CBDT to adopt a taxpayer’s charter: To ensure the tax payers right and to build trust

between tax payers and the tax administration, and for enhancing the efficiency of the

delivery system of the Income Tax Department, the budget proposes the Central Board of

Direct Taxes (CBDT) to adopt a Taxpayers’ Charter.

Instant PAN through Aadhaar

• In the last Budget, interchangeability of PAN and Aadhaar was introduced.



• In order to further ease the process, PAN shall be instantly allotted online on the

basis of Aadhaar without any requirement for filling up of detailed application form.

Indirect Tax

(a) GST: In the case of GST, a simplified return shall be implemented from the 1st April,

2020. It will make return filing simple with features like SMS based filing for nil return,

return pre-filling, improved input tax credit flow and overall simplification.

Refund process has been simplified and has been made fully automated with no human

interface.

Electronic invoice is another innovation wherein critical information shall be captured

electronically in a centralized system. It will be implemented in a phased manner starting

from this month itself on optional basis. It will facilitate compliance and return filing.

Improving compliance: Several measures have been taken for improving compliance.

Aadhaar based verification of taxpayers is being introduced. This will help in weeding out

dummy or non-existent units. Dynamic QR-code is proposed for consumer invoices. GST

parameters will be captured when payment for purchases is made through the QR-code. A

system of cash reward is envisaged to incentivise customers to seek invoice. Deep data

analytics and AI tools are being used for crackdown on GST input tax credit, refund, and

other frauds and to identify all those who are trying to game the system. Invoice and input

tax credit matching is being done wherein returns having mismatch more than 10 percent

or above a threshold are identified and pursued. Significant policy level changes have also

been made. GST rate structure is also being deliberated so as to address issues like inverted

duty structure.

(b) Customs duty On Customs side, a number of measures have been taken for ease of

doing business. Measures have also been taken for providing a level playing field to our

domestic manufacturers, particularly the MSME sector and for securing borders.

It has been observed that imports under Free Trade Agreements (FTAs) are on the rise.

Undue claims of FTA benefits have posed threat to domestic industry. Such imports require

stringent checks. In this context, suitable provisions are being incorporated in the Customs

Act. In the coming months government shall review Rules of Origin requirements,

particularly for certain sensitive items, so as ensure that FTAs are aligned to the conscious

direction of our policy.

Government is also strengthening provisions relating to safeguard duties which are

applied when surge in imports causes serious injury to domestic industry. Amended



provisions shall enable regulating such surge in imports in a systematic way. The

provisions for checking dumping of goods and imports of subsidized goods are also being

strengthened for ensuring a level playing field for domestic industry. These changes are in

line with the international best practices.

Customs duty exemptions: Exemptions from customs duty have been given in public

interest from time to time. However, a number of these have outlived their utility or have

become outdated. On review, certain such exemptions are being withdrawn. Remaining

custom duty exemptions shall be comprehensively reviewed by September 2020.

Raising import duties in footwear and furniture to support MSMEs: Labour intensive MSME

are facing threat from cheap and low-quality imports. Hence, customs duty is being raised

on items like footwear and furniture that are the favourite products of the MSME sector.

Customs duty on the import of medical equipments: Make in India succeeded in

manufacturing medical equipment as well as exporting them in large quantities. To achieve

the twin objectives of giving impetus to the domestic industry and also to generate resource

for health services, the budget proposes to impose a nominal health cess, by way of a duty

of customs, on the imports of medical equipment keeping in view that these goods are now

being made significantly in India. The proceed from this cess shall be used for creating

infrastructure for health services in the aspirational districts.

Customs duty to support Make in India: Under Make in India initiative, well laid out

customs duty rates were already laid for items like mobile phones, electric vehicles and

their components. This has ensured gradual increase in domestic value addition capacity

in India. Customs duty rates are being revised on electric vehicles, and parts of mobiles as

part of such carefully conceived Phased Manufacturing Plans.

In other changes, customs duty is being reduced on certain inputs and raw materials while

it is being revised upward on certain goods which are being made domestically.

To reduce the burden on print media, the budget proposes to reduce basic customs duty

on imports of newsprint and light-weight coated paper from 10% to 5%.

To help the textile sector, anti-dumping duty on PTA is being abolished.

As a revenue measure, the budget raises excise duty, by way of National Calamity

Contingent Duty on Cigarettes and other tobacco products. But no change is being made

in the duty rates of bidis.

Modification of residency provisions

Existing provision of the income tax act gives the following criteria to be a resident of India.



A taxpayer will qualify as a resident of India if he satisfies one of the following 2

conditions:

1. Stay in India for a year is 182 days or more or

2. Stay in India for the immediately 4 preceding years is 365 days or more and 60 days or

more in the relevant financial year

In the event an individual leaves India for employment during an FY, he will qualify

as a resident of India only if he stays in India for 182 days or more. This otherwise means,

condition (b) above of 60 days would not apply to him

Here comes an option for the citizen to stay here upto 182 days and to remain as

non-resident and thus not to pay any taxes for his global income.

This provision provides relaxation to an Indian citizen or a person of Indian origin

allowing them to visit India for a longer duration without becoming resident of India.

Misuse of the residency provision

The issue of tax misuse of the residency provisions by some individuals. There are

instances that notice where period of 182 days is being misused.

Here, individuals, who are actually carrying out substantial economic activities in

India, manage their period of stay in India as there is a substantial period of 182 days to

stay here by not paying taxes. The individual spends sizable period in India, engage in some

economic activities, gets income and retains non-resident in perpetuity and not be required

to declare their global income in India.

As per statutes, only residents have to pay the tax on their global income. Individuals

manage their stay such that they are not paying tax in any countries. The issue of stateless

persons has been bothering the tax world for quite some time. “It is entirely possible for an

individual to arrange his affairs in such a fashion that he is not liable to tax in any country

or jurisdiction during a year.”

The High Net Worth Individuals (HNWI) typically employ residence practices to avoid

paying taxes to any country/ jurisdiction on income they earn.

Changes proposed in the budget

In the light of above, it is proposed that-

(i) The limit for persons to visit India decreased to 120 days from existing 182 days

for non-resident Indians.



(ii) An individual or an HUF shall be said to be “not ordinarily resident” in India in a

previous year, if the individual or the manager of the HUF has been a non-resident

in India in seven out of ten previous years preceding that year.

(iii) an Indian citizen who is not liable to tax in any other country or territory shall

be deemed to be resident in India.

This amendment will take effect from 1st April 2021 and will, accordingly, apply in

relation to the assessment year 2021-22 and subsequent assessment years.

Table: Budget 20-21: Major Revenue Expenditure items of the government

Revenue Expenditure items Rs crores As a % of total expenditure

Interest Payments 708203 27%

Defence 323053 12%

Subsidies 262108 10%

Pension 210682 8%

Total Revenue Expenditure 2630145 86%

Table: Major Subsidies: Budget 2021

Subsidy Scheme Name 2020-21 (BE)

1. Food 115569.68

2. Fertiliser 71309

a. Urea Subsidy 47805

b. Nutrient Based Subsidy 23504

3. Petroleum 40915.21

a. LPG Subsidy 37256.21

b. Kerosene Subsidy 3659

4. Interest Subsidies 28178.86

Grand Total 262108.76

Table: Budget 20-21- Rupee comes from (Sources of Receipts):

Budget 2020-21: Rupee comes from

Item Percentage

Borrowing & other liabilities 20

CIT 18

GST 18

Non-tax revenue 10

Union Excise Duties 7

Customs 4

Income tax 17

Non-Debt Capital Receipts 6



Figure: Rupee Comes from (Sources of Receipts)

Table: Budget 2020-21 Rupee Goes to (Expenditure)

Budget 2020-21: Rupee Goes to

Item %

Centrally Sponsored Schemes 9

Central Sector Schemes 13

Other Expenditure 10

Pension 6

State share of taxes and duties 20

Interest payments 18

Defence 8

Subsidies 6

Finance Commission & other transfers 10

Figure Budget 2020-21- Rupee Goes to:



Budget at a Glance: 2020-21

2018-2019

Actuals

2019-2020

Budget

Estimates

2019-2020

Revised

Estimates

2020-2021

Budget

Estimates

1. Revenue Receipts 1729682 1962761 1850101 2020926

2. Tax Revenue (Net to Centre) 1484406 1649582 1504587 1635909

3. Non -Tax Revenue 245276 313179 345514 385017

4. Capital Receipts 727553 823588 848451 1021304

5. Recovery of Loans 13155 14828 16605 14967

6. Other Receipts 80000 105000 65000 210000

7. Borrowings and Other

Liabilities

634398 703760 766846

796337

8. Total Receipts (1+4) 2457235 2786349 2698552 3042230

9. Total Expenditure (10+13) 2457235 2786349 2698552 3042230

10. On Revenue Account 2140612 2447780 2349645 2630145

of which

11. Interest Payments 587570 660471 625105 708203

12. Grants in Aid for creation 200300 207333 191737 206500

of capital assets

13. On Capital Account 316623 338569 348907 412085

14. Revenue Deficit (10-1) 410930

(2.2)

485019

(2.3)

499544

(2.4)

609219

(2.7)

15. Effective Revenue Deficit

(14-12)

210630

(1.1)

277686

(1.3)

307807

(1.5)

402719

(1.8)

16. Fiscal Deficit

[9-(1+5+6)]

634398

(3.4)

703760

(3.3)

766846

(3.8)

796337

(3.5)

17. Primary Deficit (16-11) 46828

(0.2)

43289

(0.2)

141741

(0.7)

88134

(0.4)

Figures are in Rs crores and figures in bracket are as a percent of GDP



Table: Sources of financing the fiscal deficit

Table: Deficit Indicators Budget 2020-21

Fiscal Indicator

2018-2019 2019-2020 2019-2020 2020-21

Actuals (BE) (RE) (BE)

1. Fiscal Deficit

649418 703760 766846 796337

-3.4 -3.3 -3.8 -3.5

2. Revenue Deficit 454483 485019 499544 609219

-2.4 -2.3 -2.4 -2.7

3. Effective Revenue Deficit

262702 277686 307807 402719

-1.4 -1.3 -1.5 -1.8

4. Primary Deficit

66770 43289 141741 88134

-0.4 -0.2 -0.7 -0.4

Table: Capital Receipts Budget 2020-21

Capital receipt item Rs crores

1. Recovery of Loans 14967

2. Other Receipts (Disinvestment)

210000

3. Borrowings and Other Liabilities

796337

Total Capital Receipts 1021304

Table: Debt receipts or financing of the fiscal deficit (2020-21)

Debt receipts In Rs crores

Market borrowings 535870

Securities against small savings 240000

State PF 18000

Other Receipts 50848

External Debt 4622

Drawn down of cash balance (-) 53003

Grand total 796337



Table: Non- tax revenues –Budget 2020-21

Sl No. Non-tax revenue item (Rs crores)

1 Interest Dividends and Profits 166437.51

2 Fiscal Services 750.8

3 General Services 21620.82

4 Social and Community services 4268.59

5 Economic Services 188825.02

6 Grants in aid and contribution 812

7 Non-tax revenue from UTs 2302.56

Total 385017.3

Table: Major taxes of the central government and their % share -2020-21

Tax Amount (Rs crores) Percentage share in total tax revenue

GST 690500 28.5%

Corporate Income Tax 681000 28.1%

Personal Income Tax 638000 26.3%

Union Excise Duties 267000 11.0%

Customs Duties 138000 5.7%

Gross Tax revenue of the centre* 2423020 100.0% *Before giving state’s share

Figure: Major tax revenues of the centre (%share)

Tojo Jose

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