Budget 2020

Budget 2020 Key Highlights

By- ISHANK RAVI | TheLearnEarn | 03/02/2020

This blog post is written with the intention to explain the impact of budget 2020 on individuals, sector specific, financial markets, saving and investment habits of individuals and more specific on government backed policies. So let me discuss the main policy and reforms presented by the finance minister Nirmala Sitharaman.

The Economic Survey of India 2019-20 was tabled at the Parliament that has focused on wealth creation. The survey posits that India’s aspiration to become a USD 5 trillion economy depends critically on the invisible hand of the market, supported by the hand of trust. The Congress has asked the govt. to announce a national farm loan waiver and a minimum income scheme in the upcoming Union Budget for 2020-21. On the other hand, the Economic Survey 2019-20 has stated that govt. interventions like debt waiver or food subsidies create distortions..About 7,000 tonnes of imported onions have been reported rotting and lying idle for about a month now at the container freight stations at JNPT port. Importers are in no hurry to clear their consignments as the landed cost of onions is way above the local market costs on the other hand,

                  The Union government has withdrawn benefit of 4% MEIS (merchandise export incentive scheme) on exports of makeups and garments with retrospective effect from March 2019. Nobel laureate and economist, Abhijit V Banerjee has called for re-introduction of a wealth tax in India considering the rising “inequality”. The divestment of Air India restarted this week with the govt. seeking to sell 100% of its equity share capital in the state-owned airline,including Air India’s shareholding interest of 100% in AI Express Limited and 50% in Air India SATS Airport Services Private Limited.

                     The Department of Investment and Public Asset Management will soon issue expression of interest (EoI) for strategic disinvestment of the Center's 53.3% stake in BPCL. The GST collections have reportedly crossed the INR 1 trillion mark for the 3 rd month in a row in 20th Jan.

India and the US are likely to finalise a mega trade deal pegged above USD10bn (more than INR 710bn) next month when United States Trade Representative (USTR) Robert Lighthizer visits New Delhi.

                      Prior to the budget day, the broader market was trading at NTM PE of 17.4x, a 12% premium to its history, even though 50% of the index was trading at a discount to their long-term multiples. Of the estimated earnings growth of 29%YoY for the Nifty in FY21, our estimate was that almost 1/3rd of it was contingent on a recovery. For the stocks under coverage and outside of the Nifty, more than 50% of the earnings growth was contingent on a recovery. And the budget was one of the milestones to determine the trajectory of that recovery.

In that respect, the FY21 fiscal numbers left a few questions unanswered with the highly optimistic divestment targets (Rs2.1trillion, more than 3xFY20), the tax revenues (while optically looks under control, the run-rate for FY20 is lower than the revised estimates), capex growth (highest growth due to 4G spending on BSNL, MTNL) as well as lacking in any significant recovery measures for real estate and autos.

Now discussing about the inspirational India :-

Agriculture, Irrigation and Rural Development

– PM KUSUM to cover 20 lakh farmers for stand alone solar pumps and further 15 lakh for grid connected pumps.

– Viability gap funding for creation of efficient warehouses on PPP mode.

– SHGs run Village storage scheme to be launched.

– Increasing coverage of artificial insemination to 70%

– Doubling of milk processing capacity by 2025

– Agricultural credit target of Rs. 15 lakh crore for 2020-21

– Fish production target of 200 lakh tonnes by 2022-23

– Another 45000 acres of aqua culture to be supported

– Fishery extension through 3477 Sagar Mitras and 500 fish FPOs

– Raise fishery exports to Rs. 1 lakh crore by 2024-25.

Wellness, Water and Sanitation

– More than 20,000 impaneled hospitals under PM Jan Arogya Yojana

– Viability gap funding proposed for setting up hospitals in PPP mode

– Expansion of Jan Aushadhi Kendra Scheme to all districts by 2024

– Focus on liquid and grey water management along with waste management.

Education & Skills

– Special bridge courses to improve skill sets of those seeking employment abroad.

– About 150 higher educational institutions will start apprenticeship embedded course.

Discussing the economic development :-

Industry, Commerce and Investment

• Scheme to encourage manufacturing of mobile phones, electronic equipment and semi conductor packaging. 
• National Technical Textiles Mission for a period of 4 years. NIRVIK Scheme for higher export credit disbursement launched.
• Extension of invoice financing to MSMEs  through TReDs. Scheme to provide subordinate debt for entrepreneurs of MSMEs. 

Talking about Infrastructure :-

Road - Accelerated development of Highways,

Railways - Four station redevelopment projects,  150 passenger trains through PPP mode.

More Tejas type trains for tourist destinations.

Port - Corporatization at least one major port.

Air - 100 more airports to be developed under UDAAN.

Gas Grid - Expansion of national gas grid to 27000 KM.

Infrastructure Financing - Rs.103 lakh crore National Infrastructure Pipeline projects announces.

as we can see in the above mentioned that the MODI 2.0 has again surpassed the major points which was in focus from past few budgets such as LTCG and unnecessary tax in the name of edu cess, CGST, SGCT, STT, Margine money in deravative segment, etc.These all led to a historical fall in markets. Such fall will remain to continue unless a drastic shift is not made by the governemnt and the finance minister must understand India is a country of retail investors.

I hope the cabinate meeting will address the reason for such an weak economy and do the needful as early as possible.

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