Union Budget 2019: Aditya Channam & Rahul Nagpal
Union Budget 2019: Aditya Channam & Rahul Nagpal
Union Budget 2019: Aditya Channam & Rahul Nagpal
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Here’s a breakdown of the government’s revenue
sources and where it will deploy every rupee it earns in
the year.
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With focus on urban India, the budget aims at
boosting infrastructure by increasing the
connectivity of roads, water, air and railways.
Infrastructure initiatives such as One Nation, One
Grid for power sector, gas grids, water grids and
regional airports are taken up to boost trade and
transport within the country.
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PROMOTING USE OF
ELECTRIC VEHICLES
Another interesting takeaway from the Budget has
been the Government's increasing interest in
environment protection measure which include
incentivising the purchase and manufacture of e-
vehicles, promote use of solar stoves and battery
chargers in the country.
Tax benefits have also been announced to
promote the manufacturing and purchase of
electric vehicles.
Promoting liquidity in domestic market
The finance minister Nirmala Sitharaman
announced income tax rebates of up to ₹1.5 lakh The budget has also put lot of emphasis on financial
to customers on interest paid on loans to buy stability, financial governance and market deepening.
electric vehicles, with a total exemption benefit of
₹2.5 lakh over the entire loan period. Accordingly, ₹70,000 crore has been provided to
PSBs to boost credit for a strong impetus to the
The government has made an outlay of INR
10,000 crore over the next three years for the economy. The regulatory authority of NHB over HFCs
scheme to incentivise the purchase of electric has now been entrusted to RBI for better
vehicles. coordination and monitoring.
The Indian government’s move to reduce goods
and services tax on EVs to 5% from the existing
12%—compared to the tax range of 29% to 45%
on internal combustion ones—can spur demand
for EVs. 11
As earlier, the nature of government spending continues
to be geared towards meeting revenue expenditure rather
than raising capex.
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• While the announced fiscal deficit number (revised
estimate) for fiscal 2019 turned out lower than expected
at 3.34% of India’s gross domestic product (GDP), this is
an underestimate for two reasons.
• First, the revised estimates report higher tax revenues
than what the Controller General of Accounts (CGA) has
reported for the same fiscal, suggesting that the actual
revenues will be lower and the deficit (excess of spending
over revenue) higher, when they are published in the
next budget.
• Second, the inclusion of off-budget financing (including
government-serviced loans of public sector enterprises)
would mean that the adjusted fiscal deficit number is
close to 5% of GDP.
• This is even without accounting for recapitalization bonds
(earlier funds for recapitalization of banks were included
in the budget but since the issuance of recapitalization
bonds, only the interest payments are included).
• As a result of growing size of off-balance sheet
borrowings, the projections for the next fiscal appear
unrealistic.
• This also means that India’s public debt figure is unlikely
to decline soon.
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The share of transfers to states as a proportion of
gross tax revenues is projected to fall, but that is
largely a denominator effect.
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The nature of spending in Sitharaman’s budget remains
broadly unchanged compared to the Jaitley era.
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There is acute rural distress as the farm economy copes with
lower prices, backbreaking loan burdens, the absence of a
safety net, climate changes and water availability.
Schemes such as Har Ghar Jal, Housing for All, Swachh Bharat
Mission for solid waste management in every village and
providing electricity connection with clean cooking facility by
2022 will not only help in developing rural India but also go a
long way in alleviating poverty from our country, which has
been a constant problem for decades now.
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Bond markets enjoyed a rally because of the government’s
decision to borrow money from abroad, which could
squeeze the supply of government bonds in the market.
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AVIATION SECTOR
Prime Minister Narendra Modi’s administration plans to make India a hub for Disinvestment of Air India
financing aircraft purchases and leasing of planes, as the South Asian nation
moves to support local carriers, which are among the biggest customers for The challenge with strategic
Airbus SE and Boeing Co.
disinvestment of Air India and a few
more PSUs is in attracting investors given
“As the world’s third largest domestic aviation market, the time is ripe for the debt burden of many of these firms.
India to enter into aircraft financing and leasing activities from Indian shores," It will depend on write-offs of loans or
Finance Minister Nirmala Sitharaman said in her maiden budget speech. “This
is critical to the development of a self-reliant aviation industry, creating sweeteners.
aspirational jobs in aviation finance, besides leveraging the business
opportunities available in India’s financial Special Economic Zones." The government has also proposed
increasing the disinvestment target to Rs
1,05,000 crore in FY20 as against Rs
The ability to fund purchases and lease aircraft locally will be a boon for local 90,000 crore set in the interim budget.
carriers like InterGlobe Aviation Ltd.’s IndiGo and SpiceJet Ltd., as it will
significantly insulate them from foreign exchange fluctuations.
India was the world’s fastest-growing aviation market last year, although the
pace has slowed after a local carrier ceased flights due to a cash shortage.
With an emerging middle class flying for the first time, India is one of the
world’s most lucrative markets.
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Overall, the budget has tried to achieve a
rapid economic growth with a human face.
The measures to address development of
human resource through the new national
education policy and national research
foundation are efforts in this direction. The
budget is a great start to arrive at a $5-
trillion economy in the next years.
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THANK YOU
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