1. Increasing stake of Assam Government in Numaligarh Refinery Ltd
Numaligarh Refinery Ltd (NRL) is one of the most important Public Sector Undertakings (PSU) in the country today. Currently, Assam Government holds 12.35% shares.
Government of Assam to acquire an additional shareholding in NRL to take its total stake to 26%.
NRL Plan to expand to 9 Million Metric Tonne Per Annum (MMTPA) from the present 3 MMTPA capacity. Rs 1,500 crore has been earmarked for the same.
2. Anna Yojana
Free rice for 57 lakh beneficiaries under National Food Security Act which will cost the state Rs 472 crore.
3. Jyotisman Asom
Free electricity to all households whose monthly electricity consumption is up to 30 units.
Currently, 14 Lakh families consume electricity up to 30 units monthly and this initiative will immediately benefit families belonging to the bottom of the pyramid including tea garden workers, families living below poverty line and our SC-ST population.
Government will provide Rs. 300 Crore to APDCL for providing tariff relief to the general public. Besides, the State Government is also continuing the existing subsidy to around 38 Lakh Domestic-A consumers at prevailing rate of Rs. 1.01 per unit for 120 units per month.
Creation of entrepreneurial support groups of youth on the lines of NRLM SHGs.
The scheme will cover 2,00,000 youth of the state and provide them with seed capital at the rate of 50,000 per member for initiating entrepreneurial activities.
5. Chah Bagicha Dhan Puraskar Mela
7,21,485 Tea Garden workers from 752 gardens received a benefit of Rs. 5000 each during Financial Year 2018-19. To receive another Rs. 3000 each in FY 20-21.
This will drive financial inclusion of Tea Garden workers and inculcate banking habits.
6. Welfare Schemes for the Tea Tribes and Adivasi
Wage compensation for pregnant women
Wage compensation expanded from existing 6 months to 9 months.
Compensation increased to Rs. 18,000 to be paid in 6 installments.
These scheme will support pre-natal and post-natal health checkups and provide nutritional security.
Educational Benefits
10,000 as a onetime support to the Tea Tribes and Adivasi students who pass HSLC and HSC exams in 2020-21.
Students will continue to receive same benefit if they are still pursuing their academic course.
102 new high schools to ensure continuous education to children in tea gardens.
Other Schemes
34,000 youths to get Rs. 25,000 each for starting entrepreneurial activities.
Smartphones for approx. 4000 Tea Garden Sardars.
Government to facilitate gratuity payment of approx. Rs. 50,000 to Tea Workers.
300 km of roads in 300 tea garden divisions to be constructed.
Renovation of 100 football grounds in tea garden areas.
Establishment of District & Block Programme Management Units for effective implementation of schemes.
Assam Finance Minister Himanta Biswa Sarma presented the state budget for the financial year 2020-21 on 6th March, 2020 at the state Legislative Assam assembly. The Finance Minister informed that despite sluggish growth across the globe and slowdown of the Indian Economy, the state of Assam achieved an impressive average annual growth rate in respect to GSDP at current prices during the period 2016-17 to 2019-20 (BE) at 12.38%. Even at constant prices, Assam has grown much faster than the national average which is a notable achievement.
Open up bank branches and ATMs in the unbanked areas.
An amount of Rs. 50 Crore is earmarked for Gap funding for banks to set up necessary infrastructure in the budget for the year 2020-21
Resolution of issues plaguing the Micro-Finance Institutions
Government proposes to frame detailed guidelines for the operations of the MFIs in the state, to safeguard the interest of people.
Government propose to constitute a Microenterpreneurs Support Fund with a corpus of Rs. 500 Crores.
Education
Educational Institutions Initiatives
Start five polytechnics at Morigaon, Udalguri, Tinsukia, Hailakandi and Chirang
Seven new Government Colleges, Borkhola in Cachar, Deaithor in Karbi Anglong, Kakopathar in Tinsukia, Katlicherra in Hailakandi, Lahorighat in Morigaon, Samaguri in Nagaon and Majer Alga in South Salmara.
New University Sati Sadhoni Rayjik Vishwavidyalaya in Golaghat District.
Two new Medical Colleges in Sonari and Biswanath Chariali
One new Ayurvedic College at Dudhnoi, Goalpara
One new Law College will be established in Kaliabor
To institute a Bani Kanta Kakoti Chair at Guwahati University.
Grants of Rs. 10 crore as corpus to Mahapurush Srimanta Shankardeva Viswabidyalaya.
Infrastructure
Chuburi Poka Rasta Asoni
Provide Rs. 20 Lakhs per Kilometer gap funding to P&RD department for construction of all-weather sustainable roads in hamlets.
Government propose to provide Rs. 20 lakhs per kilometre, as gap funding in Budget 2020-21
Construct 200 Km of roads on a pilot basis
40 Crore earmarked for year 2020-21.
City Infrastructure Development Fund
Schemes under CIDF to be continued.
Overall Commitment of Rs.2300 Crore for 18 Cities across the State.
Necessary Fund Provision for carrying out required activity
Uttoron
300 Crores earmarked for execution of Signature Projects of Infrastructure development.
Assam Adarsha Gram Yojan
Create ‘villages of excellence’ in each of the assembly constituencies.
Entry point activities to kickstart in right earnest
Announcement regarding making annual patta land transferable
Initiated steps to bring legal changes to make annual patta land transferable.
Indigenous Muslim Development Corporation
Create a Development Corporation for Indigenous Muslims of Assam.
Socio-economic census of these communities on a war footing.
Health & Welfare
PPP Partnership for Healthcare in Silchar
Engage quality private health institutions in Barak Valley with specialty branches like Cardiology, Neorology etc, under Public Private Partnership mode, to cater to the medical necessities of patients belonging to Cachar, Karimganj and Hailakandi districts.
An amount of Rs. 10 Crore is earmarked in the budget for the year 2020-21.
Partnerships with reputed private hospitals to provide NICU and PICU services
Empanel all Private Health Institutions who have the necessary quality standards for Paediatric and Newborn Intensive Care Unit setup,
To provide quality care to infants and Newborns of BPL as well as low income APL families.
Private partner to be reimbursed for expenditure made.
Sanitary Napkin Scheme
Free sanitary napkins to girls in Classes 6 to 12 in government and government-aided schools.
An amount of Rs. 25 crores is earmarked for this initiative.
Fighting Drug Menace
Establish of five de-addiction centres through partnerships with reputed NGOs.
Government to launch awareness drives in schools, colleges, Youth Clubs and amongst street children
Shram-Gaurav Asoni
Improve the health and quality of life of the construction workers with the following salient features:
IT enabled registration of workers and mass registration drives.
Waiver of registration fees for workers.
Insurance cover under Pradhan Mantri Jeevan Jyoti Bima Yojana and Pradhan Mantri Suraksha Bima Yojana.
Provide Rs. 3000 to each registered worker (<40 years) and Rs. 5000 to those who are above 40 years on DBT mode for annual medical check-up.
Provide one time grants of Rs. 5000 per registered workers on DBT mode for purchasing tools.
Mega Awareness Drive against Social Evils
Assam Science Technology and Environment Council (ASTEC) to launch a mega awareness drive against all social evils in line with progressive, scientific thinking
An amount of Rs. 10 crores is earmarked for this novel initiative.
The Union Budget of India for 2020–2021 was presented by the Finance Minister, Nirmala Sitharaman on 1 February 2020, in a backdrop of a slowing down of the Indian economy with estimated GDP growth for 2019-20 being at an 11-year low of 5%. She becomes the second women to present budget for the second time after Indira Gandhi. The central ideas of the Budget are – “Aspirational India, Economic development, A Caring Society.”
Provisions for Assam and NE in Union Budget 2020-21
The budgetary allocation for the Ministry of Development of North Eastern Region (DoNER) saw a hike of over 14 per cent from Rs 2,670 crore last year to Rs 3,049 crore in 2020-21.
The budget for the North Eastern Council (NEC) has been doubled from Rs 700 crore to Rs 1,474 crore in the last five years.
The budget has accorded the highest priority to the overall development of the Northeastern region keeping in tune with the vision and declaration of Prime Minister Narendra Modi since he came to power in 2014.
In case of the Ministry of DoNER, the budgetary allocation for 2020-21 is Rs 3,049 crore as against Rs 2,670 crore in the Revised Estimate (RE) 2019-20. Of the total Rs 3,049 crore, the provision for development of infrastructure is around Rs 2,900 crore compared to Advance Estimate (AE) 2014-15 of Rs 1,719 crore.
The budget allocation of the Ministry of DoNER in 2020-21 is higher by 77.26 per cent, he said.
In case of schemes being implemented by the North Eastern Council (NEC), the current year’s budgetary allocation is Rs 1,474 crore, an increase of 19.23 per cent over RE 2019-20 allocation of Rs 1,237 crore.
The government is ensuring smooth access to financial assistance from multilateral and bilateral funding agencies to help introduce innovative and global best practices. The Central government has effectively used an online portal to reduce gestation period. This has improved the flow of funds to the Northeast region.
The inland waterways received a boost in the last five years. The Jal Vikas Marg on National Waterway-1 will be completed. Further, the 890-km Dhubri-Sadiya waterway will be completed by 2022.
Plans are afoot to energise eco-heritage sites. Government proposes to establish an Indian Institute of Heritage and Conservation under the Ministry of Culture; it shall have the status of a deemed university to start with.
Archaeological sites would be developed as iconic sites with on-site museums at Sivasagar (Assam), along with .– Rakhigarhi (Haryana), Hastinapur (Uttar Pradesh), Dholavira (Gujarat) and Adichanallur (Tamil Nadu)
Union government increases allocation for eight states of Northeast India to Rs 50,169.39 crore in the union budget 2019-20 from Rs 39,201 crore of 2018-19.
Rs 4105 Crore is allocated to Oil India Limited for exploration and production, Rs 755 Crore is allocated for MSME sector.
The budget allocation for the Northeast under the North East Road Sector Development Scheme has been increased from Rs 391 crore during 2018-19 to Rs 666 crore for 2019-20.
Budget allocation of Rs. 3000 crore for the Ministry of Development of Northeastern Region (DoNER) is a gesture that the central government is extending its continued support to ensure development and thrust to the Northeast.
The increase of fund for the North East Special Infrastructure Development Scheme (NESIDS) from Rs 140 crore during 2018-19 to Rs 695 crore for 2019-20 will enable different states in the Northeast to further initiate large infrastructure activities.
Positive for North East companies as all private entity in North East will be within 25% tax rates, as corporate tax is reduced to 25% for companies with turnover upto 400 crores.
Increase in allocation for refund of central and integrated GST to North Eastern Region (NER) the Himalayan states will ensure timely refund of GST under industrial policy.”
The Economic Survey of India is the flagship annual document of the Ministry of Finance, Govt of India. It is prepared under the guidance of the Chief Economic Adviser of India. This document is presented to both Houses of Parliament during the Budget Session. The first Economic Survey of India was presented in 1950-51 as part of the Union Budget. After 1964 it was separated from the Budget and presented each year during the Budget Session before the presentation of the budget. The document is non-binding.
The Union Minister for Finance & Corporate Affairs, Smt. Nirmala Sitharaman presented the Economic Survey 2019-20 in the Parliament on January 31, 2020. Krishnamurthy V. Subramanian is the Chief Economic Adviser of Ministry of Finance, Government of India.
We will present Highlights of the Economic Survey in PART 1, 2 and 3:
Largest Proportion of Indian population depends directly or indirectly on agriculture for employment opportunities as compared to any other sector.
The share of agriculture and allied sectors in the total Gross Value Added (GVA) of the country has been continuously declining on account of relatively higher growth performance of non-agricultural sectors, a natural outcome of development process.
GVA at Basic Prices for 2019-20 from ‘Agriculture, Forestry and Fishing’ sector is estimated to grow by 2.8 %. · Agricultural productivity is also constrained by lower level of mechanization in agriculture which is about 40 % in India, much lower than China (59.5 %) and Brazil (75 %). · Skewed pattern of regional distribution of agricultural credit in India: o Low credit in Hilly, Eastern and North Eastern states (less than 1 % of total agricultural credit disbursement). · Livestock income has become an important secondary source of income for millions of rural families: o An important role in achieving the goal of doubling farmers’ income. o Livestock sector has been growing at a CAGR of 7.9 % during last five years. · During the last 6 years ending 2017-18, Food Processing Industries sector has been growing: o Average Annual Growth Rate (AAGR) of around 5.06 % o Constitutes as much as 8.83 % and 10.66 % of GVA in Manufacturing and Agriculture sector respectively in 2017-18 at 2011-12 prices. · While interests of the vulnerable sections of the population need to be safeguarded, Survey emphasizes on sustainability of food security operations by: o Addressing the burgeoning food subsidy bill. o Revisiting the rates and coverage under NFSA.
Industry and Infrastructure
The industrial sector as per Index of Industrial Production (IIP) registered a growth of 0.6 per cent in 2019-20 (April-November) as compared to 5.0 % during 2018-19 (April-November).
Fertilizer sector achieved a growth of 4.0 % during 2019-20 (April-November) as compared to (-) 1.3 per cent during 2018-19 (April-November).
Steel sector achieved a growth of 5.2 % during 2019-20 (April-November) as compared to 3.6 % during 2018-19 (April-November).
Total telephone connections in India touched 119.43 crore as on September 30, 2019.
The installed capacity of power generation has increased to 3, 64,960 MW as on October 31, 2019 from 3, 56,100 MW as on March 31, 2019.
Report of the Task Force on National Infrastructure Pipeline released on 31.12.2019 has projected total infrastructure investment of Rs. 102 lakh crore during the period FY 2020 to 2025 in India.
Services Sector
Increasing significance of services sector in the Indian economy:
About 55 % of the total size of the economy and GVA growth.
Two-thirds of total FDI inflows into India.
About 38 per cent of total exports.
More than 50 % of GVA in 15 out of the 33 states and UTs.
Gross Value Added growth of the services sector moderated in 2019-20 as suggested by various high-frequency indicators and sectoral data such as air passenger traffic, port and shipping freight traffic, bank credit etc.
On the bright side, FDI into services sector has witnessed a recovery in early 2019-20.
Social Infrastructure, Employment and Human Development
The expenditure on social services (health, education and others) by the Centre and States as a proportion of GDP increased from 6.2 % in 2014-15 to 7.7 % in 2019-20 (BE).
India’s ranking in Human Development Index improved to 129 in 2018 from 130 in 2017: o With 1.34 % average annual HDI growth, India is among the fastest improving countries
Gross Enrolment Ratio at secondary, higher secondary and higher education level needs to be improved.
The share of regular wage/salaried employees has increased by 5 percentage points from 18 % in 2011-12 to 23 % in 2017-18.
A significant jump of around 2.62 crore new jobs with 1.21 crore in rural areas and 1.39 crore in urban areas in this category.
Total formal employment in the economy increased from 8 % in 2011-12 to 9.98 % in 2017-18.
Gender disparity in India’s labour market widened due to decline in female labour force participation especially in rural areas: o Around 60 % of productive age (15-59) group engaged in full time domestic duties.
Access to health services inter-alia through Ayushman Bharat and Mission Indradhanush across the country has improved.
Mission Indradhanush has vaccinated 3.39 crore children and 87.18 lakh pregnant women of 680 districts across the country.
About 76.7 % of the households in the rural and about 96 % in the urban areas had houses of pucca structure.
A 10 Year Rural Sanitation Strategy (2019-2029) launched to focus on sustaining the sanitation behavior change and increasing access to solid and liquid waste management.
Sustainable Development and Climate Change
India moving forward on the path of SDG implementation through well-designed initiatives
SDG India Index: o Himachal Pradesh, Kerala, Tamil Nadu, Chandigarh are front runners. o Assam, Bihar and Uttar Pradesh come under the category of Aspirants.
India hosted COP-14 to UNCCD which adopted the Delhi Declaration: Investing in Land and Unlocking Opportunities.
COP-25 of UNFCCC at Mandrid: o India reiterated its commitment to implement Paris Agreement. o COP-25 decisions include efforts for climate change mitigation, adaptation and means of implementation from developed country parties to developing country parties.
Forest and tree cover: o Increasing and has reached 80.73 million hectare. o 24.56 % of the geographical area of the country.
Burning of agricultural residues, leading to rise in pollutant levels and deterioration of air quality, is still a major concern though the total number of burning events recorded reduced due to various efforts taken.
International Solar Alliance (ISA) o ‘Enabler’ by institutionalizing 30 Fellowships from the Member countries. o ‘Facilitator’ by getting the lines of credit worth US$ 2 Billion from EXIM Bank of India and 1.5 Billion from AfD, France. o ‘Incubator’ by nurturing initiatives like the Solar Risk Mitigation Initiative. o ‘Accelerator’ by developing tools to aggregate demand for 1000 MW solar and 2.7 lakh solar water pumps.
The Economic Survey of India is the flagship annual document of the Ministry of Finance, Govt of India. It is prepared under the guidance of the Chief Economic Adviser of India. This document is presented to both Houses of Parliament during the Budget Session. The first Economic Survey of India was presented in 1950-51 as part of the Union Budget. After 1964 it was separated from the Budget and presented each year during the Budget Session before the presentation of the budget. The document is non-binding.
The Union Minister for Finance & Corporate Affairs, Smt. Nirmala Sitharaman presented the Economic Survey 2019-20 in the Parliament on January 31, 2020. Krishnamurthy V. Subramanian is the Chief Economic Adviser of Ministry of Finance, Government of India.
We will present Highlights of the Economic Survey in PART 1, 2 and 3:
GDP growth is a critical variable for decision-making by investors and policymakers. Therefore, the recent debate about accuracy of India’s GDP estimation following the revised estimation methodology in 2011 is extremely significant.
As countries differ in several observed and unobserved ways, cross-country comparisons have to be undertaken by separating the effect of other confounding factors and isolating effect of methodology revision alone on GDP growth estimates.
Models that incorrectly over-estimate GDP growth by 2.7 % for India post-2011 also misestimate GDP growth over the same period for 51 out of 95 countries in the sample.
Several advanced economies such as UK, Germany and Singapore have their GDPs misestimated with incompletely specified econometric model.
Correctly specified models that account for all unobserved differences and differential trends in GDP growth across countries fail to find any misestimating of growth in India or other countries.
Concerns of a misestimated Indian GDP are unsubstantiated by the data and are thus unfounded.
Thalinomics: The Economics of a Plate of Food in India
An attempt to quantify what a common person pays for a Thali across India.
A shift in the dynamics of Thali prices since 2015-16.
Absolute prices of a vegetarian Thali have decreased significantly since 2015-16 across India and the four regions; though the price has increased during 2019-20.
Post 2015-16: Average household gained close to Rs. 11, 000 on average per year from the moderation in prices in the case of vegetarian Thali. Average household that consumes two non-vegetarian Thalis gained close to Rs. 12, 000 on average per year during the same period.
From 2006-07 to 2019-20: Affordability of vegetarian Thalis improved 29 %. Affordability of non-vegetarian Thalis improved by 18 %.
India’s Economic Performance in 2019-20
India’s GDP growth moderated to 4.8 % in H1 of 2019-20, amidst a weak environment for global manufacturing, trade and demand.
Real consumption growth has recovered in Q2 of 2019-20, cushioned by a significant growth in government final consumption.
Growth for ‘Agriculture and allied activities’ and ‘Public administration, defense, and other services’ in H1 of 2019-20 was higher than in H2 of 2018-19.
India’s external sector gained further stability in H1 of 2019-20:
Current Account Deficit (CAD) narrowed to 1.5 % of GDP in H1 of 2019-20 from 2.1 % in 2018-19.
Impressive Foreign Direct Investment (FDI).
Rebounding of portfolio flows.
Accretion of foreign exchange reserves.
Sharper contraction of imports as compared to that of exports in H1 of 2019-20, with easing of crude prices.
Headline inflation expected to decline by year end:
Increased from 3.3 % in H1 of 2019-20 to 7.35 % in December 2019-20 due to temporary increase in food inflation.
Rise in CPI-core and WPI in December 2019-20 suggests building of demand pressure.
Deceleration in GDP growth can be understood within the framework of a slowing cycle of growth:
Financial sector acted as a drag on the real sector (investment-growth-consumption).
Reforms undertaken during 2019-20 to boost investment, consumption and exports:
Speeding up the insolvency resolution process under Insolvency and Bankruptcy Code (IBC).
Easing of credit, particularly for the stressed real estate and NBFC sectors.
Announcing the National Infrastructure Pipeline 2019-2025.
Survey expects an uptick in the GDP growth in H2 of 2019-20:
5 % GDP growth for 2019-20 based on CSO’s first Advance Estimates.
Expeditious delivery on reforms for enabling the economy to strongly rebound in 2020-21.
Fiscal Developments
Revenue Receipts registered a higher growth during the first eight months of 2019-20, compared to the same period last year, led by considerable growth in Non-Tax revenue.
Gross GST monthly collections have crossed the mark of Rs. 1 lakh crore for a total of five times during 2019-20 (up to December 2019).
Structural reforms undertaken in taxation during the current financial year:
Change in corporate tax rate.
Measures to ease the implementation of GST.
Fiscal deficit of states within the targets set out by the FRBM Act.
Survey notes that the General Government (Centre plus States) has been on the path of fiscal consolidation.
External Sector
Balance of Payments (BoP):
India’s BoP position improved from US$ 412.9 bn of forex reserves in end March, 2019 to US$ 433.7 bn in end September, 2019.
Current account deficit (CAD) narrowed from 2.1% in 2018-19 to 1.5% of GDP in H1 of 2019-20.
Foreign reserves stood at US$ 461.2 bn as on 10th January, 2020.
Global trade:
In sync with an estimated 2.9% growth in global output in 2019, global trade is estimated to grow at 1.0% after having peaked in 2017 at 5.7%.
However, it is projected to recover to 2.9% in 2020 with recovery in global economic activity.
India’s merchandise trade balance improved from 2009-14 to 2014-19, although most of the improvement in the latter period was due to more than 50% decline in crude prices in 2016-17.
India’s top five trading partners continue to be USA, China, UAE, Saudi Arabia and Hong Kong.
Exports: Top export items: Petroleum products, precious stones, drug formulations & biologicals, gold and other precious metals.
Largest export destinations in 2019-20 (April-November): United States of America (USA), followed by United Arab Emirates (UAE), China and Hong Kong.
The merchandise exports to GDP ratio declined, entailing a negative impact on BoP position.
Slowdown of world output had an impact on reducing the export to GDP ratio, particularly from 2018-19 to H1 of 2019-20.
Growth in Non-POL exports dropped significantly from 2009-14 to 2014-19.
India’s imports continue to be largest from China, followed by USA, UAE and Saudi Arabia.
Merchandise imports to GDP ratio declined for India, entailing a net positive impact on BoP.
Large Crude oil imports in the import basket correlates India’s total imports with crude prices. As crude price raises so does the share of crude in total imports, increasing imports to GDP ratio.
Significant Gold imports also correlate India’s total imports with gold prices. However, share of gold imports in total imports remained the same during 2018-19 and the first half of 2019-20, despite an increase in prices, possibly due to increase in import duty that reduced the import of gold.
Non-POL-non-gold imports are positively correlated with GDP growth.
Non-POL-non-oil imports fell as a proportion to GDP from 2009-14 to 2014-19 when GDP growth accelerated.
This may be because of consumption driven growth while investment rate declined, lowering non-POL-non-gold imports.
Continuous decline in investment rate decelerated GDP growth, weakened consumption, dampened the investment outlook, which further reduced GDP growth and along with it non-POL-non-gold imports as a proportion of GDP from 2018-19 to H1 of 2019-20.
Under trade facilitation, India improved its ranking from 143 in 2016 to 68 in 2019 under the indicator, “Trading across Borders”, monitored by World Bank in its Ease of Doing Business Report.
Logistics industry of India:
Currently estimated to be around US$ 160 billion.
Expected to touch US$ 215 billion by 2020.
According to World Bank’s Logistics Performance Index, India ranks 44th in 2018 globally, up from 54th rank in 2014.
Net FDI inflows continued to be buoyant in 2019-20 attracting US$ 24.4 bn in the first eight months, higher than the corresponding period of 2018-19.
Net FPI in the first eight months of 2019-20 stood at US$ 12.6 bn.
Net remittances from Indians employed overseas continued to increase, receiving US$ 38.4 billion in H1 of 2019-20 which is more than 50% of the previous year level.
External debt:
Remains low at 20.1% of GDP as at end September, 2019.
After significant decline since 2014-15, India’s external liabilities (debt and equity) to GDP increased at the end of June, 2019 primarily by increase in FDI, portfolio flows and external commercial borrowings (ECBs).
Repo rate was cut by 110 basis points in four consecutive MPC meetings in the financial year due to slower growth and lower inflation.
However, it was kept unchanged in the fifth meeting held in December 2019.
In 2019-20, liquidity conditions were tight for initial two months; but subsequently it remained comfortable.
The Gross Non Performing Advances ratio:
Remained unchanged for Scheduled Commercial banks at 9.3% between March and September 2019
Increased slightly for the Non-Banking Financial Corporations (NBFCs) from 6.1% in March 2019 to 6.3% in September 2019.
Credit growth:
The financial flows to the economy remained constrained as credit growth declined for both banks and NBFCs.
Bank Credit growth (YoY) moderated from 12.9% in April 2019 to 7.1% as on December 20, 2019.
Capital to Risk-weighted Asset Ratio of SCBs increased from 14.3% to 15.1% between March 2019 and September 2019.
Prices and Inflation
Inflation Trends:
Inflation witnessing moderation since 2014
Consumer Price Index (CPI) inflation increased from 3.7 per cent in 2018-19 (April to December, 2018) to 4.1 per cent in 2019-20 (April to December, 2019).
WPI inflation fell from 4.7 per cent in 2018-19 (April to December, 2018) to 1.5 per cent during 2019-20 (April to December, 2019).
Drivers of CPI – Combined (C) inflation:
During 2018-19, the major driver was the miscellaneous group
During 2019-20 (April-December), food and beverages was the main contributor.
Among food and beverages, inflation in vegetables and pulses was particularly high due to low base effect and production side disruptions like untimely rain.
Cob-web Phenomenon for Pulses:
Farmers base their sowing decisions on prices witnessed in the previous marketing period.
Measures to safeguard farmers like procurement under Price Stabilisation Fund (PSF), Minimum Support Price (MSP) need to be made more effective.
Divergence Between Retail and Wholesale price:
Observed for essential agricultural commodities in four metropolitan cities of the country from 2014 to 2019.
Divergence particularly high for vegetables like onion and tomato. This may be due to the presence of intermediaries and high transaction costs.
Volatility of Prices: o Volatility of prices for most of the essential food commodities with the exception of some of the pulses has actually come down in the period 2014-19 as compared to the period 2009-14. o Lower volatility might indicate the presence of better marketing channels, storage facilities and effective MSP system.
Regional variations: o CPI-C inflation has been highly variable across States ranging between (-)0.04 per cent to 8.1 per cent across States/UTs in financial year (FY) 2019-20 (April-December). o In most states, CPI-C inflation in rural areas is lower than the CPI-C inflation in urban areas o Rural inflation has been more variable across states than urban inflation.
Inflation dynamics: o Convergence of headline inflation towards core inflation as per the CPI-C data from 2012 onwards.
The Economic Survey of India is the flagship annual document of the Ministry of Finance, Govt of India. It is prepared under the guidance of the Chief Economic Adviser of India. This document is presented to both Houses of Parliament during the Budget Session. The first Economic Survey of India was presented in 1950-51 as part of the Union Budget. After 1964 it was separated from the Budget and presented each year during the Budget Session before the presentation of the budget. The document is non-binding.
The Union Minister for Finance & Corporate Affairs, Smt. Nirmala Sitharaman presented the Economic Survey 2019-20 in the Parliament on January 31, 2020. Krishnamurthy V. Subramanian is the Chief Economic Adviser of Ministry of Finance, Government of India.
We will present Highlights of the Economic Survey in PART 1, 2 and 3:
Wealth Creation: The Invisible Hand Supported by the Hand of Trust
India’s dominance as global economic power for three-fourths of economic history manifests by design. Historically, Indian economy relied on the invisible hand of the market with the support of the hand of trust: o Invisible hand of the market reflected in openness in economic transactions. o Hand of trust appealed to ethical and philosophical dimensions.
Post-liberalisation, Indian economy supports both pillars of the economic model advocated in our traditional thinking.
Survey illustrates enormous benefits accruing from enabling the invisible hand of the market.
Exponential rise in India’s GDP and GDP per capita post-liberalisation coincides with wealth generation.
Survey shows that the liberalized sectors grew significantly faster than the closed ones.
Need for the hand of trust to complement the invisible hand, illustrated by financial sector performance during 2011-13.
Survey posits that India’s aspiration to become a $5 trillion economy depends critically on: o Strengthening the invisible hand of the market. o Supporting it with the hand of trust.
Strengthening the invisible hand by promoting pro-business policies to: Provide equal opportunities for new entrants, Enable fair competition and ease doing business, Eliminate policies unnecessarily undermining markets through government intervention, Enable trade for job creation, Efficiently scale up the banking sector.
Introducing the idea of trust as a public good, which gets enhanced with greater use.
Survey suggests that policies must empower transparency and effective enforcement using data and technology.
Entrepreneurship and Wealth Creation at the Grassroots
Entrepreneurship as a strategy to fuel productivity growth and wealth creation.
India ranks third in number of new firms created, as per the World Bank.
New firm creation in India increased dramatically since 2014: o 12.2 % cumulative annual growth rate of new firms in the formal sector during 2014-18, compared to 3.8 % during 2006-2014. o About 1.24 lakh new firms created in 2018, an increase of about 80 % from about 70,000 in 2014.
Survey examines the content and drivers of entrepreneurial activity at the bottom of the administrative pyramid – over 500 districts in India.
New firm creation in services is significantly higher than that in manufacturing, infrastructure or agriculture.
Survey notes that grassroots entrepreneurship is not just driven by necessity.
A 10 percent increase in registration of new firms in a district yields a 1.8 % increase in Gross Domestic District Product (GDDP).
Entrepreneurship at district level has a significant impact on wealth creation at the grassroots.
Birth of new firms in India is heterogeneous and dispersed across districts and sectors.
Literacy and education in a district foster local entrepreneurship significantly: o Impact is most pronounced when literacy is above 70 per cent. o New firm formation is the lowest in eastern India with lowest literacy rate (59.6 % as per 2011 Census).
Physical infrastructure quality in the district influences new firm creation significantly.
Ease of Doing Business and flexible labour regulation enable new firm creation, especially in the manufacturing sector.
Survey suggests enhancing ease of doing business and implementing flexible labour laws can create maximum jobs in districts and thereby in the states.
Pro-business versus Pro-markets
Survey says that India’s aspiration of becoming a $5 trillion economy depends critically on: o Promoting ‘pro-business’ policy that unleashes the power of competitive markets to generate wealth. o Weaning away from ‘pro-crony’ policy that may favour specific private interests, especially powerful incumbents.
Viewed from the lens of the Stock market, creative destruction increased significantly post-liberalisation: o Before liberalisation, a Sensex firm expected to stay in it for 60 years, which decreased to only 12 years after liberalisation. o Every five years, one-third of Sensex firms are churned out, reflecting the continuous influx of new firms, products and technologies into the economy.
Despite impressive progress in enabling competitive markets, pro-crony policies destroyed value in the economy: o An equity index of connected firms significantly outperformed market by 7 % a year from 2007 to 2010, reflecting abnormal profits extracted at common citizens’ expense. o In contrast, the index underperforms market by 7.5 % from 2011, reflecting inefficiency and value destruction inherent in such firms.
Pro-crony policies such as discretionary allocation of natural resources till 2011 led to rent-seeking by beneficiaries while competitive allocation of the same post 2014 ended such rent extraction.
Similarly crony lending that led to wilful default, wherein promoters collectively siphoned off wealth from banks, led to losses that dwarf subsidies for rural development.
Undermining Markets: When Government Intervention Hurts More Than It Helps
Government intervention, though well intended, often ends up undermining the ability of the markets to support wealth creation and leads to outcomes opposite to those intended.
Four examples of anachronistic government interventions: 1. Essential Commodities Act (ECA), 1955: o Frequent and unpredictable imposition of blanket stock limits on commodities under ECA distorts: • The incentives for the creation of storage infrastructure by the private sector. • Movement up the agricultural value chain. • Development of national market for agricultural commodities. o Imposition of stock limits on dal in 2006-Q3, sugar in 2009-Q1 and onions in September, 2019 spiked up the volatility of the retail and wholesale prices of onions. o The Ministry of Consumer Affairs must examine whether the ECA is relevant in today’s India. o With raids having abysmally low conviction rate and no impact on prices, the ECA only seems to enable rent-seeking and harassment. o Survey suggests there is clear evidence for jettisoning this anachronistic legislation. 2. Drug Price Control under ECA: o The regulation of prices of drugs, through the DPCO 2013, led to increase in the price of the regulated pharmaceutical drug vis-à-vis that of an unregulated but similar drug. o The increase in prices is greater for more expensive formulations than for cheaper ones and for those sold in hospitals rather than retail shops. o These findings reinforce that the outcome is opposite to what DPCO aims to do – making drugs affordable. o Government, being a huge buyer of drugs, can intervene more effectively to provide affordable drugs by combining all its purchases and exercising its bargaining power. o Ministry of Health and Family Welfare must evolve non-distortionary mechanisms that utilise Government’s bargaining power in a transparent manner. 3. Government intervention in Grain markets: o Policies in the food-grain markets led to: • Emergence of Government as the largest procurer and hoarder of rice and wheat. • Crowding out of private trade. • Burgeoning food subsidy burden • Inefficiencies in the markets, affecting the long run growth of agricultural sector. o The food-grains policy needs to be dynamic and allow switching from physical handling and distribution of food-grains to cash transfers/food coupons/smart cards. 4. Debt waivers: o Analysis of debt waivers given by States/Centre: • Full waiver beneficiaries consume less, save less, invest less and are less productive after the waiver, compared to the partial beneficiaries. • Debt waivers disrupt the credit culture. • They reduce formal credit flow to the very same farmers, thereby defeating the purpose. Survey suggests that: o Government must systematically examine areas of needless intervention and undermining of markets; but it does not argue that there should be no Government intervention. o Instead it suggests that the interventions that were apt in a different economic setting may have lost their relevance in a transformed economy. o Eliminating such instances will enable competitive markets spurring investments and economic growth.
Creating Jobs and Growth by Specializing in Network Products
Survey says India has unprecedented opportunity to chart a China-like, labour-intensive, export trajectory.
By integrating “Assemble in India for the world” into Make in India, India can: o Raise its export market share to about 3.5 % by 2025 and 6 % by 2030. o Create 4 crore well-paid jobs by 2025 and 8 crore by 2030.
Exports of network products can provide one-quarter of the increase in value added required for making India a $5 trillion economy by 2025.
Survey suggests a strategy similar to one used by China to grab this opportunity: o Specialization at large scale in labour-intensive sectors, especially network products. o Laser-like focus on enabling assembling operations at mammoth scale in network products. o Export primarily to markets in rich countries. o Trade policy must be an enabler.
Survey analyses the impact of India’s trade agreements on overall trade balance: o India’s exports increased by 13.4 % for manufactured products and 10.9 % for total merchandise o Imports increased by 12.7 % for manufactured products and 8.6 per cent for total merchandise. o India gained 0.7 % increase in trade surplus per year for manufactured products and 2.3 % per year for total merchandise.
Targeting Ease of Doing Business in India
A jump of 79 positions to 63 in 2019 from 142 in 2014 in World Bank’s Doing Business rankings.
India still trails in parameters such as Ease of Starting Business, Registering Property, Paying Taxes and Enforcing Contracts. Survey has numerous case studies: o For merchandise exports, the logistics process flow for imports is more efficient than that for exports. o Electronics exports and imports through Bengaluru airport illustrate how Indian logistical processes can be world class.
The turnaround time of ships in India has almost halved to 2.48 days in 2018-19 from 4.67 days in 2010-11.
Suggestions for further Ease of Doing Business: o Close coordination between the Logistics division of the Ministry of Commerce and Industry, the Central Board of Indirect Taxes and Customs, Ministry of Shipping and the different port authorities. o Individual sectors such as tourism or manufacturing require a more targeted approach that maps out the regulatory and process bottlenecks for each segment.
Golden jubilee of bank nationalisation: Taking stock
Survey observes 2019 as the golden jubilee year of bank nationalization
Accomplishments of lakhs of Public Sector Banks (PSBs) employees cherished and an objective assessment of PSBs suggested by the Survey.
Since 1969, India’s Banking sector has not developed proportionately to the growth in the size of the economy.
India has only one bank in the global top 100 – same as countries that are a fraction of its size: Finland (about 1/11th), Denmark (1/8th), etc. A large economy needs an efficient banking sector to support its growth.
The onus of supporting the economy falls on the PSBs accounting for 70 % of the market share in Indian banking: o PSBs are inefficient compared to their peer groups on every performance parameter. o In 2019, investment for every rupee in PSBs, on average, led to the loss of 23 paise, while in NPBs it led to the gain of 9.6 paise. o Credit growth in PSBs has been much lower than NPBs for the last several years. ·Solutions to make PSBs more efficient: o Employee Stock Ownership Plan (ESOP) for PSBs’ employees o Representation on boards proportionate to the blocks held by employees to incentivize employees and align their interests with that of all shareholders of banks. o Creation of a GSTN type entity that will aggregate data from all PSBs and use technologies like big data, artificial intelligence and machine learning in credit decisions for ensuring better screening and monitoring of borrowers, especially the large ones.
Financial Fragility in the NBFC Sector
Survey investigates the key drivers of Rollover Risk of the shadow banking system in India in light of the current liquidity crunch in the sector.
Key drivers of Rollover Risk: o Asset Liability Management (ALM) Risk. o Interconnectedness Risk. o Financial and Operating Resilience of an NBFC. o Over-dependence on short-term wholesale funding.
Survey computes a diagnostic (Health Score) by quantifying the Rollover risk for a sample of HFCs and Retail-NBFCs (which are representative of their respective sectors).
The analysis of the Health Score has the following findings: o The HFC sector exhibited a declining trend post 2014 and overall health of the sector worsened considerably by the end of FY2019. o The Score of the Retail-NBFC sector was consistently below par for the period 2014 -19. o Larger Retail-NBFCs had higher Health Scores but among medium and small Retail- NBFCs, the medium size ones had a lower score for the entire period of 2014-19.
Survey suggests that the Health Score provides an early warning signal of impending liquidity problems.
Equity markets react favourably to increase in Health Score of individual HFCs and Retail-NBFCs.
The Survey prescribes this analysis to efficiently allocate liquidity enhancements across firms (with different Health Scores) in the NBFC sector, thereby arresting financial fragility in a capital-efficient manner.
Privatization and Wealth Creation
Survey examines the realized efficiency gains from privatization in the Indian context and bolsters the case for aggressive disinvestment of CPSEs.
Strategic disinvestment of Government’s shareholding of 53.29 per cent in HPCL led to an increase of around Rs. 33,000 crore in national wealth.
Survey presents an analysis of the before-after performance of 11 CPSEs which underwent strategic disinvestment from 1999-2000 to 2003-04: o Financial indicators such as net worth, net profit, return on assets (ROA), return on equity (ROE) etc of the privatized CPSEs, on an average, have improved significantly. o Privatized CPSEs have been able to generate more wealth from the same resources. Survey suggests aggressive disinvestment of CPSEs to: o Bring in higher profitability. o Promote efficiency. o Increase competitiveness. o Promote professionalism.
Is India’s GDP Growth Overstated? No!
GDP growth is a critical variable for decision-making by investors and policymakers. Therefore, the recent debate about accuracy of India’s GDP estimation following the revised estimation methodology in 2011 is extremely significant.
As countries differ in several observed and unobserved ways, cross-country comparisons have to be undertaken by separating the effect of other confounding factors and isolating effect of methodology revision alone on GDP growth estimates.
Models that incorrectly over-estimate GDP growth by 2.7 % for India post-2011 also misestimate GDP growth over the same period for 51 out of 95 countries in the sample.
Several advanced economies such as UK, Germany and Singapore have their GDPs misestimated with incompletely specified econometric model.
Correctly specified models that account for all unobserved differences and differential trends in GDP growth across countries fail to find any misestimating of growth in India or other countries.
Concerns of a misestimated Indian GDP are unsubstantiated by the data and are thus unfounded.
Thalinomics: The Economics of a Plate of Food in India
An attempt to quantify what a common person pays for a Thali across India.
A shift in the dynamics of Thali prices since 2015-16.
Absolute prices of a vegetarian Thali have decreased significantly since 2015-16 across India and the four regions; though the price has increased during 2019-20.
Post 2015-16: Average household gained close to Rs. 11, 000 on average per year from the moderation in prices in the case of vegetarian Thali. Average household that consumes two non-vegetarian Thalis gained close to Rs. 12, 000 on average per year during the same period.
From 2006-07 to 2019-20: Affordability of vegetarian Thalis improved 29 %. Affordability of non-vegetarian Thalis improved by 18 %.
India’s Economic Performance in 2019-20
India’s GDP growth moderated to 4.8 % in H1 of 2019-20, amidst a weak environment for global manufacturing, trade and demand.
Real consumption growth has recovered in Q2 of 2019-20, cushioned by a significant growth in government final consumption.
Growth for ‘Agriculture and allied activities’ and ‘Public administration, defense, and other services’ in H1 of 2019-20 was higher than in H2 of 2018-19.
India’s external sector gained further stability in H1 of 2019-20:
Current Account Deficit (CAD) narrowed to 1.5 % of GDP in H1 of 2019-20 from 2.1 % in 2018-19.
Impressive Foreign Direct Investment (FDI).
Rebounding of portfolio flows.
Accretion of foreign exchange reserves.
Sharper contraction of imports as compared to that of exports in H1 of 2019-20, with easing of crude prices.
Headline inflation expected to decline by year end:
Increased from 3.3 % in H1 of 2019-20 to 7.35 % in December 2019-20 due to temporary increase in food inflation.
Rise in CPI-core and WPI in December 2019-20 suggests building of demand pressure.
Deceleration in GDP growth can be understood within the framework of a slowing cycle of growth:
Financial sector acted as a drag on the real sector (investment-growth-consumption).
Reforms undertaken during 2019-20 to boost investment, consumption and exports:
Speeding up the insolvency resolution process under Insolvency and Bankruptcy Code (IBC).
Easing of credit, particularly for the stressed real estate and NBFC sectors.
Announcing the National Infrastructure Pipeline 2019-2025.
Survey expects an uptick in the GDP growth in H2 of 2019-20:
5 % GDP growth for 2019-20 based on CSO’s first Advance Estimates.
Expeditious delivery on reforms for enabling the economy to strongly rebound in 2020-21.
Fiscal Developments
Revenue Receipts registered a higher growth during the first eight months of 2019-20, compared to the same period last year, led by considerable growth in Non-Tax revenue.
Gross GST monthly collections have crossed the mark of Rs. 1 lakh crore for a total of five times during 2019-20 (up to December 2019).
Structural reforms undertaken in taxation during the current financial year:
Change in corporate tax rate.
Measures to ease the implementation of GST.
Fiscal deficit of states within the targets set out by the FRBM Act.
Survey notes that the General Government (Centre plus States) has been on the path of fiscal consolidation.
External Sector
Balance of Payments (BoP):
India’s BoP position improved from US$ 412.9 bn of forex reserves in end March, 2019 to US$ 433.7 bn in end September, 2019.
Current account deficit (CAD) narrowed from 2.1% in 2018-19 to 1.5% of GDP in H1 of 2019-20.
Foreign reserves stood at US$ 461.2 bn as on 10th January, 2020.
Global trade:
In sync with an estimated 2.9% growth in global output in 2019, global trade is estimated to grow at 1.0% after having peaked in 2017 at 5.7%.
However, it is projected to recover to 2.9% in 2020 with recovery in global economic activity.
India’s merchandise trade balance improved from 2009-14 to 2014-19, although most of the improvement in the latter period was due to more than 50% decline in crude prices in 2016-17.
India’s top five trading partners continue to be USA, China, UAE, Saudi Arabia and Hong Kong.
Exports: Top export items:Petroleum products, precious stones, drug formulations & biologicals, gold and other precious metals.
Largest export destinations in 2019-20 (April-November): United States of America (USA), followed by United Arab Emirates (UAE), China and Hong Kong.
The merchandise exports to GDP ratio declined, entailing a negative impact on BoP position.
Slowdown of world output had an impact on reducing the export to GDP ratio, particularly from 2018-19 to H1 of 2019-20.
Growth in Non-POL exports dropped significantly from 2009-14 to 2014-19.
India’s imports continue to be largest from China, followed by USA, UAE and Saudi Arabia.
Merchandise imports to GDP ratio declined for India, entailing a net positive impact on BoP.
Large Crude oil imports in the import basket correlates India’s total imports with crude prices. As crude price raises so does the share of crude in total imports, increasing imports to GDP ratio.
Significant Gold imports also correlate India’s total imports with gold prices. However, share of gold imports in total imports remained the same during 2018-19 and the first half of 2019-20, despite an increase in prices, possibly due to increase in import duty that reduced the import of gold.
Non-POL-non-gold imports are positively correlated with GDP growth.
Non-POL-non-oil imports fell as a proportion to GDP from 2009-14 to 2014-19 when GDP growth accelerated.
This may be because of consumption driven growth while investment rate declined, lowering non-POL-non-gold imports.
Continuous decline in investment rate decelerated GDP growth, weakened consumption, dampened the investment outlook, which further reduced GDP growth and along with it non-POL-non-gold imports as a proportion of GDP from 2018-19 to H1 of 2019-20.
Under trade facilitation, India improved its ranking from 143 in 2016 to 68 in 2019 under the indicator, “Trading across Borders”, monitored by World Bank in its Ease of Doing Business Report.
Logistics industry of India:
Currently estimated to be around US$ 160 billion.
Expected to touch US$ 215 billion by 2020.
According to World Bank’s Logistics Performance Index, India ranks 44th in 2018 globally, up from 54th rank in 2014.
Net FDI inflows continued to be buoyant in 2019-20 attracting US$ 24.4 bn in the first eight months, higher than the corresponding period of 2018-19.
Net FPI in the first eight months of 2019-20 stood at US$ 12.6 bn.
Net remittances from Indians employed overseas continued to increase, receiving US$ 38.4 billion in H1 of 2019-20 which is more than 50% of the previous year level.
External debt:
Remains low at 20.1% of GDP as at end September, 2019.
After significant decline since 2014-15, India’s external liabilities (debt and equity) to GDP increased at the end of June, 2019 primarily by increase in FDI, portfolio flows and external commercial borrowings (ECBs).
Monetary Management and Financial Intermediation
Monetary policy:
Remained accommodative in 2019-20.
Repo rate was cut by 110 basis points in four consecutive MPC meetings in the financial year due to slower growth and lower inflation.
However, it was kept unchanged in the fifth meeting held in December 2019.
In 2019-20, liquidity conditions were tight for initial two months; but subsequently it remained comfortable.
The Gross Non Performing Advances ratio:
Remained unchanged for Scheduled Commercial banks at 9.3% between March and September 2019
Increased slightly for the Non-Banking Financial Corporations (NBFCs) from 6.1% in March 2019 to 6.3% in September 2019.
Credit growth:
The financial flows to the economy remained constrained as credit growth declined for both banks and NBFCs.
Bank Credit growth (YoY) moderated from 12.9% in April 2019 to 7.1% as on December 20, 2019.
Capital to Risk-weighted Asset Ratio of SCBs increased from 14.3% to 15.1% between March 2019 and September 2019.
Prices and Inflation
Inflation Trends:
Inflation witnessing moderation since 2014
Consumer Price Index (CPI) inflation increased from 3.7 per cent in 2018-19 (April to December, 2018) to 4.1 per cent in 2019-20 (April to December, 2019).
WPI inflation fell from 4.7 per cent in 2018-19 (April to December, 2018) to 1.5 per cent during 2019-20 (April to December, 2019).
Drivers of CPI – Combined (C) inflation:
During 2018-19, the major driver was the miscellaneous group
During 2019-20 (April-December), food and beverages was the main contributor.
Among food and beverages, inflation in vegetables and pulses was particularly high due to low base effect and production side disruptions like untimely rain.
Cob-web Phenomenon for Pulses:
Farmers base their sowing decisions on prices witnessed in the previous marketing period.
Measures to safeguard farmers like procurement under Price Stabilisation Fund (PSF), Minimum Support Price (MSP) need to be made more effective.
Divergence Between Retail and Wholesale price:
Observed for essential agricultural commodities in four metropolitan cities of the country from 2014 to 2019.
Divergence particularly high for vegetables like onion and tomato. This may be due to the presence of intermediaries and high transaction costs.
Volatility of Prices: o Volatility of prices for most of the essential food commodities with the exception of some of the pulses has actually come down in the period 2014-19 as compared to the period 2009-14. o Lower volatility might indicate the presence of better marketing channels, storage facilities and effective MSP system.
Regional variations: o CPI-C inflation has been highly variable across States ranging between (-)0.04 per cent to 8.1 per cent across States/UTs in financial year (FY) 2019-20 (April-December). o In most states, CPI-C inflation in rural areas is lower than the CPI-C inflation in urban areas o Rural inflation has been more variable across states than urban inflation.
Inflation dynamics: o Convergence of headline inflation towards core inflation as per the CPI-C data from 2012 onwards.
The Union Budget of India for 2020–2021 was presented by the Finance Minister, Nirmala Sitharaman on 1 February 2020, in a backdrop of a slowing down of the Indian economy with estimated GDP growth for 2019-20 being at an 11-year low of 5%. This is the second budget of Narendra Modi led NDA government’s second term. The Economic Survey for 2019-2020 is released on 31 January 2020, a day before the budget. Before the budget speech the report of the 15th Finance Commission was tabled by the Finance Minister. The central ideas of the Budget are – “Aspirational India, Economic development, A Caring Society.”
Nirmala Sitharaman read out a Kashmiri poem during the budget speech in the Parliament as well as a Tamil couplet written by Thiruvalluvar. Nirmala Sitharaman delivered the longest budget speech ever by Finance Minister. She becomes the second women to present budget for the second time after Indira Gandhi.
The Union Budget is the annual financial report of India; an estimate of income and expenditure of the government on a periodical basis. As per Article 112 of the Indian Constitution, it is a compulsory task of the government. India’s first Budget was presented on 18 February 1860. R K Shanmukham Chetty, the first finance minister of independent India presented the Union Budget on 26 November 1947.
A simplified and new Income Tax Regime has been proposed as an option to the old regime.
Income between Rs 5 lakh to Rs 7.5 lakh: Reduced to 10% from the current 20%
Between Rs 7.5 lakh to Rs 10 lakh: Reduced to 15% from the current 20%
Between Rs 10 lakh to Rs 12.5 lakh: Reduced to 20% from the current 30%
Between Rs 12.5 lakh to Rs 15 lakh: Reduced to 25% from the current 30%
Above ₹15 lakh: Continue at 30%, but without exemptions
However, those who wish to continue to pay old rates may do so.
~ Business Sector ~
Concessional corporate tax rate of 15 per cent to new domestic companies in manufacturing and power sector.
Corporate tax for existing companies slashed to 22 per cent.
Govt proposes 100 per cent tax concession to sovereign wealth funds on investment in infra projects.
Concessional tax rate of 15 per cent extended to power generation companies.
Tax concession for sovereign wealth fund of foreign governments and other foreign investments.
Tax benefits to Start-ups by way of deduction of 100 per cent of their profits are enhanced by increasing turnover limit and period of eligibility period of eligibility.
Concessional tax rate for cooperatives proposed.
Turnover threshold for audit of MSMEs increased.
Extension of time limits pertaining to the tax benefits for affordable housing.
Issuance of Unique Registration Number to all charity institutions for easy tax compliance.
Health cess to be imposed on imports of medical equipment.
Dividend Distribution Tax removed and classical system of dividend taxation adopted
Simplified GST return shall be implemented from 1st April 2020. Refund process to be fully automated.
National Textile Mission to be launched with a proposed Rs 1,480 crore allocation. National Technical Textiles Mission for a period of 4 years
Allocation of Rs 27,300 crore for development of industry and commerce.
Foreign direct investment (FDI) into the country has increased to $284 billion during 2014-19 from $190 billion in previous five years.
Scheme to encourage manufacturing of mobile phones, electronic equipment and semiconductor packaging
NIRVIK Scheme for higher export credit disbursement launched
Setting up of an Investment Clearance Cell to provide end to end facilitation
Extension of invoice financing to MSMEs through TReDs
A scheme to provide subordinated debt for entrepreneurs of MSMEs
Scheme anchored by EXIM Bank and SIDBI to handhold MSMEs in exports markets
~ Health Sector ~
Rs 69,000 crores allocated for the healthcare sector.
More than 20,000 empanelled hospitals under PM Jan Arogya Yojana.
FIT India movement launched to fight NCDs
Expansion of Jan Aushadhi Kendra Scheme to all districts by 2024
Chennai-Bengaluru expressway will also be started.
Delhi-Mumbai expressway to be completed by 2023.
100 more airports to be developed by 2025
Transport infrastructure: Rs 1.7 lakh crore
National Infrastructure Pipeline: Rs 22,000 crore
National Logistics Policy to be launched soon National Logistics Policy to be launched soon
Accelerated development of Highways
Railways will set up Kisan Rail through PPP model so that perishable goods can be transported quickly.
150 trains will run under the public private partnership (PPP) mode, also four stations will be redeveloped with the help of the private sector.
More Tejas type trains for tourist destinations
Coporatizing at least one major port
An International Bullion Exchange to be set up at GIFT City.
Power sector: Efforts to replace conventional energy meters by prepaid smart meters.
Gas Grid: Expand National Gas Grid to 27,000 km
~ Education & Training ~
Rs 99,300 crore allocated for education in FY21.
Govt will start Ind-Sat Exam to promote under Study in India programme and a degree-level online education programme for the deprived.
A total of Rs 3,000 crore will be given for skill development.
About 150 higher educational institutions will start apprenticeship embedded courses.
Internship opportunities to fresh engineers by urban local bodies.
Special bridge courses to improve skill sets of those seeking employment abroad.
Degree level online education programmes for students of deprived sections of the society.
~ Social Welfare Sector ~
Allocation for Swachh Bharat Mission for 2020-21 stands at Rs 12,300 crore.
In further push to PM Modi’s ‘Nal se jaal’ scheme, govt proposes Rs 3.6 lakh crore towards piped water supply to households.
Rs 35,600 crore allocated for nutritional related programme in FY21.
Rs 85,000 crore has been budgeted for the welfare of Scheduled Castes and other backward classes.
Rs 53,700 crore for Scheduled Tribes
Allocation for senior citizens and ‘Divyang’ enhanced to Rs 9500 crore.
Rs 4,400 crore to tackle Delhi’s air pollution problem.
Extends additional Rs 1.5 lakh tax benefit on interest paid on affordable housing loans to March 2021.
Tax holiday to affordable housing developers.
~ Women and Child Development ~
A task force to be appointed to recommend regarding lowering MMR and improving nutrition levels
Rs 28,600 crore will be allocated in FY21 for women-linked programmes.
~ Banking and Financial Sector ~
DICGC has been permitted to increase Deposit Insurance Coverage for a depositor from Rs 1 lakh to Rs 5 lakh per depositor.
Amendments in Banking regulation Act to strengthen Cooperative Banks.
Proposal to sell balance holding of the government of India IDBI Bank to private investors.
Recovery eligibility limit for NBFCs reduced to asset size of 100 crore or loan size of 50 lakh.
Separation of NPS Trust for government employees from PFRDAI
Specified categories of government securities would be opened for non-resident investors
FPI Limit for corporate bonds to be increased to 15 per cent.
New debt ETF proposed mainly for government securities
~ Technology Sector ~
550 WiFi facilities have been commissioned at railway stations.1 lakh gram panchayats to get optical fibre link
An allocation of Rs 6,000 crore will be provided for BharatNet scheme. Rs 20,000 crore for renewable energy sector in a bid to tackle pollution and climate change.
A new scheme of smart meters will be launched.
An allocation of Rs 8,000 crore will be made for National Mission on Quantum Computing and Technology.
Knowledge Translation Clusters for emerging technology sectors
Scaling up of Technology Clusters harbouring test beds and small scale manufacturing facilities.
~ Disinvestment ~
Govt proposed an ambitious disinvestment target of PSU stake sales to the tune of Rs 2.1 lakh crore in the next financial year 2020-21.
Government to sell part holding in LIC.
Govt to also sell stake in IDBI Bank to private investors.
~ Agriculture & Allied Sectors ~
Budget allocation of Rs 2.83 lakh crore for agriculture and allied activities.
Doubling farmers incomes by 2020.
Krishi Udaan under Ministry of Civil Avaition on international and national routes to benefit farmers. Krishi Udaan scheme to transport agri products to national as well international destinations to be launched.
Self Help Groups will be allowed to set up village agri storage facilities.
NABARD will map and geo-tab 162 mn tonne capacity agri warehouses across country. FCI and Warehousing Corporation of India to build warehousing facility on their land. Government to incentivise farmers to go solar.
Over 6 crore farmers under Pradhan Mantri Fasal Bima Yojna have been insured.
Pradhan Mantri Kisan Urja Suraksha and Utthan Mahabhiyan (PM KUSUM) to be expanded, providing 20 lakh farmers in setting up standalone solar pumps.
Railways will set up Kisan Rail through PPP model so that perishable goods can be transported quickly.
Agri-credit target for the year 2020-21 has been set at Rs 15 lakh crore.
One horticulture crop in one district on cluster basis will be promoted. Viability gap funding for creation of efficient warehouses on PPP mode.
SHGs run Village storage scheme to be launched.
Integartion of e-NWR with e-NAM.
Elimination of FMD and brucellosis in cattle and PPR in sheep and goat by 2025.
Increasing coverage of artificial insemination to 70 per cent.
Doubling of milk processing capacity by 2025.
Fishery extention through 3477 Sagar Mitras and 500 fish FPOs.
Raise fishery exports to `1 lakh crore by 2024-25
Fish Production target of 200 lakh tonnes by 2022-23.
~ Culture & Tourism ~
Five archaeological sites would be developed as iconic sites with on-site museumswould be developed at Rakhigarhi in Haryana, Hastinapur in Uttar Pradesh, Sivasagar in Assam, Dholavira in Gujarat and Adichanallur in Tamil Nadu.
Indian Institute of Heritage and Conservation
Museum of Numismatics and trade
Tribal museum in Ranchi
Maritime Museum in Lothal
Tourism promotion gets Rs 2500 crore.
Ministry of Culture to get Rs 3,150 crore.
~ Fiscal Scenario ~
Fiscal deficit target pegged at 3.8% of GDP for FY 2019-20. FY21 fiscal deficit target pegged at 3.5% of GDP.
~ Miscellaneous ~
G20 Presidency in 2022 – Allocation of Rs 100 crore
Allocation of Rs 30,757 crore for Union Territory of Jammu & Kashmir
Allocation of Rs 5,958 crore for Union Territory of Ladakh
§ State of Indian Economy §
Between 2006-2016, 271 million are out of poverty and we should be proud of it.
Total of 60 lakh new taxpayers and 105 crore e-way bills generated under GST
Central government debt reduced to 48.7 per cent of GDP in 2019 from 52.2 per cent.
India is now 5th largest economy in world.
Gross enrollment of girls is 94.32 per cent in elementary levels, 81.32 per cent in secondary level and 59.7 per cent in higher secondary level.
Foreign direct investment (FDI) into the country has increased to $284 billion during 2014-19 from $190 billion in previous five years.
Nominal growth of GDP for 2020-21 has been estimated at 10 per cent
Receipts for 2020-21 estimated at 22.46 lakh crore rupees, and expenditure at 30.42 lakh crore rupees
‘Vivad se Vishwas’ scheme for direct tax payers whose appeals are pending at various forum. 4.83 lakh direct cases pending in various appellate forums. Under the scheme, taxpayer to pay only amount of disputed tax. They will get complete waiver on interest and penalty if scheme is availed by March 31, 2020.
15th Finance Commission has cut state share of central taxes by one percentage point to 41 per cent.
Rs 12.7 lakh crore to be transferred to states and union territories in 2020-21.
Government has insured 6.11 crore farmers under Pradhan Mantri Fasal Bima Yojna.
- Provisions related to Assam & North East India -
Union government increases allocation for eight states of Northeast India to Rs 50,169.39 crore in the union budget 2019-20 from Rs 39,201 crore of 2018-19.
Rs 4105 Crore is allocated to Oil India Limited for exploration and production, Rs 755 Crore is allocated for MSME sector.
The budget allocation for the Northeast under the North East Road Sector Development Scheme has been increased from Rs 391 crore during 2018-19 to Rs 666 crore for 2019-20.
Budget allocation of Rs. 3000 crore for the Ministry of Development of Northeastern Region (DoNER) is a gesture that the central government is extending its continued support to ensure development and thrust to the Northeast.
The increase of fund for the North East Special Infrastructure Development Scheme (NESIDS) from Rs 140 crore during 2018-19 to Rs 695 crore for 2019-20 will enable different states in the Northeast to further initiate large infrastructure activities.
Positive for North East companies as all private entity in North East will be within 25% tax rates, as corporate tax is reduced to 25% for companies with turnover upto 400 crores.
Increase in allocation for refund of central and integrated GST to North Eastern Region (NER) the Himalayan states will ensure timely refund of GST under industrial policy.”
Finance Minister Nirmala Sitharaman on 5th July, 2019 presented the Union Budget to boost infrastructure and foreign investment at a time when the economy is showing signs of slowdown. Taking a pragmatic approach, Finance Minister announced no changes in personal income tax rates but levied additional surcharge on the super-rich. She also sought to spur growth with reduction in corporate tax and sops to housing sector, startups and electric vehicles. She also said that digital payments will get cheaper and govt will launch an ATM-like One Nation One Card for pan-India travel.
Highlights & important points of the Union Budget 2019-20
- Income Tax & other Personal Taxes -
Interest deduction on housing loan under Section 80EE increased by 1.5 lakhs for home loans taken on self-occupied house property by 31/3/2020, houses with the cost of Rs 45 lacs will be eligible for this.
Interchangeability of PAN and Aadhar for ease and convenience of taxpayers. Income Tax return can be filed using Aadhar Number.
To discourage cash payments TDS@2% on withdrawals exceeding 1Cr per annum from a bank account
Surcharge for individuals having taxable income from Rs 2 crores to Rs 5 crores increased to 18% from 15%. Surcharge for individuals having taxable income from Rs 5 crores to Rs 10 crores increased to 22% from 15%.
Additional Rs 1.5 lakh tax relief on home loan for purchase of a house up to Rs 45 lakh.
To make electric vehicles affordable, additional IT deduction on 1.5 lakh on interest paid on loan taken to purchase electric vehicles
- Business Taxes -
Corporate tax worth 25% that is applicable to companies with an annual turnover Rs 250 crore will be applicable to the ones with an annual turnover of Rs 400 crore.
Custom duty hike on fuel by 1 rupee, gold and precious items; Petrol & diesel to get costlier.
Duty has been raised on: tiles, cashew kernels, vinyl flooring, auto parts, some synthetic rubber, digital and video recorder and CCTV camera.
Businesses with less than Rs. 5 crore annual turnovers, comprising over 90% of GST payers, will be allowed to return quarterly returns.
2 % interest subvention on loan of 1 crore for GST registered MSME units.
350 crore rupees allocated for 2% interest subvention for all GST-registered MSMEs on fresh or incremental loans
Advises GST Council to Lower GST Rate from 12% to 5% on Electric vehicle and Additional Income Tax Deduction of 2.5 Lakh on Interest paid on loan taken to purchase an electric vehicle.
Propose easing angel tax for startups.
To resolve the angel tax issue, startups will not be subject to any scrutiny in respect to valuation. Funds raised by startups will not require any scrutiny by the I-T department.
FAME II scheme aims to encourage faster adoption of electric vehicles through the right incentives and charging infrastructure.
- Business Sector -
MSME: Large-scale extensive reforms planned, government to create a platform for MSME payments
MSME to get loans up to 1 crore within 59 minutes. Loans worth Rs. 350 crore already disburse
Government to introduce a host of exclusive programs for startups on DD News
Govt plans to create MRO (Manufacturing, Repair and Operate) industry.
2% interest subvention for GST-registered MSME on fresh or incremental loans.
‘Stand Up India’ Scheme to continue till 2025.
Pension benefit extended to retail traders with annual turnover less than Rs 1.5 crore.
Local sourcing norms will be relaxed for the single-brand retail sector.
Govt to open FDI in aviation, insurance, animation AVGC and media.
- Infrastructure Sector -
Focus on investment in infrastructure, national highways and aviation sectors
The second phase of Bharat Mala to develop state highways
A comprehensive restructuring of national highways will be taken up
Inter-operable One Nation One transport card: ATM-like Transport card for universal travel on various modes of transport (metro, road, railways etc).
PPP to be used to unleash faster development and the delivery of passenger freight services.
Comprehensive restructuring of National Highways Programme for creation of National Highways Grid.
Government envisions using rivers for cargo transport to decongest roads and railways.
- Education Sector -
National education policy to propose major changes in both secondary and higher education
Swayam Initiative – Digital education to be promoted
Greater focus on research and development – National Research Foundation to fund and promote research – pooling of research grants from various ministries and disbursing them, preventing duplication of research projects
For the Youth – New national educational policy to transform the Indian education system
Govt to launch ‘Study in India’ programme to attract foreign students in higher education.
Allocate Rs 400 crore for world-class higher education institutions in FY 20.
New Higher Education Commission with focus on higher autonomy.
- Social Welfare -
Gaon, Garib and Kisan are the focus of our government.
Provision of housing, electricity, clean cooking facility, safe and adequate drinking water to all in rural India
Rental laws to be reformed. Modern tenancy laws will be shared with states to promote house renting.
Encouragement of rainwater harvesting, groundwater recharge, and management of household wastewater for reuse in agriculture
Har Ghar Jal – to all rural household by 2024
7 crore LPG connections delivered to rural households
Proposed pension benefit to 3 crore retail traders and shopkeepers whose annual turnover is up to Rs 1.5 crore
Rs 3,000 pension per month for workers from the informal sector.
New Jal Shakti ministry will work with states to ensure Har Ghar Jal for all rural houses by 2024.
Pradhan Mantri Gram Sadak Yojana phase 3 is envisaged to upgrade 1,25,000 km of road length over the next 5 years.
Govt will set up 100 new clusters for 50,000 artisans in FY 20.
To invest Rs 80,250 cr for upgradation of roads under PM Gram Sadak Yojana.
Every single rural family, except those unwilling, to have electricity by 2022.
- Women and Child Development -
Committee to be formed with Public and Private stakeholders for gender equality
Every SHG Women having Jan Dhan Account – Rs. 5,000/- overdraft allowed
Loan up to 1 lakh to be provided for SHG women members, under Mudra Scheme for Women entrepreneurs
Nari tu Narayani: Women SHG Interest Subvention Programme to be expanded to all districts in India.
Every verified woman SHG member having a Jan Dhan account can avail Rs 5,000 rupees overdraft facility.
- Banking and Financial Sector -
Reforms will be taken to strengthen governance in Public Sector banks
Record Recovery of over 4lac crore with IBS
NPAs of commercial banks reduced by over 1 lakh crore over last year
After Consolidation of Public Sector Banks, now 70,000 Crore of Capital boost for credit improvement
Government has smoothly carried out consolidation, reducing the number of PSBs by 8
NBFCs – that are fundamentally sound, will get fundings from govt to a total of 1lakh crore during the current financial year
RBI has limited regulatory Authorities, Now the Regulatory Authorities of RBI over NBFC will be placed
Proposals for strengthening the regulatory authority of RBI over NBFCs – Debenture Redemption Reserve to be maintained
2% TDS on withdrawals of Rs 1 crore in a year from your bank account for business payments.
No charge on digital payments: MDR charges waived on cashless payment.
On purchase of high-rate pooled assets of NBFC amounting of Rs 1 lakh core in this FY, govt will provide one-time 6 month credit guarantee.
Propose to provide Rs 70,000 crore capital for PSU Banks.
Regulation of HFCs (Housing Finance Cos) to move to RBI from National Housing Bank.
- Technology Sector -
Solar storage batteries and chargers included in 35AD deduction
Program of mass scaling of LED Bulbs – Approx. 35 Crores of LED bulbs distribute
Machines and robots to be deployed for scavenging
Focus on VR, AI, Robotics training to youth to align India with the World
- Investment -
Existing KYC norms for FPIs to be rationalized and simplified to make it more investor-friendly.
Long-term bonds for market.
To allow FIIs & FPIs investment in debt securities issued by NBFCs.
Credit Guarantee Enhancement Corporation to be set up long-term bonds with specific focus on infra sector
Propose Social Stock Exchange under SEBI for listing social enterprises & voluntary organisations.
To merge NRI portfolio route with FPI route.
To hike statutory limit for foreign investment in some companies.
To set up a credit guarantee enhancement corporation.
Govt will take up measures to make RBI & SEBI depositories inter-operable.
SEBI to mull increasing minimum public shareholding to 35% from 25%.
User friendliness of trading platforms for corporate bonds will be reviewed, including issues arising out of capping of International Securities Identification Number.
To deepen corporate tri-party repo market in corporate debt securities. Plan to enable stock exchanges to allow AA rated bonds as collateral.
Annual Global Investors’ Meet for attracting global players to come and invest in India.
To allow FPIs to subscribe to listed debt papers of REITs.
- Disinvestment -
Govt to modify present policy of retaining 51% stake in PSUs.
Govt to continue with strategic divestment of select CPSEs.
Divestment target of Rs 1.05 lakh crore for FY 20.
- Agriculture & Allied sector -
Govt to promote innovative zero Budget farming.
10,000 new farm produce organisations.
80 Livelihood business incubators and 20 technology business incubators to be set up in 2019-20 under ASPIRE to develop 75,000 skilled entrepreneurs in agro-rural industries.
- NRI’s -
Proposal for Issuance of Aadhar Card on arrival for NRIs with Indian Passports
Aadhaar card for NRI’s post arrival in India
To increase NRI investment in Indian capital market – NRI portfolio scheme route and FPI route should merge
- Railway Sector -
Railway infrastructure will need an investment of Rs 50 lakh crore between 2018 and 2030.
PPP to be used to unleash faster development and delivery of passenger freight services
Railway Station Modernisation will be launched this year.
Indian Railways to be encouraged to invest more in urban and suburban regions
657KM of Metro Rail operational in the country.
Railways to be encouraged to invest more in suburban rail network via SPVs.
- State of Indian Economy -
It took us over 55 years to reach $1 trillion dollar economy, but we added $1 trillion in just 5 years. We can very well reach $5 trillion in the next few years.
India will become $3 trillion economy this year. We need to continue to take many structural reforms to achieve $5 trillion economic goal.
- Fiscal Scenario -
Fiscal deficit in FY 19 at 3.3% of the GDP.
Govt external debt to GDP is among the lowest in the world.
- Miscellaneous -
17 iconic world-class tourist sites to be developed.
India has emerged as a major space power. It is time to harness our ability commercially.
A public sector enterprise, New Space India Limited (NSIL) has been incorporated to tap benefits of ISRO.
To popularise sports at all levels, National Sports Education Board for development of sportspersons to be set up under ‘Khelo India.’
Schemes such as BharatMala, Sagarmala and UDAN are bridging rural urban divide and improving our transport infrastructure.
‘Gandhipedia’ is being developed to sensitize the youth about positive Gandhian values.
NPAs recover Rs 4 lakh crore over the last four years, NPAs down by Rs 1 lakh crore in the last one year.
Rashtriya Swachhta Kendra to be inaugurated at Rajghat on October 2.
‘ Yakeen ho to koi raasta niklata hai, hawa ki awt(protection) bhi le kar chiragh jalta hai’
Connectivity is the lifeline of the economy.
Budget: Glossary of Terms
Consolidated Fund
All revenues received by the Government including tax and non-tax revenues, loans raised and repayment of loans given (including the interest thereon) form the Consolidated Fund. All expenditure and disbursements of the Government, including release of loans and repayments of loans taken (and the interest thereon), are met from this fund.
Contingency Fund
A reserve fund set aside for possible unforeseen expenditure and established under Article 267(2) of the Constitution. It is an imprest placed at the disposal of the Governor.
Public Account
All public moneys received, other than those credited to the Consolidated Fund, are accounted for under the Public Account. In respect of such receipts, Government acts as a banker or trustee. The Public Account comprises of repayable like Small Savings and Provident Funds, Reserve Fund, Deposits and Advances, Suspense and Miscellaneous transaction (adjusting entries pending booking to fi nal heads of account), Remittances between accounting entities, and Cash Balance.
Deficit
It is the gap between Revenue and Expenditure. The kind of deficit, how the deficit is financed, and application of funds are important indicators of prudence in Financial Management.
Fiscal Deficit
When the government’s non-borrowed receipts fall short of its entire expenditure, it has to borrow money form the public to meet the shortfall. The excess of total expenditure over total non-borrowed receipts is called the fiscal deficit.
Primary Deficit
The primary deficit is the fiscal deficit minus interest payments. It tells how much of the Government’s borrowings are going towards meeting expenses other than interest payments.
Revenue Deficit/ Surplus
It is the gap between Revenue Receipts and Revenue Expenditure. Revenue Expenditure is required to maintain the existing establishment of Government and ideally, should be fully met from Revenue Receipts.
Direct and Indirect Taxes
Direct taxes are the one that fall directly on individuals and corporations. Eg. Income tax, corporate tax etc. Indirect taxes are imposed on goods and services. They are paid by consumers when they buy goods and services. These include excise duty, customs duty etc.
Fiscal policy
It is the government actions with respect to aggregate levels of revenue and spending. Fiscal policy is implemented though the budget and is the primary means by which the government can influence the economy.
Capital Budget
The Capital Budget consists of capital receipts and payments. It includes investments in shares, loans and advances granted by the central Government to State Governments, Government companies, corporations and other parties
Revenue Budget
The revenue budget consists of revenue receipts of the Government and it expenditure. Revenue receipts are divided into tax and non-tax revenue.
Tax revenues constitute taxes like income tax, corporate tax, excise, customs, service and other duties that the Government levies.
Non-tax revenue sources include interest on loans, dividend on investments.
Budget Estimates Amount of money allocated in the Budget to any ministry or scheme for the coming financial year.
Guillotine
Parliament, unfortunately, has very limited time for scrutinizing the expenditure demands of all the Ministries. So, once the prescribed period for the discussion on Demands for Grants is over, the Speaker of Lok Sabha puts all the outstanding Demands for Grants, Whether discussed or not, to the vote of the House.
Assam finance minister Himanta Biswa Sarma presented the state budget for the financial year 2019-20 on 6th February, 2019 at the state Legislative Assam assembly. This is the second digital budget of the state.
Assam Budget 2019 is dedicated to each of 3 crore & 30 lakhs population of our state, their happiness health & positivity. Each of the proposals of Assam Budget 2019 is in consonance with philosophy of Sarve Bhavantu Sukhinah, the greater well-being of people of this great State Assam.
Finance Minister Himanta Biswa Sarma started Assam Budget 2019 speech by saying: ‘Itu Bitupon, Dharma Sanatan Aakexe Kirtan, Kore Sdhujon’ Magnificent and sublime is the eternal faith which inspires the noble man to sing to the holy tune!
Sector-Wise Analysis
Social Welfare
Vistarita Atal Amrit Abhiyan, a cashless healthcare scheme for families whose income is Rs.5 lakhs or less. Propose to expand the coverage of AAA.
In 2017, announced Kanaklata Mahila Sabalikaran Yojana with vision of promoting self-help groups. Provided financial support to tune of Rs 184.89 crore to 1.32 Lakh SHGs.
15 Lakh beneficiaries have been paid stipend under Deen Dayal Divyangyan Sahayjya Asoni amounting to Rs138 crore. An outlay sum of Rs200 crore for these initiatives under Assam Budget 2019 is allocated.
Indira Miri Universal Widow Pension Scheme is dedicated to Smt Indira Miri. Allocated Rs136 crore in Assam Budget 2019 to cover 40,000 families under ‘Immediate Family Assistance Scheme’ & an estimated 2.4 Lakh widows under this scheme.
Rs 25,000 immediate assistance to widows below 45 years. – A new scheme under which any woman, upto age of 45 years, who loses her husband, will receive a lump sum amount of Rs 25,000 as Immediate Family Assistance which will support the family tide over the financial vacuum created by the loss of the bread earner
Central Govt is providing Old Age Pension for 7 lakh persons & almost equal number of beneficiaries are being covered by state government. I am allocating 250 crore for the scheme with commitment to provide more funds when new beneficiaries are identified.
Govt also passed the PRANAM Act, 2017 that strongly advised government employees to assure the security of senior citizens and the elderly people do not face abuse and are never deprived of their dignity in their old age.
Govt will give one tola gold (costs around Rs 38,000 as on today) to brides belonging to all such communities of Assam where it is customary to provide gold at the time of wedding. While other parts of India is plagued with the curse of dowry, in Assamese society, this is a voluntary act of assurance from the parents that no matter where she is, their support is always with her. This constitutes a part of the Stree-dhana.”
Earmarking Rs 300 crorefor Arundhati. Benefit under Arundhati can be availed upon formal registration of marriages under Special Marriage (Assam) Rules, 1954 & will reach beneficiaries right in time for the social marriage. It will be limited to only economically weaker sections, whose ann income is below Rs 5 lakh.
New scheme will be launched where rice will be sold at Rs 1/kg; 53 lakh families to benefit.
10 lakh aid will be given to each 108 religious places of all faith that are 100 years old in the state.
Launch of Bhasha Gaurav Achoni scheme for the protection and promotion of tribal languages of the state
Proposal to mitigate 380 arsenic affected habitations and 7 fluoride affected habitations
Near 1100 families have benefited under Compassionate Family Pension Scheme.
Education
Free textbooks to students up-to degree level from present level of Class XII, for children of families having annual income below Rs 2 lakh.
E-bike for students passing class XII state board in first division. The government will also provide free uniform to students of class IX and X.
All college students from tea garden community to get Rs 10,000 monthly stipends.
Rs 200 crores earmarked for Minority Girls Scholarship Scheme in Assam Budget 2019. Minority Girls Scholarship Scheme– A step towards education of girls belonging to minority. The scheme will encourage the girls to continue higher education. This scheme will be launched from Financial Year 2019-20.
A University for Divyangjan to be set up in Boko, Kamrup district under Deen Dayal Divyang Sahayjya Asoni scheme. It is one of the biggest initiatives to aid Divyang persons.
Gyan Deepika – The government will enhance parental income level of Rs. 1 lakh to Rs. 2 lakh for free admission.
CULTURE & TOURISM
Three giant statues of Assam Monarchs- Kumar Bhaskaravarman, Chaolung Siu-ka-Pha and Maharaj Nara-Narayana to be built at the state secretariat as icons of good governance.
Rs 155 crore given for the renovation of Batadrava Than, the sacred birth place of Mahapurusha Srimanta Sankaradeva, at Bordowa, Nagaon.
Rs 25 crore sanctioned for development of tombs of Ahom Kings as tourist attraction.
Rise of domestic tourist footfalls from 57,13,156 to 59,34,791 and from 28,419 to 31,739 in respect of foreign tourists
GOVERNANCE
Village headmen to get smartphones to stay connected with the district administration
SPORTS
One time cash incentive worth Rs 50,000 for a total of 2000 sports and arts personalities for their contribution.
ECONOMY
Construction of a new crude oil pipeline from Paradip Port to Numaligarh Refinery at a cost of Rs. 22,594 crore.
Rs 2200 crore sanctioned for the construction of 6-lane bridge over Brahmaputra river in Guwahati
Proposal to enhance threshold limit for registration under GST for supplier of goods to Rs 40 lakhs.
For MSME sector, annual turnover limit for availing Composition Scheme enhanced to Rs 1.5 crore
Scheme to rehabilitate boatmen who have lost jobs after the India’s two longest bridges were completed over Brahmaputra.
Rs 100 crore earmarked for developmental and employment related activities for indigenous Muslims of the state.
MAJOR ANNOUNCEMENTS
I. Aami Axomiya Initiative
Propose to appoint a Welfare Officer in each of the Tier 1 and Tier 2 cities which has a sizeable Assamese diaspora.
These Welfare Officers will support the distressed during times of medical emergency, provide assistance to young students to adjust to a new city and provide a temporary monetary assistance of immediate nature to those who have lost their jobs.
Further, depending on the availability of land, will also strive to construct Namghars in cities with sizeable Assamese diaspora.
Will also provide immediate logistical and financial assistance in cases of death of Assamese people living outside the State to provide the families of the deceased some succor during this time of grief.
II. Bhasha Gaurav Asoni
Protection and preservation of the rights, language and cultural traditions of the indigenous people of our state.
To ensuring that vernacular languages and dialects are preserved and promoted.
Will promote research of individual tribal languages helping them to develop grammar, publish books in their languages, and also develop dictionaries and encyclopedias in their languages. Various learning centres for the young students can
Earmarked Rs.50 crores in financial year 2019-20 out of the total budgetary commitment of Rs. 100 crore.
III. City Infrastructure Development Fund
In the Budget of 2017-18 a new scheme of City Infra Development Fund (CIDF) was
This scheme is aimed at increasing the Urban Infrastructure by carrying out infrastructure projects in 6 large cities (except Guwahati). Subsequently, the Budget of 2018-19 announced CIDF schemes of middle tier towns, having population of above 40,000.
Expanding CIDF to the 6th Scheduled areas which are the priority areas of this Government and create long felt need for amenities in the three beautiful towns namely Kokrajhar, Diphu and Haflong.
Each town under this scheme will be Rs. 100 crores.
Allocating Rs. 300 crore in the Budget for the year 2019-20 for CIDF.
IV. Incentive to the Technicians and Artists of Mobile Theatres of Assam
Provide a one-time grant of Rs. 50,000 for theatre artists and technicians, who have spent at least 5 years with the industry as a recognition of their efforts and outstanding contribution to this art form.
Earmarked a sum of 5 crore for the same Budget 2019-20.
V. One-Time Financial Assistance to 2000 leading Sports & Cultural Personalities
Hima Das and Ms. Rima Das have not just become household names across the country but have also taken the Assamese pride a notch higher with their outstanding achievements in the field of Sports and Cinema respectively.
To express appreciation to these icons and to encourage others, will give a one-time cash incentive of Rs. 50,000 each to total 2000 Sporting and Art Personalities for their contributions.
VI. Property Tax Amnesty for property owners in Guwahati
Residential and commercial buildings in Guwahati were constructed without complying with the building byelaws of Guwahati Metropolitan Development Authority (GMDA)
Government has decided to introduce a one-time amnesty scheme for property tax payers in Guwahati.
On voluntary declaration of their building violations, a one-time settlement and regularisation of the construction will be done against the payment of the building violation penalties.
VII. Restoration of Batadrava Than
In 1468, Srimanta Sankardev established the very first Kirtanghar of Assam at Batadrava for propagation of the Ek Saran Nam Dharma founded by him to bring together our people, breaking the barriers of caste, race or ethnicity.
He built the ‘Monikut’ together with Kirtanghar or Namghar and the Chari-Hati for accommodation of his disciples. This institution complex, now called as Sri Sri Batadrava Than, was completed in 1509.
The condition of Sri Sri Batadrava Than currently has deteriorated due to lack of proper maintenance.
Even the land belonging to this sacred Than was under encroachment which our Government has freed. It is overdue that this place is renovated and brought back to its original glory!
Propose an amount of Rs. 155 crore over the next 3 years.
VIII. Mobile Phones for Gaon Burahs
Gaon Burahs play a major role in maintaining the peace and brotherhood in rural Assam.
Propose to provide each of the 8000+ Gaon Burahs with smart phones.
Allocated Rs. 4 crore for this initiative in this year’s budget.
IX. Charaideo Maidams
Charaideo Maidams are an intrinsic part of the Assamese culture and an important archaeological asset of the State.
There have been calls for the sight to be listed as UNESCO World Heritage site. Steps will also be taken to promote this site as a major tourist attraction of the State and will initiate the efforts towards listing the site as a UNESCO World Heritage Site.
For the development of this important of this historical site, earmarked Rs.25 crores in this Budget and the Cultural Affairs Department will implement this scheme in consultation with the stakeholders.
X. Package for Integrated Development of Majuli Island (PIDMI)
Majuli is indeed at the heart of the Assam’s cultural heritage.
However, due to the perennial floods in the mighty Brahmaputra, this river island is gradually eroding.
Will provide a funding of Rs. 150 crore over medium term. Earmarking a sum of Rs. 50 crore for the integrated development of Majuli in this year’s budget.
XI. State Level Mega Skill Development Scheme
The Government plans to provide comprehensive skill training to the youth of the State so that they can obtain gainful employment in different priority sectors.
Earmark Rs. 77 crore for this scheme for the year 2019-20.
XII. Dharmajyoti Scheme
Government of Assam has been providing 50% subsidy to pilgrims who visit various holy places related to Assamese culture and heritage.
To ensure that more people are able to visit these temples government has decided to increase the subsidy for this scheme to 75% from 2019-20 and I am earmarking sufficient budget for this.
XIII. Statues of Kumar Bhaskaravarman, Chaolung Siu-Ka-Pha and Maharaj Nara-Narayana
Assam has seen some legendary rulers during the last millennium, the most prominent and well-known among them are Kumar Bhaskarvarman, most illustrious of the monarchs of the ancient kingdom of Kamarupa, the founder of the Ahom Kingdom – Chaolung Siu-Ka-Pha, and the last ruler of the undivided Koch Kingdom – Maharaj Nara Narayana
it is essential to remember the great rulers of our State and to this effect, govt. have decided to install giant statues of Kumar Bhaskaravarman, Chaolung Siu-Ka-Pha, and Maharaj Nara-Narayana in the Assam Secretariat Complex.
XIV. Initiatives for Preserving Cultural Heritage
Govt announce the following initiatives:
(a) Swargadeo Smriti Khetra at Charaideo in memory of the 42 great swargadeos of the Ahom Dynasty
(b) Siu-ka-pha Chair in Dibrugarh University in the memory of Siu-Ka-Pha, the first Ahom king and founder of the Ahom kingdom
(c) Museum in the name of Motok King Sarbananda Singha who is one of our royal icons.
(d) Will create Samannay Khetra in the name of Sati Radhika in Majuli, Sati Sadhini in Sadia and Bhimbor Deori samannay khetra in Bihpuria
(e) Viswa Mahabir Chilarai Sanskritik Kala Ketra in North Guwahati
(f) Govt will also develop the second capital of Ahom Kingdom – Habung, established by Chaolung Siu-Ka-Pha, as international research destination for Tai-Ahom culture.
XV. Relief package for boatmen, restaurant, etc. affected by the opening of Dhola-Sadia and Bogibeel Bridges
The inauguration of the Dhola-Sadia and Bogibeel Bridges has been a moment of pride and a boon for most of us in the State has also brought misfortune for the boatmen, restaurant owners and others who have lost their income sources.
In order to ensure that they are not left with a source of income our Government has decided to rehabilitate such individuals with an alternate source of income through the enterprise of the Inland Water Transport Department and govt earmarked Rs. 5 crore initially, for this scheme in this year’s budget.
XVI. Incentives for organizing Assamese traditional sports
During the last two years, government has made sincere efforts for the upgradation of sports infrastructure in Assam with our vision of making Guwahati as the ‘Sports Capital of India’.
will devote equal attention towards encouraging our traditional Assamese sports such as Nau Khel, Kaar Khel, Kori Khel, Ghila Khel Maal juj, Haatur, etc. which are extremely popular among our people.
Government has decided to organize a Traditional Sports Festival in Assam in 2019-20, along with taking other initiatives to showcase the richness of our traditional sports.
XVII. Training facility for UPSC/APSC exams for young students
Government focuses in providing training facilities for UPSC & APSC exams for the students of these communities.
Last year, introduced an initiative for providing UPSC/APSC training facilities for the students from the tea tribes and this year, will set up similar facility for the students from the Moran and Motok communities.
XVIII. Formation of new district
Govt have decided to create a separate new district from the existing Dima Hasao district considering its large geography and hilly terrain which makes the access of government services difficult for the citizens.
XIX. Beneficiaries Data Hub for the State of Assam
Announced the setting up of a Beneficiaries Data Hub in the state. This system would be housed within the Finance Department, and would be given better shape with the help of other departments like IT, P&RD, Social Welfare, Health, Education, etc.
XX. Provision of Additional Classrooms, Partition Walls, and Electricity in Elementary Schools
NABARD has approved Rs.438 crores for Financial Year 18-19 for the improvement of the schools and the work will start very soon.
In 2018, Govt conducted the 2nd round of Gunotsav in 33 districts covering nearly 36 Lakh children from Class-II to Class-IX, to assess the qualitative achievement level of learners in terms of scholastic and co-scholastic aspect and infrastructural assessment of the school and remedial measures on the gaps identified and to provide remedial Support thereof.
In continuance of endeavour to bridge the infrastructural gaps in our schools, earmarking a sum of Rs.219 crore for this scheme in budget 2019-20.
XXI. Incentives for ANM and GNM in Rural Areas
The rate of Infant Mortality (IMR) and Maternal Mortality (MMR) has seen a steady decline over the past decade.
From an IMR of 67 of 1000 in 2006, this has come down to 44 (out of every 1000 births) in 2016, while the MMR has come down from 480 deaths (out of every 100000 births) in 2006 to 237 in 2016.
Announcing an allowance of Rs. 1500 per month for every GNM and Rs. 750 per month for every ANM as rural allowance on the lines of a similar allowance already being given to the doctors posted in far flung areas.
XXII. Creation of Development Corporation for Indigenous Muslims
The Indigenous Muslims of Assam – Goria, Moria, Ujani, Deshi, Jola, Poimal, Syed, etc.- have always played an extremely important role in the social and economic progress of the State.
Will establish a Development Corporation for the Indigenous Muslims which will take up various programs aimed at the holistic development of this section of the society, including self-employment activities, provisioning banking linkages etc.
Allocated a sum of Rs. 100 crore for taking up various developmental and employment related activities.
XXIII. Solidarity Fund to Meghalaya for National Games, 2022
Assam hosted the National Games in the year 2007 and extend our support to Meghalaya and wish them the very best for organizing the ‘Best-ever’ National Games.
To this effect, as a goodwill gesture, Assam would like to give a solidarity fund of Rs. 10 crore to the Government of Meghalaya.
XXIV. Developmental Initiatives for Positive Engagement of Society
To actively create various opportunities for positive engagement of youth residing in the Tinsukia – Charaideo – Dibrugarh area.
These districts are mostly inhabited by our indigenous communities such as Moran, Motok, etc. The funds allocated for these schemes will be utilized for initiatives in the fields of sports, skill development, livelihoods and entrepreneurship, and importantly, emotional connect with special outreach programmes such as development of monuments, construction of statues, preservation of historical sites, etc.
Earmarked a sum of Rs. 500 crore for this important scheme and providing a sum of Rs.100 crore in the current budget.
XXV. Special Grants to VIth Schedule Areas
As an indication of commitment to the Bodoland Territorial Council (BTC), promised a sum of Rs. 1000 crore as special grant over a period of three years, Govt have already released funds worth Rs. 600 crores so far.
Started the construction of Kokrajhar Medical College with an outlay of Rs. 382.70 crore.
During this financial year, will take two other important initiatives viz. setting up of a Sports College in Kokrajhar and a Forest School in Chirang.
Will provide funds of Rs. 300 crore to BTC and will provide an additional infrastructure support of Rs.50 crore in BTC area.
In Karbi Anglong, promised a special grant of Rs. 10 crore for each of the 26 constituencies of Autonomous Councils. Shall release the remaining sum of Rs. 160 crore in year 2019-20 thereby fulfilling our commitment.
Almost completed the construction of Diphu Medical College and hope to start the Medical College Hospital in 2019-20.
Announced several projects for developing Dima Hasao into a model district and also taken up preparatory works for setting up a Civil Services Academy for the officers of Assam Civil Services cadres in Umrangso. Would also like to allocate an additional Rs. 10 crore for various development projects under each of the 26 constituencies of Autonomous Councils over a period of three years. Allocated an initial sum of Rs. 87 crore in the current budget for these schemes.
XXVI. Employee Welfare Measures
Some of the employee benefit related initiatives launched and the outcomes of those:
(a) In Budget 2017-18, implemented the 7th Pay commission awards for all the
government employees. All arrears on account of this have also been paid in the last financial year.
(b) Bidyalakshmi Scheme which was announced in 2017-18, banks have so far disbursed educational loans of over Rs. 30 crores benefitting hundreds of young students.
(c) Under the Apun Ghar scheme which was announced in the Budget 2016-17, loans for 19,261 new homes of the employees amounting to Rs. 2288 crores have been sanctioned.
(d) Under the Compassionate Family Pension scheme announced in the budget 2017-18, ensured sustained income to the family of the deceased employee by providing full pay of the deceased employee to the family.
Announce some additional schemes for the welfare of government employees:
(a) Extending Apun Ghar interest subvention on all the home loans taken prior to the launch of Apun Ghar scheme.
(b) A Cashless Health Assurance scheme for government employees will be rolled out from this year which will also enable them treatment across leading hospitals in India.
(c) Under the National Pension System (NPS), the mandatory contribution by the Government for its employees covered under NPS Tier-I account will be increased from 10% to 14% in line with the decision of Government of India.
(d) The Gyan Deepika scheme announced in this budget, students who have taken higher education loans from the banks will receive a one-time grant of Rs. 50,000.
(e) Under the Aapunar Apun Ghar scheme announced in this budget, providing home loan subsidy to all the citizens of Assam who opt for loans under this scheme. Thus, any Government employee who does not wish to avail loan under Apun Ghar scheme can opt for the benefits under the Aapunar Apun Ghar scheme.
XXVII. Assamese as a subject in schools
Presently, there is no compulsion on the part of a student to study Assamese language while pursuing education in Assam.
Propose that in Class IX and X, a student has to take Assamese subject as Modern Indian Language (MIL) or as Elective subject except in Sixth Schedule areas and Barak Valley.
FISCAL SCENARIO
Fiscal deficit rises to 2 per cent in 2017-18 from 2.4 per cent in 2016-17, primarily due to the implementation of the recommendation of the 7th Pay Commission.
Budget of estimated Rs. 99418.91 crore, but no additional tax.
Revenue account Rs 79742.26 crore
Capital account Rs 19676.65 crore
Assam will cross Rs 70,000 crore in expenditure, a new mark in the state. The revenue earning has increased by 20 per cent.
Breakup of Revenue Receipt for the year 2019-20 –
During the financial year 2019-20, the revenue of the State is estimated at Rs.294981.13 Crore, out of which Rs.98339.05 Crore is from the Consolidated Fund, Rs.100.00 Crore is from the Contingency Fund and Rs. 194855.42 Crore from the Public Account.
Breakup of Expenditure for the year 2019-20 –
Out of the total estimated expenditure of Rs.294374.33 Crore during 2019-20, out of which Rs.99418.91 Crore is from the Consolidated Fund, Rs.100.00 Crore is from the Contingency Fund and Rs.194855.42 Crore from the Public Account.
Glossary of Terms
Consolidated Fund
All revenues received by the Government including tax and non-tax revenues, loans raised and repayment of loans given (including the interest thereon) form the Consolidated Fund. All expenditure and disbursements of the Government, including release of loans and repayments of loans taken (and the interest thereon), are met from this fund.
Contingency Fund
A reserve fund set aside for possible unforeseen expenditure and established under Article 267(2) of the Constitution. It is an imprest placed at the disposal of the Governor.
Public Account
All public moneys received, other than those credited to the Consolidated Fund, are accounted for under the Public Account. In respect of such receipts, Government acts as a banker or trustee. The Public Account comprises of repayable like Small Savings and Provident Funds, Reserve Fund, Deposits and Advances, Suspense and Miscellaneous transaction (adjusting entries pending booking to fi nal heads of account), Remitances between accounting entitiees, and Cash Balance.
Deficit
Refers to the gap between Revenue and Expenditure. The kind of defi cit, how the defi cit is fi nanced, and applica on of funds are important indicators of prudence in Financial Management.
Revenue Deficit/ Surplus
Refers to the gap between Revenue Receipts and Revenue Expenditure. Revenue Expenditure is required to maintain the existing establishment of Government and ideally, should be fully met from Revenue Receipts.
Types of Receipts
Tax Revenue
Comprises taxes collected and retained by the State and State’s share of Union taxes under Article 280(3) of the Constitution.
Non-Tax Revenue
Includes interest receipts, dividends, profits etc.
Grants-in-Aid
Essentially, a form of Central Assistance to the State Government from the Union Government. Includes ‘External Grant Assistance’ and ‘Aid Material and Equipment’ received from foreign governments and channelized through the Union Government. In turn, the State Governments also give Grants-in-aid to institutions like 6th Schedule Councils, Panchayati Raj Institutions, Autonomous Bodies etc.
Capital Receipts
These are loans raised by the Government from the public (these are termed as market loans), borrowings by the Government from the Reserve Bank of India and other parties through the sale of Treasury Bills, the loans received from foreign Governments and bodies, disinvestment receipts and recoveries of loans from State and Union Territory Governments and other parties.
Expenditure is classified as Revenue Expenditure and Capital Expenditure.
Revenue Expenditure
Revenue Expenditure is an amount to meet the day-to-day running of the Government departments and for rendering of various services, making interest payments on debt, meeting subsidies, etc.
Capital Expenditure
Capital Expenditure is an amount to create permanent assets, or to enhance the utility of such assets, or to reduce permanent liabilities. Examples of capital expenditure are acquisition of assets like land, buildings, machinery, equipment, investments in shares, etc.
