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LAHORE: Indian government's $428 billion budget for fiscal year 2020-21 has been announced at a time when the country’s economy is stuck in its biggest economic slump in more than a decade, though the economic wizards in New Delhi are optimistic that the country's economic growth will rebound and hit a rather promising 6 per cent to 6.5 per cent mark during the forthcoming financial year starting April 1.
It is imperative to note that just last year, India was the world's fastest growing major economy.
Currently the Fifth largest economy in world, India’s debt had come down to 48.7 per cent in March 2019, from 52.2 per cent in March 2014--but snags have obstructed the smooth sailing since.
Although Indian businessmen were expecting of their government to inject more fiscal stimulus into an economy that had grown at about 4.8 percent in 2019, a sharp drop from 6.8 percent in 2018, many of them were largely dismayed with the budgetary provisions.
The "New York Times" has remarked: "The government unveiled a modest budget that one economist called "smoke and mirrors. But it offered no large stimulus program to provide more jobs or money in the pockets of India’s 1.3 billion residents, most of who barely get by through farming or work in the informal economy. Nor did the budget propose any additional support for the country’s weakened financial institutions."
This was Indian Union Finance Minister, Nirmala Sitharaman’s second budget, which thus means that she became the second women ever to present an Indian budget twice after the late Indira Gandhi.
This also incidentally was the second budget after the Premier Narendra Modi-led National Democratic Alliance had returned to power for a second successive term.
More highlights from Indian budget 2020-21:
According to the "Economic Times" of India, the "India Today," the "New York Times" and "Live Mint," an Indian financial daily newspaper published by Hindustan Times Media etc, the recent Indian budget speech was the longest-ever delivered by any Indian Finance Minister since February 18, 1860 when the first-ever budget was presented.
However, the first budget of independent India was tabled by the-then Finance Minister, Shanmukham Chetty, on November 26, 1947.
The Indian government has allocated INR,370 billion or PKR 7274 billion (over US$ 47.108 billion) as the defence budget for 2020-21, which was a hike of only 5.8 percent over the allocation for this sector for the ongoing financial year.
In 2001, according to research conducted by the "Jang Group and Geo Television Network," the Indian defence budget had stood at US $11.8 billion.
And what could be dubbed a sharp contrast, Pakistan’s defence budget currently stands at US$7.6 billion only!
Indian Budget papers have shown that the defence pension bill has surged by 13 per cent. Defence pensions have been allocated Indian Rs130 billion (US$1.8 billion).
For modernization and buying new weapon systems, defence forces have been allocated Rs1,107.34 billion (PKR2,393 billion) which is Rs 103.40 billion more than what was provided in last year's budget.
According to a leading Indian media house, this year's Indian defence budget saw an increase of Rs 25 billion in the Army's capital budget, when compared to revised estimates of last year's defence budget.
Undergoing the process of upgrading their ageing arsenals with new fighter jets, warships and submarines, Indian armed forces have thus witnessed a modest rise in their financial resources!
The Indian defence budget (minus pensions) is currently around 1.8 per cent of the country’s GDP. Defence analysts say it is one of the lowest since the 1962 India-China border war that New Delhi's forces had lost miserably.
India has approximately 2.6 million defence pensioners and each year it adds 5.5 million pensioners to this total.
The government clubs the defence budget with pensions to say it is over 2 per cent of the GDP. The Army accounts for a lion's share of the budget - over 56 per cent.
The Indian Air Force, in sharp contrast, saw capital budget slashed by Rs 12 billion.
The Modi government has retained its focus on affordable housing, but did not announce specific measures to revive demand.
Market analysts have hoped that the budgetary announcements may not revitalise the sluggish Indian real estate market.
The Indian Educational sector’s allocation stands at Indian Rupees 993 billion or US$14 billion.
The healthcare budget stands at Rs690 billion.
A health assurance cover of up to Rs5 lakh per family would be given and is targeted to cover over 100 million poor and vulnerable families.
The agriculture sector outlay rests at Rs1.38 lakh crore, the rural development allocation is Rs 1.23 lakh crore and the agriculture credit target stands at Rs15 lakh crore. By the way, the country plans to double its Milk processing capacity by 2025.
Food subsidy would see a spending of Rs1.15 trillion (PKR2,486 billion) in 2020/21, an amount of Rs 409.15 billion ($5.76 billion) would be dished out as Petroleum subsidy and there would be a Fertilizer subsidy to the tune of Rs713.09 billion ($10.03 billion) in 2020/21.
The Indian government has slashed the personal income tax rate for individuals for fiscal year 2020-21.
Under the new regime, taxpayers will pay 10 per cent, 15 per cent, 20 per cent and 25 per cent for incomes between Rs 5-7.5 lakh, Rs 7.5-10 lakh, Rs 10-12.5 lakh and Rs 12.5-15 lakh respectively. However, to avail this scheme, which is optional, the taxpayers would have to let go of certain exemptions.
According to Indian Finance Minister, five new smart cities would be developed and 100 more airports would be constructed by 2024.
India plans to monetize over 6,000 km of highways in 12 lots by 2024 and is aiming to privatize at least one major port.
New Delhi plans to raise Rs 900 billion funds by selling a partial stake in Life Insurance Corporation through an Initial Public Offering (IPO), it plans to sell a stake in Industrial Development Bank of India to private sector and also aims to establish an Indian Institute of Heritage and Conservation at five sites to develop them into world class archaeological sites.
An amount of Rs 100 lakh crore would be invested on infrastructure over the next 5 years and as far as the National Infrastructure Pipeline is concerned, more than 6,500 projects across sectors would be classified as per their size and stage of development.
Indian Rs 7 billion (US$19 billion) has been earmarked for the welfare and uplift of Scheduled Tribes and Castes (inclusive of backward classes).
The development of Indian Occupied Kashmir (IOK) has been allocated Indian Rs30,757 crore (PKR665 billion) and the territory of Ladakh has been given Indian Rs 5,958 crore (US$840 million).
An amount of Rs one billion (US$14 million) has been allocated for holding the G-20 summit.
Welfare fund of senior citizens has got Rs 95 billion (US$1.3 billion).
Power and renewable energy sectors have been allocated Rs 220 billion.
Indian Finance Minister announced in her 45-page long speech that the national gas grid to be increased by over 10,000 km.
India plans to come out with a scheme focused on encouraging manufacture of mobile phones, electronic equipment and semiconductor packaging, besides wishing to encourage private sector to build Data Centre Parks throughout the country. This step can potentially benefit all major IT firms, including TCS, Infosys, Wipro, HCL Technologies, Tech Mahindra, Mindtree, Persistent, Hexaware and Adani Enterprises.
India will provide Rs 273 billion ($3.84 billion) for promotion of industry and commerce and Rs 44 billion ($619.11 million) for clean air incentives in cities with over one million people.
Firms operating old thermal power plants have been advised to shut units if emission norms are not met.
Moreover, the National Indian Skill Development Agency would give special thrust to infrastructure-focused skill development opportunities, assist in project preparation and actively involve young engineers, management graduates and economists from Universities.
The Infrastructure agencies of the government would involve youth-power in start-ups.
An amount of Rs 1.7 lakh crore has been proposed for transport infrastructure in 2020-21; while a dividend distribution tax for companies would be scrapped, entailing a revenue loss of Rs 250 billion.
The tax on cigarettes and other tobacco products would be increased.
The Indian Union Finance Minister also announced that the Modi regime has allocated Rs 90 billion for the welfare of senior citizens.
The Indian government proposed an outlay of Rs 273 billion for the development of industry and commerce during 2020-21
A General Sales Tax (GST) benefit of Rs1 lakh crore has been extended to consumers and some 1.6 million new taxpayers have been added to the system.
According to Indian Finance Minister, an average household now saves about 4 per cent of its monthly spend on account of reduced GST. According to an American media outlet "Bloomberg," Finance Minister Nirmala Sitharaman said that Non-Resident Indians (NRIs) would only pay taxes on income earned in India.
An Indian newspaper "Financial Express" has maintained: "Budget 2020 has proposed to exempt Non-resident Indians (NRIs) from filing income tax return in certain conditions. Also, the Budget has proposed to modify residency provisions to prevent tax abuse.
Earlier, if you spent over 165 days in India a year you were liable to pay tax in India. This has now been reduced to 120 days."
Expected Indian financial indicators in 2020/21:
Nominal GDP growth is estimated at 10 per cent, Fiscal deficit is seen at 3.8 per cent of GDP, Fiscal deficit for 2020/21 is seen at 3.5 per cent of GDP, Fiscal deficit for 2021/22 is seen at 3.3 per cent of GDP, Fiscal deficit for 2022/23 is seen at 3.1 per cent of GDP, and the Revenue deficit is seen at 2.7 per cent of GDP in FY21.