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Budget 2020-21 Summary

Budget 2020 Explained

Approx Read Time: 35 minutes 

General Highlights: Budget 2020

  • Lower personal income tax rates
  • Hike in the deposit insurance cover for bank depositors (from Rs 1 lakh to Rs 5 lakh)
  • Listing the Life Insurance Corporation of India
  • Abolishing the Dividend Distribution Tax
  • Boosting farm incomes and the rural sectors:
    1. To boost farm incomes and the rural sectors, the budget has allocated Rs 2.83 lakh crore and fixed Rs 15 lakh crore target for agriculture credit.
    2. To boost farmer incomes (to be doubled by 2022 as per the government’s timeline), 16 new and renewed measures were put forth.
  • Another Rs 1.7 lakh crore spending was planned for transport infrastructure and Rs 40,740 crore allocation was made for the energy sector.
  • More borrowings:
    • Proposed market borrowings for the coming year have been raised to Rs 5.36 lakh crore, following a Rs 26,000 crore hike in this year’s borrowing plan from Rs 4.73 lakh crore to Rs 4.99 lakh crore.
  • Fiscal Deficit target:
    1. A combination of a midyear reduction in corporate tax rate and lackluster GST collections on the heels of a slowdown in economic momentum resulted in government overshooting its fiscal deficit target.
    2. The next financial year is expected to see a reduction in the fiscal deficit to 3.5% from the current year’s 3.8%.

Summary of the Budget 2020 across various sectors/themes

Disinvestment (Budget 2020)

Budget 2020
Budget 2020
Disinvestment
  • The government has set a divestment target of Rs 2.1 lakh crores for financial year 2021 compared with Rs 1.05 lakh crore target for the ongoing financial year.
  • The government has already invited bids from potential buyers for a 100% stake sale in Air India and is going ahead with divestment in BPCL, Shipping Corporation and Container Corporation.
Disinvestment in LIC:
  • The government currently owns the entire 100% stake in Life Insurance Corporation of India (established in the year 1956).
  • The government will sell a part of its stake in Life Insurance Corporation (LIC) through an Initial Public Offering (IPO).
  • The move is expected to raise vital resources for the treasury and improve transparency of the insurer that serves a quarter of the population.
  • If LIC begins trade on stock exchanges it would be one of India’s biggest companies in terms of market capitalization along with Reliance Industries, TCS and HDFC Bank.
  • LIC with assets under management of Rs 31 lakh crore in 2019 is likely to get a valuation of about Rs 8-10 lakh crore.

Taxation (Budget 2020)

Budget 2020
Budget 2020
New Tax slabs:
  • The Budget gives all taxpayers the option of migrating to a new scheme.
  • The new rates can be opt by the tax payers if they give up almost all tax exemptions and deductions they enjoy under the current regime.
  • Most exemptions used by salaried employees on account of leave travel allowance, house rent allowance, housing loan repayments, savings instruments like PPF and LIC, as well as the standard deduction will cease to be available.
Implications:
  • The intention is to reduce the rates as much as to simplify the structure.
  • The government has brought the income tax down for middle class and the lower middle class in order to keep money in people’s hands. More money with the public is expected to increase savings.
  • Pensioners and new entrants to the job market, who have no investments in tax-saving schemes or HRA and LTA benefits may gain under the new tax regime.
Tax changes on dividend
Abolished DDT:
  • All kinds of dividend income i.e. dividend income received from mutual funds and shares will now be taxable in the hands of taxpayers and abolished DDT.
  • The government has abolished the Dividend Distribution Tax (DDT), which was levied on dividend income before distribution by the company or mutual fund house.
  • This would come as a relief for companies, which they felt led to double taxation as such payouts are also taxed at the investor level.
What is Dividend distribution tax (DDT)?
  • Dividend distribution tax is the tax imposed by the Indian Government on Indian companies according to the dividend paid to a company’s investors.
  • DDT is paid by the companies before paying dividend to their shareholders. Therefore, it made dividend received by the shareholders of the company of tax-free in their hands.
  • Currently, companies are required to pay 15% tax plus applicable surcharge and cess on the dividends. Further, investors that receive more than Rs 10 lakh as dividend in a financial year have to pay 10% tax on such income.
Implication:
  • The taxable income of the individuals will go up:
    • For example, earlier, an individual taxpayer was required to pay tax on dividend at 10% only in case dividend received from Indian companies was more than Rs 10 lakhs and no tax was payable in case of dividends received from mutual funds.
    • As per the budget proposal, the recipient of dividend would be liable to pay income tax at applicable rates irrespective of the amount of dividend received.
Tax deduction at source:
  • Further, TDS on such dividend incomes will be levied at the rate of 10% if it exceeds Rs 5, 000 in a financial year.
Taxpayer’s charter:
  • A new ‘taxpayer’s charter’ (which would enumerate taxpayer’s rights) has been proposed which aimed at boosting trust between the citizens and the authorities, in order to improve the efficiency of tax administration.
  • The charter would be incorporated in the Income Tax Act through suitable amendments.
  • There are only three countries in the world which have enshrined the rights of a tax payer in their laws — Canada, U.S. and Australia.
New Tax on e-commerce Transaction:
  • To widen the tax base, a new tax has been proposed to levy on e-commerce transactions.
  • E-commerce operator shall deduct TDS on all payments or credits to e-commerce participants at the rate of 1% in PAN/Aadhaar cases and 5% in non-PAN/Aadhaar cases.
  • This means the e-commerce operator (an entity owning, operating or managing the digital platform) will have to deduct TDS on the gross amount of sales or service or both.
  • Exemption: However, small businessmen, individuals and HUF who receive less than Rs 5 lakh and furnish PAN/Aadhaar would be exempt from the TDS norm.
  • The amendments will take effect from April 1, 2020.
Cut in withholding tax:
  • In order to attract more international investors to IFSC exchange (located in GIFT City, near Ahmedabad in Gujarat), the government has proposed to reduce the withholding tax rate to 4% from 5% on interest payment on bonds listed on the bourse.
  • Note: Withholding tax is levied by countries on interest or dividends paid to a person who is resident outside that country.
About GIFT City:
  • GIFT City is a global financial and IT services hub, a first-of-its-kind in India, designed to be at par with globally benchmarked business districts.
  • It is supported by state-of-the-art infrastructure encompassing all basic urban infrastructure elements along with an excellent external connectivity.
  • Companies from financial services, technology and all other services sector are targeted as potential occupants within the city.
Deferred taxes for ESOPs:
What is ESOP?
  • An employee stock ownership plan (ESOP) is a type of employee benefit plan which is intended to encourage employees to acquire stocks or ownership in the company.
  • Under these plans, the employer gives certain stocks of the company to the employee for negligible or less costs which remain in the ESOP trust fund, until the options vests and the employee exercises them or the employee leaves/retires from the company or institution.
  • These plans are aimed at improving the performance of the company and increasing the value of the shares by involving stock holders, who are also the employees, in the working of the company.
  • The ESOPs help in minimizing problems related to incentives.
What was the issue with ESOP?
  • At present, ESOPs are taxable as perquisites at the time of exercise, which leads to cash-flow problems for employees who do not sell the shares immediately and continue to hold the same for the long term.
  • ESOPs are currently taxed when they become eligible for allotment, which puts a financial burden on employees as they may not be able to sell them at the same time. Employees are also taxed twice, at the time of exercising and at the time of selling (capital gains tax).
  • Startup lobby groups like IndiaTech, IVCA and LocalCircles had requested the government to simplify this by taxing ESOPs just at the time of liquidity or sale.
Budget Proposal on ESOP:
  • The Budget has proposed to tax employees only at the realization of ESOPs (employee stock options) i.e. the employee can defer the tax payment on ESOPs by five years, or till the employees holding ESOPs leave the company or when they sell their shares, whichever is the earliest.
Implications:
  1. This will ensure people get what they deserve and also encash at the first potential opportunity.
  2. This would excite them to be part of start-ups and increase the importance of ESOPs.
  3. This would also encourage more employees to participate in the programme.
  4. Moreover, this would also help more liquidity in the market as transactions would take place.
  5. The proposal on deferring the payment of taxes for five years is only applicable to startups formed after 2016.
Changes to prevent tax abuse:
  • The Finance Bill has also proposed three major changes to prevent tax abuse by citizens that don’t pay taxes anywhere in the world.
    1. Reduction in the number of days that an Indian citizen can be granted non-resident status for tax purposes from 182 to 120:
      • This is done to put a check on those who escape tax by exploiting their non-resident status.
      • Some taxpayers divided their time between India and overseas to avoid being categorized as tax residents in India.
    2. Citizens who don’t pay taxes anywhere will be deemed to be a resident of India, and
    3. The definition of ‘not ordinary resident’ has been tightened: In order to become a non-resident, one has to stay out of the country 240 days.
5% TCS for remittances over Rs 7 lakh under the LRS
  • The government has announced a 5% tax collection at source (TCS) for remittances over Rs 7 lakh under the Liberalized Remittance Scheme (LRS). So far there was no deduction of tax at source on remittances under the LRS.
  • What is Liberalized Remittance Scheme (LRS)?
    • The Liberalized Remittance Scheme (LRS) of the Reserve Bank of India (RBI) allows resident individuals to remit a certain amount of money during a financial year to another country for investment and expenditure.
  • So far there was no deduction of tax at source on remittances under the LRS.
Implication:
  • This will enable the government collect $75 million in advance every month as Indians have been sending on an average $1.5 bn (Rs 10,700 crore) abroad every month under various heads including education, travel, purchase of immovable property, investment in equity/debt, gift/donations, maintenance of close relatives, and medical treatment.

Markets (Budget 2020)

Reforms to deepen bond market:
  • Increasing the investment limit for foreign portfolio investors (FPIs) in corporate bonds.
  • The limit for FPIs’ purchases of corporate bonds, currently capped at 9% of outstanding stock, would be increased to 15% of the outstanding stock.
  • Opening certain government securities for non-resident investors.
  • Launching a new debt exchange traded fund (ETF) comprising primarily of government securities:
    1. This will give retail investors access to government securities as much as giving an attractive investment for pension funds and long-term investors.
    2. All above measures will help in ease of operation bringing in more flows (all other things being equal) and that especially the measure on government bonds could be in the direction of ultimate inclusion in global bond indices.
Setting up an international bullion exchange at IFSC
  • The government has proposed to set up an international bullion exchange at IFSC in GIFT City.
  • This will lead to better price discovery of gold, create more jobs and enhance India’s position in such market.
  • International Bullion Exchange will be an additional option for trade by global market participants in India.

Cultural aspects (Budget 2020)

Budget 2020

Poets, the FM quoted in her Budget speech:

Pt. Dinanath Nadim:
  • The Kashmiri nationalist poet Dinanath Nadim was at the centre of Kashmir’s progressive movement, especially in the 1930s, 40s and 50s.
  • Nadim wrote in Kashmiri, Hindi and Urdu, and inspired a powerful tradition of Kashmiri poetry.
  • Nadim received the Sahitya Akademi award in 1986 for his opera Shuhul Kull (The Shady Tree).
  • Among his other well-known works are Vitasta (Jhelum River), Safar Taa Shehjaar (The Journey And The Shade), Heemaal Taa Naaegrai (Heemaal and Naagraaj), and Bombur Taa Yamberzal (The Bumble Bee And The Narcissus Flower).
  • Sitharaman quoted from Nadim’s poem “Myon Watan”, which translates into English as “My Motherland”.
Avvaiyar:
  • Avvaiyar translates to “Respected Woman”, and the title was used by several woman poets who contributed to Tamil literature during different periods of time.
  • Sitharaman quoted from Aaathichoodi’s verse 81 which translates to “first tend to till one’s land and then eat. One must eat only after work.”
  • She used the quote in the context of encouraging balanced use of all kinds of fertilizers including the traditional organic and other innovative fertilizers.
Thiruvalluvar:
  • Thiruvalluvar, the Tamil poet and philosopher regarded as a cultural and moral icon for Tamils across caste and religious lines.
  • He is best known as the author of Thirukkural, a collection of couplets on ethics, politics, economics, and love.
  • Sitharaman quoted Thiruvalluvar: “Pini Inmai Selvam Vilaivu Inbam Emam Ani Enba”, which loosely translates to having the “five jewels” required for a country that is without illness, with wealth, with good crops, with happiness, as well as safety and security.
Kalidas:
  • Kalidas, the legendary Sanskrit scholar, is believed to have lived during the middle of the fourth and early fifth centuries AD, during the reigns of Chandragupta II Vikramaditya and Kumaragupta.
  • Raghuvamsa, from which Sitharaman quoted, is one of two long epic poems written by Kalidas.
  • She mentioned the 18th verse: “Surya, the Sun, collects vapour from little drops of water. So does the King. They give back copiously. They collect only for people’s wellbeing.”

Iconic archaeological sites mentioned in the Budget:

  • The Finance Minister, in her budget speech, proposed to set up an Indian Institute of Heritage and Conservation under the Ministry of Culture.
  • The aim is to develop five archaeological sites as “iconic sites” with onsite museums in:
    1. Rakhigarhi (Haryana)
      • Rakhigarhi in Haryana’s Hissar district is one of the most prominent and largest sites of the Harappan civilization.
      • It is one among the five known townships of the Harappan civilization in the Indian subcontinent.
      • Between 2013 and 2016, excavations by a team of Indian and South Korean researchers discovered the skeletal remains of a couple.
      • Interestingly, of the 62 graves discovered in Rakhigarhi, only this particular grave consisted of more than one skeletal remains and of individuals of the opposite sex together.
    2. Hastinapur (Uttar Pradesh)
      • Hastinapur finds mention in the Mahabharata and the Puranas.
      • One of the most significant discoveries made at this site was of the “new ceramic industry”, which was named the Painted Grey Ware (PGW).
    3. Sivsagar (Assam)
      • In Sivasagar, excavations at the Karenghar (Talatalghar) complex led to the discovery of buried structures.
      • Among the structural remains found at the site were ceramic assemblages including vases, vessels, dishes, and bowls, etc. Terracotta smoking pipes were also found.
    4. Dholavira (Gujarat)
      • Dholavira in Gujarat is located in the Khadir island of the Rann of Kutch, and is one of the sites where the remains of the Harappan civilization have been found.
      • Dholavira is unique because remains of a complete water system have been found here.
      • The people who lived there for an estimated 1,200 years during the Harappan civilization are noted for their water conservation system using rainwater harvesting techniques in an otherwise parched landscape.
    5. Adichanallur (Tamil Nadu)
      • The discovery of an ancient Tamil-Brahmi script on the inside of an urn containing a full human skeleton.
      • A fragment of a broken earthenware.
      • The remains of living quarters.
      • Adichnallur lies in the Thoothukudi district of Tamil Nadu, where an urn-burial site was found in 1876.
      • Over the years, the site has gained attention because of three important findings:

Scheme-Related (Budget 2020)

Budget 2020
Budget 2020
1. National Technical Textiles Mission:
  • India imports significant quantity of technical textiles worth $16 billion every year.
  • To reverse this trend, Finance Minister announced a Rs 1,480-crore National Technical Textiles Mission, to be implemented from 2020-2021 to 2023-2024.
  • It aims at positioning India as a global leader in technical textiles by giving thrust to production of a wide variety of textiles used in sectors such as healthcare, infrastructure, automobiles, defense, and agriculture.
  • The Mission was needed to create a domestic base for raw material production, push for manufacture of high end technical textile products, boost investments, and increase per capita consumption
2. ‘Vivad Se Vishwas’ scheme:
  • Currently, there are about 4.83 lakh direct tax cases under litigation in various appellate forums — Commissioner (Appeals), Income Tax Appellate Tribunal (ITAT), High Court and Supreme Court.
  • To deal with this, the finance minister announced ‘Vivad Se Vishwas’ scheme to reduce litigation.
  • Under the proposed scheme, a taxpayer would be required to pay only the amount of the disputed taxes and will get complete waiver of interest and penalty provided he pays by March 31, 2020.
  • Those who avail this scheme after March 31, 2020, will have to pay some additional amount. The scheme will remain open till June 30, 2020.
3. NIRVIK (Niryat Rin Vikas Yojana) scheme:
  • The Finance Minister, in her budget speech, announced Nirvik (Niryat Rin Vikas Yojana) scheme to achieve higher export credit disbursement.
  • Nirvik scheme will provides for high insurance cover, reduction in premium for small exporters and simplified procedures for claim settlements.
  • Under the scheme, also called the Export Credit Insurance Scheme (ECIS), the insurance guaranteed could cover up to 90% of the principal and interest.
  • In comparison, the current Export Credit Guarantee Corporation currently provides credit guarantee of up to 60% loss.
  • The Ministry has also proposed to subsidize the premium under the scheme that has to be paid by exporters of certain key sectors.
4. Village storage scheme:
  • Farmers desire integrated solutions covering storage, financing, processing and marketing.
  • As a backward linkage, the Finance Minister proposed a village storage scheme to be run by the self-help groups (SHGs).
  • This is intended to provide farmers a good holding capacity and reduce their logistics cost.

Trade (Budget 2020)

Budget 2020
  • The government has announced one of the biggest-ever increases in customs duty on close to 100 product categories, as it sought to clamp down on “nonessential” imports, much of it from China.
  • This has been done keeping in view the interests of the MSME segment, to facilitate ease of doing business, secure trade borders and to keep uncontrolled dumping under check.
  • Further, in coming months, the government would review Rules of Origin requirements, particularly for certain sensitive items, to ensure that FTAs are aligned to the conscious direction of the policy.
  • The measures are expected to give boost to the domestic industry, particularly the MSME sector, shore up local employment and eventually impact GDP.
Measures announced on the trade front:
  • The government has reduced import tariffs on several inputs and components, such as unassembled solar cells and open cell for TV sets, as part of a push for local manufacturing of finished products.
  • Besides, import of electric vehicles, in completely built form or in semi-knocked down state, as well as completely built commercial vehicles are being discouraged.
  • The localization drive was also strengthened on the high-volume mobile phones category where components such as printed circuit boards, fingerprint scanners, display panels, and ringers also saw the import duty go up.
  • However, industry players said that prices would not see much of an impact as investments are already underway for making them in India.
  • The Finance Minister also announced steps for the manufacture of mobile phones, electronic equipment and semi-conductor packaging in the country, which are seen to be critical to the growing import of electronic goods.
  • The government has also announced a Rs 1,000 crore scheme to help mid-sized companies in export development, R&D and technology upgrade.

Infrastructure (Budget 2020)

  • Setting a theme of opening up more space in the infrastructure sector for private players, the Budget has proposed a slew of measures with the aim of attracting private investment.
  • These include expanding public-private partnership (PPP) in physical and social infrastructure projects such as railways, highways, medical colleges and smart cities. This is in addition to laying down policy roadmaps for data centres, logistics, etc.
  • Also, 100% tax exemption has been proposed for interest, dividend and capital gains incomes to major FDI investments in infrastructure projects before March 31, 2024, with a lock-in period of three years.
Power and Renewable energy:
  • The Union Budget has allocated Rs 22,000 crore to the power and renewable energy sector in 2020-21 with an aim to improve the financial health of power distribution firms and boost the use of solar power.
  • In a bid to promote ‘smart’ metering, the Finance Minister urged all the States and Union Territories to replace conventional energy meters with prepaid smart meters. A three-year roadmap will see every conventional meter in the country replaced by pre-paid meters.
  • Smart meters will allow consumers to choose, through pre-paid cards, the most affordable supplier as per time of the day once multiple players enter after separation of carriage and content.
  • This will help discoms improve load and service delivery management, leading to reduced operational costs through optimized power procurement.
  • The Budget also announced a reduced corporate tax rate of 15% for new gencos (generating companies) that received the ‘manufacturing’ tag.
  • In addition, the removal of dividend distribution tax (DDT) is likely to boost foreign investment in the sector.
Expansion of the gas grid:
  • The government plans to expand the national gas grid from the present 16,200 km to 27,000 km.
  • Further reforms will be undertaken to facilitate transparent price discovery and ease of transactions to deepen the gas markets in the country.
Expansion of the gas grid:
  • The government plans to expand the national gas grid from the present 16,200 km to 27,000 km.
  • Further reforms will be undertaken to facilitate transparent price discovery and ease of transactions to deepen the gas markets in the country.
Five new Smart Cities:
  • The government announced the setting up of five new ‘smart cities’ on the public-private partnership (PPP) model but did not share more details, or even the allocation set aside for them.
  • Whether the new cities will be developed under the mission run by the urban affairs ministry or the industrial promotion department is not yet clear.
  • The Smart City Mission was launched in 2015 and 100 cities have been selected so far, with an aim to make them citizen-friendly and sustainable.

Transport Infrastructure (Budget 2020)

  • Overall, the Budget proposed an allocation of Rs 1.70 lakh crore for the transport infrastructure sector in 2020-21.
  • In her speech, Finance Minister Nirmala Sitharaman said the government would focus on infrastructure for economic development, and 6,500 projects across sectors under the National Infrastructure Pipeline (NIP) were envisioned towards ease of living for citizens though Ease of Moving.
  • The transportation infrastructure development will also focus on accessibility to all, including senior citizens and persons with disabilities.
Railways:
  • The Budget proposed a budgetary allocation of Rs 70,000 crore for the Indian Railways, with overall capital expenditure of Rs 1.61 lakh crore for the next financial year in the Union Budget.
  • While the capital expenditure for 2020-21 saw an increase of a mere 3% from Rs 1.56 lakh crore for 2019-20, the Budget promises increased investment for passenger amenities and safety-related works, including track renewals, level crossings and road over/under bridges.
  • The Rs 1.61 lakh crore outlay comprises Rs 70,000 crore from budgetary support, Rs 250 crore from the Nirbhaya Fund, Rs 7,500 crore from Internal Resources and Rs 83,292 crore from Extra Budgetary Resources.
  • The Budget also proposed setting up a large solar power capacity alongside the rail tracks, on the land owned by the railways, besides re-development of four stations, operation of 150 passenger trains via public-private partnership mode and introduction of more Tejas type trains to iconic tourist destinations.
  • The FM also proposed a 148-km Bengaluru suburban transport project at a cost of Rs 18,600 crore, which would have fares on the metro model.
Highways:
  • The Ministry of Road Transport and Highways saw an increase of 10% in its budgetary allocation, but a large chunk of it is through monetization of national highways by the NHAI.
  • The Budget proposed accelerated development of highways which will include development of 2,500 km of access control highways, 9,000 km of economic corridors, 2,000 km of coastal and land port roads and 2,000 km of strategic highways.
  • The FM said that the Delhi-Mumbai Expressway and two other packages would be completed by 2023 . Further, 12 lots of highway bundles totaling Rs 6000 crore would be monetized before 2024.
Port Development:
  • The government will corporatize at least one major port and list it on the stock exchange and efforts would be made to use technology to improve performance of ports.
  • The allocation for the Ministry of Shipping has seen an increase of 18% from Rs 1,523 crore last year to Rs 1,800 crore this fiscal. In line with the vision laid out by the Minister, the development of ports has seen a 44% increase in allocation, from Rs 98 crore last fiscal to Rs 142 crore.
  • The Sagarmala project that aims to exploit India’s waterways and coastline has seen a doubling of allocation from Rs 98 crore to Rs 211 crore and the budget for ship building has also grown more than three-fold from Rs 42.43 crore to Rs 151 crore.
  • The shipping ministry is already preparing a change in law to convert the port trusts, which run them, into port authorities and the Major Port Authorities Bill is likely to be introduced during the ongoing Budget Session.
100 more airports under UDAN:
  • The Finance Minister announced that the government plans to set up 100 more airports by 2025 under the Regional Connectivity Scheme (RCS), also known as UDAN or Ude Desh ka Aam Naagrik.
  • The Ministry of Civil Aviation has received Rs 465.17 crore towards the regional connectivity scheme for 2020-21, which will be utilized towards the revival of 50 airports and viability gap funding for the North East Connectivity plan.
  • Under the program, airlines compete to win subsidies for operating flights linking small airports with the bigger ones.
  • The scheme, launched in 2017, is now in its fourth phase and at present, 232 routes across 43 cities and towns connect 137 small cities under the RCS.

Rural Development and Agriculture (Budget 2020)

Budget 2020
Budget 2020
MGNREGS budget cut down:
  • The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) provides 100 days of unskilled work for every rural household, helps generate rural employment and provides a social safety net.
  • However, despite a slowdown in the rural economy and the need to stimulate rural demand, the Centre has slashed budgetary allocation by Rs 9,500 crore for the coming year.
  • The Finance Minister announced Rs 61,500 crore for the scheme in 2020-21, a 13% drop from the 2019-20.
  • The Economic Affairs Secretary said that if additional allocations were required for the scheme, it would be given later in the year.
Other announcements in the agri sector:
  • Credit: On agricultural credit, the Finance Minister said the NABARD refinance scheme would be further expanded and increased this year’s farm loan disbursal target by 11% to Rs 15 lakh crore.
  • Warehousing: The Budget also proposed to step up viability gap funding to set up warehouses and double the milk processing capacity to 108 million tonnes by 2025.
  • Rail, flight services to transport farm produce: Railways would set up a Kisan Rail programme through public-private partnership to build a seamless national cold supply chain for perishables, including milk, meat and fish. Further, refrigerated coaches would be built in express and freight trains as well.
  • A Krishi Udaan scheme would also be launched by the Civil Aviation Ministry on international and national routes, in a move that would help improve value realization especially in the northeast and tribal districts.

Subsidies (Budget 2020)

Budget 2020
  • The government’s food, fertilizer and fuel subsidy bill has been pegged marginally higher by 0.24% at Rs 2.28 lakh crore for 2020-21.
  • Of the total subsidy bill, the maximum allocation has been made for food (Rs 1.15 lakh crore), followed by fertilizer of about Rs 71,000 crore) with fuel getting about Rs 41,000 crore.
  • The allocation for LPG subsidy has been increased to more than Rs 37,000 crore.
  • However, the allocation for kerosene subsidy has been reduced to Rs 3,659 crore.
Analysis:
  • The Economic Survey had called for rationalization of government intervention in the food grain market. It said the government’s role as largest procurer and hoarder of rice and wheat, has led to burgeoning food subsidy burden and inefficiencies in the markets.
  • Questions have also been raised in the past, over fertilizer and fuel subsidy being provided to large scale farmers, who do not pay income tax. Hence it would be advisable to provide subsidy through direct benefit transfer below a particular threshold.
  • The fertilizer subsidy also leads to overuse of fertilizers due to which the related increase in productivity is fast declining, along with a deterioration in soil quality (nutrient deficiency).
  • The FM has proposed to reverse it by reducing subsidies on chemical fertilizer and encouraging organic farming. This solution is expected to benefit farmers and food security in the long run.

Social Sector (Budget 2020)

Health Sector:
  • The health sector got an allocation of Rs 69,000 crore in the Union Budget, including Rs 6,400 crore for Prime Minister Jan Arogya Yojana (PMJAY).
  • The Finance Minister announced expansion of the Jan Aushadhi Kendra Scheme to all districts, offering 2,000 medicines and 300 surgicals by 2024.
  • Also, Mission Indradhanush has been expanded to cover 12 such diseases, including five new vaccines.
Hospitals to be set up in PPP mode:
  • The Finance Minister said that presently, under PM Jan Arogya Yojana, there are more than 20,000 empaneled hospitals. However, there is need of more such hospitals in Tier-2 and Tier-3 cities for poorer people under this scheme.
  • It has been proposed to set up viability gap funding window for setting up hospitals in PPP mode. In the first phase, those aspirational districts will be covered where presently there are no Ayushman-empaneled hospitals.
  • Also, to address the shortage of qualified doctors (specialist and general practitioners), it has been proposed to attach a Medical College with existing District Hospitals in PPP mode.
  • Those States that fully allow the facilities of the hospital to the medical college and wish to provide land at a concession would be able to receive viability gap funding from the Centre.
  • The move will encourage large hospitals with sufficient capacity to offer resident doctors DNB/FNB courses under the National Board of Examinations.
Cess on imports of medical equipments:
  • The government, in order to boost domestic industry and to generate resources for health services, has proposed a nominal health cess of 5% on imports of specified medical equipment.
  • The proceeds from this cess shall be used for creating infrastructure for health services in the aspirational districts.
Women and Child Development:
  • Categorizing women and children under the larger budgetary theme of “Caring India”, finance minister allocated Rs 35,600 crore to nutrition related programmes under various ministries.
  • The anganwadi programme, under which the government provides supplementary nutrition to children between six months to six years, has received an increase in allocation of 15%, to Rs 20,532 crore.
  • The POSHAN Abhiyaan or the Nutrition Mission received Rs 3,699 crore.
Analysis:
  • According to an analysis, the entire budget for children as a proportion of the total budget has hit the lowest level in five years, falling to 3.16% of the total budget this fiscal.
Gender budget sees a drop:
  • The gender budget of the government as a share of the Budget has seen a marginal decline of 0.01% this fiscal – dropping from 4.72% last year to 4.71% of the overall budget- in financial year 2020-2021.
  • However, in absolute terms there has been an increase of 8.9% as compared to last year’s gender budget of Rs 1,31,700 crore.
  • The schemes that have seen an increase include the scheme for adolescent out-of-school girls, One Stop Centre, Nirbhaya Fund, Pradhan Mantri Matru Vandana Yojana etc.
Task Force to reduce maternal mortality:
  • The FM also announced that a task force will be set up to look at the age at which a girl enters motherhood to reduce maternal mortality rate and improve nutrition levels.
  • This will ensure their participation and contribution to the economy, as delayed age of marriage will enable them to complete their education and acquire job and life skills.
  • This will also help the country to deal with the population momentum and achieve population stabilization.
Education:
  • The Budget proposes to provide Rs 99,300 crore for education in 2020-21, while Rs 3,000 crore will be for skill development.
  • School education has seen an allocation of about Rs 60,00 crore, across three prominent schemes — Samagra Shiksha Abhiyaan, Kendriya Vidyalaya Samiti and Navodaya Vidyalaya Samiti.
  • The FM announced that select higher educational institutions among the ‘Top 100’ will offer degree-level online education programmes for underprivileged students.
  • Further, 150 higher educational institutions will start apprenticeship-embedded degree/diploma courses by March 2021 to boost job opportunities for general stream students.
  • Government has also opened up higher education to foreign direct investment (FDI) and external financial borrowings. It has been hailed as a positive move, as this would enable institutions to be competitive.

Science & Technology (Budget 2020)

Boost in funding:
  • Science and Technology got a boost in the Budget, with key scientific departments receiving an across-the-board increase of 10% or more.
  • The Department of Science and Technology got a 14% increase, with an outlay of Rs 6,301 crore.
  • The Department of Biotechnology (DBT) posted the largest 17% increase, with an outlay of Rs 2,786 crore.
  • The Earth Sciences Ministry posted a 14% hike at Rs 2,070 crore while the Council of Scientific and Industrial Research (CSIR) got a 10% hike at Rs 5,385 crore.
  • Overall, the science Ministries received Rs 16,542 crore, 13% more than what was spent last year.
  • The Department of Atomic Energy got Rs 18,228 crore and the Department of Space got Rs 13,479 crore.
  • The Budget sets aside Rs 9,761 crore for space technology, covering development of spacecraft, launchers, payloads on satellites and the ground system (that receives, interprets and provides data for various uses).
Biotechnology:
  • The DBT has embarked on projects to map the genes of Indians as well the genetic structure of every plant variety.
  • Mapping of India’s genetic landscape is critical for next generation medicine, agriculture and for bio-diversity management.
  • To support this development, two new national level Science Schemes will be initiated, to create a comprehensive database.
National Mission on Quantum Technologies and Applications:
  • Quantum technology is opening up new frontiers in computing, communications, cyber security with wide-spread applications.
  • It is expected that lots of commercial applications would emerge from theoretical constructs which are developing in this area.
  • The budget proposed to provide a massive outlay of Rs 8000 crore over a period five years for the National Mission on Quantum Technologies and Applications.
Innovation:
Digital platform for intellectual property:
  • To expand the base for knowledge-driven enterprises, intellectual property creation and protection will play an important role.
  • A digital platform would be promoted that would facilitate seamless application and capture of IPRs.
  • A Centre would be established, in an Institute of Excellence, that would work on the complexity and innovation in the field of Intellectual Property.
Knowledge Translation Clusters:
  • Knowledge Translation Clusters would be set up across different technology sectors including new and emerging areas.
Technology Clusters:
  • For designing, fabrication and validation of proof of concept, and further scaling up Technology Clusters, harboring such test beds and small scale manufacturing facilities would be established.

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