The Union Budget 2019 is just around the corner, and the expectations are sky high, especially since the current government came back to power following a bigger mandate than the first term. On July 5, Nirmala Sitharaman, who is the first full-time woman Finance Minister of India, will present the Union Budget 2019. This budget will be a challenge for Sitharaman given the fragile state of the Indian economy with sliding exports, increasing unemployment and slumping GDP numbers. She will have to manoeuvre a tough balancing act, as she charts out an economic plan to boost the financial growth of the nation. Expectations have been flooding in from different sectors such as automobile, banking, and the middle class. As a taxpayer and the citizen of India, there may be numerous unanswered questions in your mind about the upcoming Union Budget and its impact. In this article, we have attempted to answer all of the important questions that surround the impending budget:-
The government is expected to increase the income tax basic exemption limit in the upcoming Budget 2019. Confederation of Indian Industry (CII) has urged the government to double the basic income tax exemption limit to 5 lacs from the current 2.5 lakhs. Presently, 5% tax is levied for income between 2.5 Lakhs – 5 Lakhs. While income above 10 lakh attracts a tax of 30%. The Industrial body has suggested that income between 5 Lakhs -10 Lakhs should be taxed at a lower rate of 10% and those having income between 10-20 Lakhs, should be taxed at 20%. A reduction in the corporate tax rate is also expected to go down from 25% from 30% irrespective of the turnover.
Interim Budget 2019 was a welcome change for the common man with reference to the housing sector in general. This signifies that the current government is making specifically targeted moves to provide a fillip to the housing sector and increase the common man’s net take-home pay. Speculations are rife that the government is planning to provide an interest deduction up to Rs. 2 Lakh separately for each of self-occupied properties, which amounts to a total deduction of up to Rs. 4 Lakh for two self-occupied properties. Increasing the deduction for the interest paid on home loans will provide the required liquidity for additional investment through a mortgage in the affordable housing sector.
Unlike the effect of the elections in the stock market, the budget will have more rational triggers for the market. Considering the Sensex movement on and around the Budget day since 2000, wide fluctuations in the market are unlikely. The calmness of the capital market during budget sessions can be attributed to various policy announcements made outside the budget, the many off-Budget items bringing down the relevance of the annual exercise for the market and the GST limiting any action on indirect taxes. However, many leading stock market analysts hold a divided opinion on a possible pre-budget market rally. The market is expected to remain muted and sideways while the auto sector remains at the tipping point. Hence, these stocks may either revive or fall off the cliff, depending on the support provided by the government in the upcoming budget. Other sectors that may benefit from the budget would be agriculture, infrastructure and low-cost housing, as all of these industries have multiplier effects that can set the nation on the right track for economic growth.
The Modi government is expected to push spending in the economy and spur growth through tax incentives to boost consumer demand and investment. With the upcoming budget, the primary task before the government is to work towards growth recovery right from the start. Although the Modi government has been able to keep inflation under control, this has led to a slowdown of the economy. With this budget, the government is largely expected to address its employment issue with impetus on the three E’s – Employment, Employability, and Ease of Doing Business to boost economic growth. Hence, it is plausible to say that the economic growth rate is expected to pick up significantly following the Union Budget 2019.
Nirmala Sitharaman has hinted at industry status for agriculture at the 4th SBI Banking & Economics Conclave. She was quoted saying “I think agriculture should be given industry status if so many people are dependent on agriculture." Naturally, financial analysts are assuming that she will be inclined to stick to her stance. Agriculture will certainly be a focal point in the Union Budget as the agriculture sector will not only boost India’s overall development but also improve the economic status of the rural poor.
As far as the job sector is concerned, the new budget may push tax rebates for the companies which make capital investments and generate employment. The present government has been working hard to boost private sector investment and job creation and hence, there is a likelihood that tax sops could be announced. Job creation is likely to be the key focus of Sitharaman’s maiden budget. The government itself has been financially constrained to spend more. However, it can still enthuse private companies to invest more by wooing them with tax rebates and reductions.
The new government may consider focusing on the MGNREGA to kick start the rural economy. The scheme may be crucial for the government’s efforts to quell farmer distress in underdeveloped agricultural areas. Finance Minister Nirmala Sitharaman is expected to raise the allocation for MGNREGA to alleviate the agrarian crisis.
The NDA government’s flagship Pradhan Mantri Ujjwala Yojana is likely to get a boost with an eye on increasing access to cooking, or LPG to each and every household in the country before the year-end. As per the latest financial reports, 93-94 per cent of Indian households have access to LPG. However, the new measures in the upcoming budget are expected to increase access to 100 per cent of the country’s households.
The PMAY scheme is expected to be a key figure in the upcoming budget as the scheme received an allocation of more than Rs. 25,000 crore in the previous two Union Budgets. The PMAY scheme was launched in the year 2015 to provide affordable housing to eligible Indian citizens.
Over the previous term, healthcare was one of the cornerstones of the current government’s welfare policy. Former health minister JP Nadda stated that a total of Rs. 10,000 Crore had been allocated for implementation of the PMJAY scheme until 2020. Going by this number, a substantial allocation is expected for the PMJAY scheme in the Union Budget 2019.
Given the rampant water scarcity in the country, the centre introduced the Jal Shakti Abhiyan, which is aimed at water conservation. Finance Minister Sitharaman is expected to provide a substantial allocation to the Jal Shakti scheme as there is a widespread water crisis in the country. Other water-related schemes such as ‘Jal Jivan Mission’ and ‘Nal se Jal’ initiative are also expected to receive a significant allocation in the upcoming budget.
Without a doubt, the budget-related challenges faced by Sitharaman are plenty. There are clear signs of a rural slowdown, private investment remains muted, and consumption and demand are suffering. Consequently, Sitharaman is expected to boost domestic consumption and support micro, small and medium enterprises to lower farmer distress and create employment for the nation. The upcoming budget is likely to spell out a roadmap for banking reforms, including consolidation of the state-owned lenders. This budget is expected to play a pivotal role in pushing India towards being a USD 5 trillion economy. Hopefully, Finance Minister Nirmala Sitharaman will be able to deliver on the promises made by the new government.