Growth Driven Budget
The budget has met the
expectations of a most segments of the population. Lots of sops for farmers, Salaried and the workers in the unorgainsed
sector. There is an increase in outlay for Rural employment scheme to Rs.60,000 cr. Overall,
the budget is likely to put more money in the hands of the common man. When
more money is available, the people from Mid income and Low income tend to
spend more and the growth of GDP from personal consumption will increase.
More than Rs.120,000 cr is likely
to be put in the hands of the final customers on implementation of the budget
proposals. The companies which are having a large presence in Rural areas and
having business model based on consumption are likely to benefit in a big way. Rs.20,000 cr for compensation to farmers has
been budgeted in this fiscal and this money will be disbursed before March 19.
The budget is very good for stock
markets and many companies will improve their financial performance and able to come up with good quarterly and
annual results. The companies can focus on rural markets and increase their
presence in rural markets.
Apart from giving a waiver of
payment of income tax for those who are earning
Rs.5 Laks per annum, which will benefit more than 3 crore tax payers, there was
no change in tax rates. The purchasing power of tax payers will rise and the
exemption alone is going to put more than
Rs.25, 000 cr in the hands of tax payers, if additional benefits ,they
will avail be taken into account.
The total receipts of the
government is likely to rise to Rs.24.50 Lakh cr, a rise of 14.72% over the
previous year. The projection for FY 20 is Rs.27.84 Lakh cr , a projected
increase of 13.31% over the previous year. Tax revenue for the centre in FY 19
increased by 19.47% to Rs. 14.84 Lakh cr. In FY 20, it is projected rise to
Rs.17.05 Lakh cr , a rise of 14.86%
Corporate tax will rise by 17.47%
to Rs6.71 Lakh cr and in FY 20 , it is expected to rise by 13.26% to Rs.7.60
Lakh cr. Income tax collection will rise by 22.80% to Rs. 5.29 Lakh cr and the
projection for FY 20 is Rs.6.20 Lakh cr,
growth of 17.2%. This is despite, 3 cr people who will stop paying taxes
as per the tax waiver announced.
Since the trade growth was very
tepid, the collections from customs is likely to rise by less than once per
cent to Rs.1.30 Lakh cr in FY 19 but in FY 20, they are expecting a rise in
revenue of 11.8% at Rs.1.45 Lakh cr.
Excise duties are likely to rise by only
0.07% to Rs. 2.59 Lakh cr in FY 19 and it is likely to remain at the same level
as in FY 19.
There will be a shortfall in GST
collection of Rs. 1 Lakh cr at Rs.6.43 Lakh crore in FY 19. It will rise to
Rs.7.61 Lakh cr in Fy 20 , a rise of 18.22%.
In the year FY 18, dividends and
taxes received by the Central government was at Rs.91,360 cr. In FY 19, they
expect to collect Rs.1.19 Lakh cr, a sharp rise of 30.54% . In FY 20, the
revenue from Dividends is projected to rise by 14% to Rs.1.36 Lakh cr. To
achieve this target, there is a need to improve the performance of PSUs and
there has to be a strategy to monetise the assets of PSUs in India.
Disinvestment receipts in FY 18
were at Rs.100,045 cr. In FY 19 , it is likely to be at Rs.80,000 cr and in FY
20, they are planning to divest Rs.80,000 cr.
They are showing an item of Strategic disinvestment of Rs.93,155 cr in
FY 19 and the projection for FY 20 is Rs.102,507 cr.
Non tax revenue in FY 19 is
likely to rise to Rs.2.45 Lakh cr, a rise of 27.2% over FY 18. In FY 20, it is likely to rise to Rs.2.72 L cr, a rise of 11.16%. Capital receipts in FY 19 likely to be Rs.7.27
Lakh cr, a rise of only 2.94% over the previous year. But in FY 20, it is
likely to rise to Rs.8.06 Lakh cr, a rise of Rs;10.85%. On capital receipts,
the main source will be Borrowings. In FY 19 , borrowings are likely to be at
Rs.6.24 Lakh cr, a rise of 7.33% over the previous year. In FY 20, it will rise
to Rs.7.04 Lakh cr, a rise of Rs.10.97 %. The Fiscal deficit is projected at
3.4% for FY 19 and it is likely to remain at the same level at 3.4%.
The budget deficit is likely to be mainly funded by borrowings.
Government will be the largest borrower in the market in FY 20.
On the expenditure side, Total revenue expenditure is likely to rise
to Rs.21.40 Lakh cr, a rise of 13.93% and it is likely to rise by 14.36% to
Rs.24.47 Lakh cr. Interest payments in FY 19 , on the total expenditure is
likely to be at 23.9% and it is likely to be at 23.88% of the projected
receipts.
Revenue deficit in Fy 19 is
likely to be at Rs.4.10 Lakh cr. 2.2%. In budget , the ratio is kept at the same level at 2.2% for
Fy 20. Since no new measures were
announced for raising further taxes, most of the incremental expenses are
likely to be met by other sources including Disinvestment, Strategic sale of
assets and asset monetisation. It will be supported by borrowings by the
government.
R.Kannan
Head – Corporate Performance
Monitoring and Research
Hinduja Group
The Article appeared in Free Press Journal on 2nd
Feb 2019
