6 July 2019: From enhancing the ease of doing business, to creating a conducive environment for new-age companies, with a focus on rural growth and infrastructure creation the new Union Budget for 2019-20 ticks several boxes.
Here is a quick recap of the highlights and an analysis from the desk of the Group Chief Economist -
Finance Minister Nirmala Sitharaman, presented a 'mega investment-oriented' budget with a blueprint to transform India's economy by 2025. This will be achieved by setting up a Credit Guarantee Enhancement Corporation, enhancing the source of capital or infrastructure financing and easing the norms for Foreign Direct Investment (FDI).
Anand Mahindra, Chairman, Mahindra Group, said, "Instead of lowering Goods and Services Tax (GST) on all cars, Nirmala Sitaraman aligned with the vision for mobility & incentivized only Evs. In fact, the budget is an accumulation of seemingly unspectacular moves that will nudge the economy onto a trajectory toward USD 5 trillion & an improved ‘ease of living."
V. S. Parthasarathy, Mahindra Group CFO, said, "Budget 2019 has re-imagined solutions to old chronic problems. This was a 'Governance' focused Budget pivoting around technology, digital and enhancing the ease of doing business in India. It can prove to be a powerful catalyst for economic prosperity if the implementation is flawless and executed in near ‘crisis mode'.
Enhancing the ease of direct and indirect taxation the government has increased the threshold turnover for a lower rate of corporate tax. Currently, the lower tax rate of 25% is only applicable to companies having an annual turnover of up to Rs 250 crore. This has now been expanded to include all companies with an annual turnover of up to Rs 400 crore.
Aadhar card and PAN will be interchangeable and a scheme of faceless assessment in electronic mode involving no human interface will also be launched this year.
In order to incentivize and give thrust to the Electric Vehicles (EVs) sector, customs duty on specified parts required for the manufacture of EVs has been brought down to nil. In addition, there is already a proposal before the GST Council to reduce the GST on e-vehicles from the present 12% to 5%
The Budget also focusses on transforming rural lives by setting up 100 new clusters for traditional industries, 80 Livelihood Business Incubators to develop agro-rural industry sectors, the formation of 10,000 new Farmer Producer Organizations to ensure economies of scale, and expansion of Swachh Bharat Mission to reach every village in India.
Mahindra's Group Chief Economist desk reviewed the Budget saying, "The Budget eschewed the temptation of a big spending splurge because it lacked the room to do so. The government has imparted an Infra thrust by significantly focussing on national grids for water, power, gas, internet, and aviation apart from transportation. Financing the fiscal deficit from abroad, however, can be a double-edged sword especially for countries running twin deficits.
V. Ravi, Executive Director and Chief Financial Officer, Mahindra Finance, said, "The positive reference made by the Finance Minister about NBFCs as an important growth lever by contributing to improved consumption and capital formation, will go a long way in reinvigorating the SME sector. The NBFC industry would have been glad to see the formation of a refinancing body which would address the liquidity stress created by certain entity-specific events that tend to affect the sector as a whole."