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News Analysis: 02-02-2019
General Studies-III : Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
The interim Budget 2019-20 contained elements that are aimed at benefiting three major segments of the population — farmers, informal sector workers, and salaried taxpayers — with announcements of an income support scheme for farmers, a new pension scheme for informal sector workers, and tax exemptions for salaried workers.
Finance Minister Piyush Goyal, in his interim Budget speech on Friday, announced the creation of the Pradhan Mantri Kisan Samman Nidhi Scheme, which is aimed at providing income support to vulnerable landholding farmers.
Under this programme, vulnerable landholding farmer families, having cultivable land up to 2 hectares, will be provided direct income support at the rate of ₹6,000 per year, Mr. Goyal said.
“This income support will be transferred directly into the bank accounts of beneficiary farmers, in three equal instalments of ₹2,000 each. This programme will be funded by the Government of India and will entail an annual expenditure of ₹75,000 crore.”
The scheme is applicable with retrospective effect from December 2018 and will be fully funded by the Union government. It has been allocated ₹20,000 crore in the revised estimates for the current financial year 2018-19, as well as ₹75,000 crore for the next financial year 2019-20.
Announcing the scheme, Finance Minister Piyush Goyal acknowledged that farmers’ incomes are falling due to a decline in international prices and domestic food inflation, and fragmented landholdings.
The Rythu Bandhu scheme of Telangana offers ₹10,000 per acre a year to all farmers, excluding tenant farmers, while the Krushak Assistance for Livelihood and Income Augmentation (KALIA) scheme of Odisha offers direct benefit cash transfer of ₹25,000 for a farm family over five seasons to small and marginal farmers.
What was notable about the announcement, however, was that he allocated ₹20,000 crore for the scheme for the current financial year.
Opposition party members were quick to point out that this was designed to evade the Election Commission rules regarding announcements that are allowed to be made in an election year.
The Finance Minister was, however, silent on how these high-expenditure schemes would be financed.
In fact, he even admitted that implementing the farmers’ income transfer scheme was the reason why the government would be missing its fiscal deficit target not just for the current year but also for the next year.
He said the fiscal deficit would be 3.4% of the GDP for both 2018-19 and 2019-20, compared with a target of 3.3% and 3.1% respectively.
Other measures announced in the Budget include a 2-5% interest subvention for loans taken by farmers hit by natural disasters or for livestock farming and fisheries.
Friday’s Budget may have provided a bonus for landholding farmers, but the jobs guarantee scheme, which is a lifeline for landless labourers and other rural workers, faces a continued funds crunch.
The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) scheme was allocated only ₹60,000 crore for the next financial year, slightly lower than its revised estimate of ₹61,084 crore for the current year.
While keeping tax rates unchanged, the Finance Minister announced that those earning up to ₹5 lakh a year would be exempt from income tax.
This, he said, effectively meant that those earning ₹6.5 lakh a year would not need to pay tax if they made full use of the ₹1.5 lakh exemption available under Section 80C of the Income Tax Act.
The standard deduction limit for salaried taxpayers would be raised to ₹50,000 from the ₹40,000 announced in last year’s Budget. “This will provide additional tax benefit of ₹4,700 crore to more than three crore salary earners and pensioners
The Tax Deduction at Source (TDS) threshold on interest earned on bank/post office deposits has been proposed to be raised from ₹10,000 to ₹40,000.
Further, the TDS threshold for deduction of tax on rent has also been proposed to be increased from ₹1,80,000 to ₹2,40,000.
He also proposed to exempt the levy of income tax on notional rent on a second self-occupied house. Currently, income tax on notional rent is payable if one has more than one self-occupied house.
The informal sector workers, the Finance Minister announced the Pradhan Mantri Shram Yogi Maandhan Scheme designed to ensure a fixed monthly pension of ₹3,000 per month for informal sector workers above the age of 60.
The contribution would be ₹100 per month for those joining the scheme at the age of 29, while it would be just ₹55 a month for those joining at the age of 18. The government will match the monthly contributions with an equal contribution of its own.
The Centre expects 10 crore workers to get the benefit within the next five years.
However, the Budget documents show that an existing pension scheme, which already benefits more than 3 crore poor people who are senior citizens, disabled or widows, has had its allocation slashed. The National Social Assistance Programme (NSAP), a pension scheme administered by the Ministry of Rural Development, had originally been allocated ₹9,975 crore in the 2018-19 Budget. For 2019-20, the scheme’s allocation has been cut to ₹9,200 crore, a drop of ₹775 crore.
The NSAP featured in last year’s Budget speech, when then Finance Minister Arun Jaitley had said the government was “implementing a comprehensive social security and protection programme to reach every household of old, widows, orphaned children, divyaang and deprived as per the Socio Economic Caste Census (SECC).”
Using the SECC criteria as opposed to the existing Below Poverty Line criteria would have doubled the pension coverage to more than 6 crore people.
However, Mr. Jaitley’s Budget allocation remained unchanged. This year, Mr. Goyal made no mention of the NSAP, but reduced next year’s allocation from the current year’s estimates.
While Budget 2019 did not specifically make any announcement for the capital markets, investors gave a thumbs-up to the interim budget on expectations that the sops aimed at enhancing the farm income and tax benefits would boost consumer spend in the coming days.
The Centre will form a welfare panel for nomadic, semi-nomadic and de-notified communities, Finance Minister Piyush Goyal announced in Friday’s Budget speech.
To start with, a committee will be set up under NITI Aayog to complete the task of identifying de-notified, nomadic and semi-nomadic communities, especially as they move from place to place in search of a livelihood. The committee will follow up on the work of the Renke Commission and the Idate Commission.
A Welfare Development Board will also be set up under the Ministry of Social Justice and Empowerment to design and implement programmes for these hard-to-reach communities, Mr. Goyal said.
He said a substantial increase is proposed in the allocation for welfare of the scheduled castes and scheduled tribes.
In the Budget speech, Finance Minister Piyush Goyal revised the fiscal deficit target for 2018-19 to 3.4% from 3.3%.
Originally, the target was to reach a fiscal deficit of 3.1% of GDP by March 2020, and 3% by March 2021.
At a time when retail inflation — the main yardstick of RBI for policymaking purpose — has fallen to an 18-month low of 2.2%, there is a case for the central bank to lower the interest rate and change stance to ‘neutral’.
In the wake of the development on the fiscal deficit front, the RBI may now opt for status quo.
Mr. Goyal said if the farmers’ scheme allocation was to be excluded, the fiscal deficit would have been “less than 3.3% for 2018-19 and less than 3.1% for year 2019-20.”
The micro, small and medium enterprises (MSMEs) sector, the cornerstone of Indian economy, has got a boost in the Interim Budget, with the government offering 2% subvention for loans up to ₹1 crore and extending the Government eMarketplace (GeM) platform to support domestic services and trade.
With the Budget largely focused on the rural segments of the country, this will benefit the MSME sector greatly as 51% of all 634 lakh MSMEs are based in rural areas, consequently being a vital source of rural employment.
The government has opened a new market for the home-grown entrepreneurs by allowing sourcing from MSMEs through government up to 25%, including 3% from women-run organisations.”
The government has increased the share of its procurements from MSMEs through GeM to 25%.
AI centre on the anvil
Union Finance Minister Piyush Goyal’s announcement of a ‘National Programme on Artificial Intelligence’ ties into an existing programme led by the Union Science Ministry called the National Mission on Interdisciplinary Cyber-Physical Systems (NM-ICPS).
The latter was cleared by the Union Cabinet last December at a total outlay of ₹3,660 crore for five years.
Cyber physical systems deal with training youth for new kinds of jobs that would be created due to the destruction of conventional jobs and the mechanisation of jobs.
The mission aims to establish of 15 Technology Innovation Hubs (TIH), six Application Innovation Hubs (AIH), four Technology Translation Research Parks (TTRP).
The hubs and TTRPs would connect to academics, industry, Central Ministries and State government in developing solutions at reputed academic, R&D and other organisations across the country in a hub and spoke model, according to a note from the Union Science Ministry. About 40,000 jobs would be created in the short term and about 2,00,000 in long term, the note adds.
CPS and its associated technologies, include Artificial Intelligence (Al), Internet of Things (loT), Machine Learning (ML), Deep Learning (DP), Big Data Analytics, robotics, quantum computing, quantum communication, quantum encryption (quantum key distribution), Data Science and Predictive Analytics.
Goyal unveils Vision 2030, highlighting 10 dimensions
Presenting the Interim Budget, Finance Minister Piyush Goyal on Friday laid out the government’s vision for India in 2030, highlighting “10 most important dimensions.”
Stating that India aspires to become a $10-trillion economy in the next eight years, he said the first dimension or point of this vision is to build physical as well as social infrastructure for a $10-trillion economy and facilitate ease of living.
“On the social infrastructure side, every family will have a roof on its head and will live in a healthy, clean and wholesome environment.”
While the second dimension of “our vision” is to create a Digital India, making India a pollution-free nation is the third point which will be driven by electric vehicles and renewables.
“Expanding rural industrialisation using modern digital technologies to generate massive employment is the fourth dimension of our vision,” he said. This will be built upon this government’s flagship ‘Make in India’ programme.
Under the fifth dimension, Mr. Goyal talked about clean rivers and safe drinking water for all Indians.
“India’s long coastline has the potential of becoming the strength of the economy, particularly through exploitation of the Blue Economy…coastline and our ocean waters powering India’s development and growth is the sixth dimension of our vision,” the Minister said.
“The seventh dimension of our vision aims at the outer skies… making India self-sufficient in food, exporting to the world to meet their food needs and producing food in the most organic way is the eighth dimension of our vision.
Next comes the vision of a healthy India. “By 2030, we will work towards a distress-free healthcare and a functional and comprehensive wellness system for all.”
“Our vision can be delivered by Team India — our employees working together with the elected government, transforming India into a minimum government, maximum governance nation. This is the tenth dimension,” the Minister said.
Source: The Hindu
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