Union Budget 2019 clearly underscores the theme of enablement, ease of living, and ease of doing business. Directed at enabling the world’s largest democracy to be fit for the future, institutional reforms and green technology-led growth are its underlying essence.
Finance minister Nirmala Sitharaman has driven home the point that to be a $5-trillion economy in the next five years, proactive actioning of her pithy phrases—“Minimum Government, Maximum Governance”, “Gaon, Garib, Kisan”, “Har Ghar Jal”, “Nari to Narayani”, “Women-centric Policies to Women-led Initiatives”—is imperative along with a far more concerted effort from India Inc., private investments, and accelerated consumption.
Governance through digital
Be it about connectivity, compliance or payments, the Budget’s focus giving a further impetus to the Digital India programme and the formalisation of the economy was much needed. With gross tax revenue as a percentage of GDP projected at 11.7% in 2019-20, a tad less than the 11.9% in 2018-19, to mobilise resources and investments, the country’s tax base needs to expand. Making it mandatory for businesses whose annual turnover exceeds ₹50 crore to make digital payments and a levy of 2% tax deducted at source for cash withdrawals exceeding `1 crore from banks would lead to further formalisation of the economy and expansion of the tax base. This would also pave the way for a truly digital India. For the past few years, India has been on the journey towards becoming a digital economy. But it needs an enabling ecosystem. With this Bud - get, we are a step closer to realising that goal.
Access to funds has been a long-standing challenge for India’s micro, small, and medium enterprises (MSMEs). Capital infusion of ₹70,000 crore in public sector banks (PSBs) and a one-time guarantee on first loss on pooled assets of strong non-banking financial companies (NBFCs) would allow informed risk-taking by PSBs lending to NBFCs, enhancing access to credit for MSMEs.
Scope for infrastructure boost
It is estimated that upgrading India’s infrastructure would need ₹100 lakh crore over the next five years. It was expected that the government would go for pump-priming the economy through infra investments. But since it has stuck to the path of fiscal prudence by lowering the fiscal deficit to 3.3%, private sector-led investments would be the way forward. Steps announced on strengthening NBFCs’ regulation, bringing housing finance company regulation under the Reserve Bank of India, and allowing foreign institutional investments and foreign portfolio investments in debt securities issued by infra debt funds and NBFCs will support this plan.
Many Indian cities have been grappling with the flip side of development, growth, and resultant prosperity. The government’s sharp focus on reducing its carbon footprint through the use of plastic waste and green tech for construction of roads in rural parts under the Pradhan Mantri Gram Sadak Yojana is a welcome move towards sustainable and responsible growth. Also, many incentives under the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India scheme to aid faster adoption of e-vehicles for mobility and direct tax incentives on loans to purchase e-vehicles are a step in that direction.
Fostering talent, entrepreneurship, and skill upgradation
As part of the Skill India initiative, the finance minister’s announcement to focus on imparting skills training through the Pradhan Mantri Kaushal Vikas Yojana to ready the country’s youth for high-paying jobs overseas is another interesting step. Whether beneficiaries take up jobs abroad or not, it will definitely make India’s youth fit for the future. Training in language skills, artificial intelligence, the Internet of Things, Big Data, 3D printing, virtual reality, and robotics is necessary for tomorrow’s workforce.
The success of India’s startups has infused new life into its economy, workplaces, and the general entrepreneurial spirit among Indians. These startups have been crucial in solving many societal and business problems, including job creation. The government’s laser focus on startups in the Budget is a step towards nurturing an enabling ecosystem for startups. It is expected to boost the entrepreneurial spirit and spur innovative ideas, especially pertaining to the agro-rural sector that has been facing greater stress.
The focus on empowering women, especially in rural areas, is commendable. India needs to create a more enabling environment for women and the interventions announced around self-help groups are a need of the hour to truly build tomorrow’s India.
Despite the vibrant vision, the road ahead for a fit-for-the-future India is fraught with challenges—the fiscal deficit, economic slow - down, job creation, and the stressed balance sheet of the private sector, skilling, among others. Addressing these needs unwavering intent, stable policy, strong governance, and attracting long-term capital to India.
Views are personal. The author is leader advisory, PwC India