Post the interim budget presented in February, Modi government has presented the Union Budget for the year 2019-20 (Budget 2019) with the aim to make a strong nation and a strong citizen. While presenting the 89th Union Budget, Finance and Corporate Affairs Minister Nirmala Sitharaman said, “Our objective was, and continues to be, ‘Mazboot Desh Ke Liye Mazboot Nagrik’ (empowered citizens for a strong nation). With determined human efforts, the task will surely be completed.” She also said that the Indian economy, which is currently the sixth largest in the world, will grow to become an US$ 3 trillion economy in the current year.
Taking a pragmatic approach, Sitharaman has announced several initiatives for the growth of Micro, Small and Medium Enterprises (MSMEs), an increase in excise duty on fuel and gold, surcharge on the super-rich, ₹ 70,000 crore capital for PSU banks, tax relief for home loan holders and no change in personal income tax rates. Among other announcements, the government aims to promote digital transactions, affordable housing, ease of living and boost the transportation industry by launching ‘One Nation One Card’ for pan India travel. Two per cent TDS (Tax Deducted at Source) has also been levied on withdrawals of ₹ 1 crore in a year from bank accounts for business payments.
Ex Finance Minister Arun Jaitley reacted on the Budget and wrote on twitter, “The budget besides being a policy document for boosting growth serves the larger interest of all sectors of the economy.” On the other hand, Rahul Gandhi hinted it as pro-rich budget.
Let us take a look at the sectoral announcements highlighted in the budget and the industry reactions.
MSMEs and startups
For the growth of MSMEs, the government has emphasised a greater deal and made several announcements. The government will create a payments platform for MSMEs, which will enable filing of bills and payments on the platform itself. A uniform payments platform for contractors and suppliers including MSMEs will be created. Loans of ₹ 1 crore for MSMEs will be cleared within 59 minutes through the online portal.
Over the years, MSMEs have battled to get loans, given their inability to produce relevant assets as collateral. In fact, the current gap between the demand and credit supply within the Indian MSME sector is about US$ 230 billion. On the announcement of a uniform payments system, Chief Executive Officer and Co-founder of payments gateway provider Instamojo, Sampad Swain, says, “The introduction of the one crore – 59 minutes MSME loan brings great relief to small business owners, making easier accessibility and processing of loans through a single portal. This, in turn, will translate into stability and growth of the sector, with the sustenance of existing business and birth of new ones.”
Aiswarya Ravi, Chief Financial Officer, Kinara Capital, an NBFC, says, “This budget has recognised that MSME entrepreneurs today are getting savvier and has extended digital inclusion to this often-ignored group. A dedicated online payments platform for the MSMEs will be a big boost to small businesses as it will reduce their credit cycle and help them to actively manage their payments. Being able to digitise their data will be a useful tool for their future funding requirements, because this group often gets rejected at the first step of a loan application. The new e-marketplace platform will help in cutting down credit cycles for MSMEs, who can then can increase their economic potential and sales reach beyond their local regions with new e-channels that will allow them to sell their products easily.”
Further, the Finance Minister announced an allocation of ₹ 350 crore for two per cent interest subvention for all GST-registered MSMEs on fresh or incremental loans.
Kumar Rajagopalan, Chief Executive Officer, Retailers Association of India (RAI), reacted on the Budget and that the budget is pro-poor, pro-rural and pro-ease of doing business. He comments, “The Budget 2019-20 seems to provide a sense of well-being for the common citizens of India. With its focus firmly on accelerating country-wide development, the budget focused on a slew of measures for the rural sector, SMEs and startups. The measures for the rural sector, including better infrastructure and road connectivity, will boost consumption and make rural markets more accessible to modern retail.”
Under Prime Minister’s Karam Yogi Man Dhan Scheme, pension benefits will be extended to around three crore retail traders and shopkeepers with an annual turnover of less than 1.5 crores. “The accordance of pension benefits to retail traders and shopkeepers with an annual turnover of less than ₹ 1.5 crore under the Pradhan Mantri Karam Yogi Maan Dhan Scheme is indeed a laudable move. This is the first time a budget has recognised the retail trader and the role of small retailers in the country” Rajagopalan adds.
Talking about the pension scheme for retailers, Swain says, “The pension programme for 30 million retail traders is an encouraging move, keeping in mind that the Indian retail space is still majorly driven by small business owners and traders. This not only brings a long-term life plan for these traders, but also helps towards the gradual formalising of this majorly unorganised sector.”
Additionally, the startups and investors who file requisite declarations will not be subjected to any kind of scrutiny in respect of valuation of share premium. A mechanism for e-verification will be put in place and, with this, the funds raised by startups will not require any tax scrutiny. Special arrangements will be made by Chairperson, Central Board of Direct Taxes (CBDT) for pending reviews and cases related to startups.
Startups like Excess2sell, an online marketplace and Adda52.com, an online poker website, are enthusiastic about the announcements for startups. “Taking the Startup India initiative and its focus ahead, the government has reinstated its intent of resolving key concerns of new technology businesses. The measures announced in this Union Budget will reinforce and help scale up the growth of startups that are on the verge of their next phase of consolidation. By taking concrete measures and a clear roadmap on taxation, capital gains, corporate tax and GST rates, this budget will help startups like ours to grow and expand to their fullest potential,” opines Rajan Sharma, Founder and Chief Executive Officer, Excess2sell.
Mohit Agarwal, Chief Executive Officer of Adda52.com, tells us that the budget announcements by the government of India for Indian startups is a sign of relief for all entrepreneurs across the country. According to him, the step of not scrutinising the startups and investors who have filed the returns has provided a major respite to the startup community. “The budget has relieved the startup community from tax issues, as returns of startups will not be subject to any scrutiny from the Income Tax department. More than half of the startups have received Angel Tax notices,” he adds.
He also says, “In this technology-driver world, it is indeed an interesting step by the government of India to air a channel under its Doordarshan bouquet only for startups. This channel managed by the startups will broadcast programmes aimed at inspiring startups across the country. It will be a great help to entrepreneurs, as it will ensure that important updates from the industry are aired through the channel.”
The step of the proposed television program exclusively for startups has been praised by all.
The government aims to strengthen Reserve Bank of India’s (RBI) authority over non-banking financial companies (NBFCs). In this initiative, public sector banks will be provided a capital of ₹ 70,000 crores to boost credit to provide fora strong impetus to the economy. Besides, this budget also proposes Social Stock Exchange under SEBI for listing social enterprises and voluntary organisations.
Manish Lunia, Co-founder of digital lending platform Flexiloans.com, says that for NBFCs this budget proposes a great relief amidst the liquidity crunch. The government’s credit guarantee for highly-rated NBFCs is likely to reflect on the overall health of the NBFC sector. He adds, “Allowing all NBFCs to participate in Trade Receivables Discounting System (TReDS) – the scheme for setting up and operating the institutional mechanism for facilitating the financing of trade receivables of MSMEs from corporate buyers through multiple financiers – is a great move for the sector. It will greatly help several MSMEs in accessing supply chain finance at competitive cost and with great ease.”
Romesh Tiwari, Head of Research, CapitalAim, a financial advisory, comments, “The creation of Social Stock Exchange for social organisations to raise capital for their social service venture via equity and debt by the issuing unit is a welcome step, and we see a lot more voluntary organisations coming up to serve society. The impact on the immediate market is negligible as the need for more clarity on the structure and process will be needed.”
A big relief came to home loan holders as the Finance Minister announced tax relief for them with a deduction up to ₹ 2 lakhs. Prasoon Chauhan, Chief Executive Officer, HomeKraft, a residential developer by ATS Company, tells us, “This budget has clearly shown the intent to continue and further grow the platform for affordable housing segment in India. Total interest savings of ₹ 7 lakhs for home loans over a time period of 15 years is significant savings for the middle class, and that too with bigger houses as carpet area norms have been significantly relaxed. This will lead to many developers, including us, launching projects in this segment as currently there is huge demand and supply mismatch.”
Pankaj Goel, Secretary of CREDAI, foresees the Union Budget with a clear mandate to put emphasis on the housing sector. He says, “The new government with a clear-cut mandate has tried to provide a further impetus to the housing sector. The Finance Minister has shifted the base year for holding period to calculate long-term gains from immovable property to 2001 from 1981. Regulation of housing finance companies is being returned from the National Housing Bank (NHB) to RBI, which will bring about the much-needed reforms for the financing of the real estate sector. Hopefully, this will give a boost to the real estate industry as a whole.”
The real estate industry is also positive about the move to allocate ₹ 100 lakh crores for infrastructure development in the next five years. Anshuman Magazine, Chairman and Chief Executive Officer, India, South East Asia, Middle East and Africa, CBRE, says, “Increased allocation for the development of railways, ports, roads, aviation and intra-city networks such as metro rail will strengthen the overall infrastructure fabric of the country. In particular, it is commendable that the government has paid due emphasis to further empower the rural economy. The Finance Minister specifically mentioned the requirement for investing in rural road infrastructure, connectivity and rural housing, and promised the construction of 1.95 crore rural homes by 2022 under the government’s Housing for All scheme, in addition to equipping these homes with toilets, electricity and LPG connections.”
On the housing front, an additional deduction of ₹ 1.5 lakhs has been proposed on the interest paid for affordable housing loans till March 2020. A model rental tenancy law will also be established to enhance the rental housing market. These measures, besides sustained investment in the Pradhan Mantri Awas Yojna, will continue to support the housing market in the country.
The most important announcement on the agriculture front in the 2019-20 budget is the announcement to create 75,000 skilled agri-entrepreneurs. The agrarian society is reacting positively towards the various announcements made in the budget. R.G. Agarwal, Chairman of Dhanuka Agritech Ltd, which manufacturers agro-chemicals, has praised the budget. He says, “We are happy to see the government supporting private entrepreneurship in the agriculture sector to drive value-addition to farmers’ produce and for those from allied activities However, the emphasis on zero budget farming is not practical in my opinion as the food security that we have achieved through great efforts of farmers and scientists only through use of proper technology. We only have to adopt hi-tech agriculture, which can provide food security, as the land is shrinking.”
The government has also proposed Pradhan Mantri Matsya Sampada Yojana to address the critical infrastructure gap in the fisheries sector. Amit Saraogi, Managing Director of Kolkata-based Anmol Feeds Pvt Ltd, welcomes the scheme, “We welcome the Pradhan Mantri Matsya Sampada Yojana (PMMSY) that will focus on addressing the critical infrastructural gap in the fisheries sector. The impetus provided to develop the infrastructure of the fisheries sector will yield in better productivity and efficiency, thereby, strengthening the value chain, including infrastructure, modernisation, traceability, production, productivity, post-harvest management and quality control. This will certainly benefit the aqua farmers and the rural economy in a big way.”
K.C. Ravi, Chief Sustainability Officer at Syngenta India Ltd, which provides crop-related solutions to farmers, talks about budget, “The emphasis on creating more public private partnerships (PPPs) in creating agri-businesses will go a long way, as there are many successful models available in the private sector.
“The second important announcement is around creating 10,000 more Farmer Producer Organisations (FPOs). The only watch-out here is to look more closely on the implementation, as many of the FPOs created thus far have not been able to achieve the very objective of improving the collective bargaining power of the farming community.”
Sitharaman made some crucial announcements in the budget, which will give women leaders wings to fly and surely bring some more women leaders to the fold in the near future. The expansion of the interest subvention programme to all districts for women self-help groups is a crucial move, which will bring positivity to the self-help group members. Women entrepreneurs are welcoming the women empowerment initiatives.
Savitha Kuttan, Founder and Chief Executive Office, Omnicuris, a health tech startup that provides digital CME to medical practitioners, says, “As a woman entrepreneur, I welcome the Modi 2.0 government’s budget with open arms, as a lot of focus has been laid on the achievements of women in various fields. A committee to evaluate and suggest measures to improve women’s welfare move will be beneficial to empower the fairer sex in the society. I am elated how the government has celebrated the efforts made by the women in their day-to-day life and given them their due credit for being the main propellant for the welfare of the world. Even the announcement of a ₹ 1 lakh loan for women under the Mudra scheme will boost more women entrepreneurs to come forward and spread their wings.”
Shreya Sabharwal, Founder and Owner of Square Fork Digital Marketing and PR Agency, says, “In the first place, I believe it is a proud moment for us that Nirmala Sitharaman is the first full-time woman Finance Minister who has presented the Union Budget. I strongly believe the budget is in safe hands, who has allocated more services for women-specific issues in terms of health, safety and empowerment. These are some gaps that need to be filled to make this nation developed in a comprehensive manner.
“Being a women entrepreneur, I am also looking forward to witness more encouragement and support for us concerning accessibility to funds. This reinforcement will bring more confidence and positivity for women entrepreneurs to come up and flourish.”
Transportation, logistics and electric vehicles
The budget proposes to encourage faster adoption of electric vehicles (EVs) through the right incentives and charging infrastructure under FAME II scheme. Commenting on the decision taken on EVs in the budget, Ayush Lohia, Chier Executive Office, Lohia Auto Industries, says, “It is a welcome move that the government has reduced GST on EVs from 12 to 5 per cent, and allocated ₹ 10,000 crores for the faster adoption of EVs, in addition to upfront incentives for EVs. This will help attract investments for manufacturers and ensure clean energy over time. This decision will represent the next generation in sustainable mobility and make it an attractive alternative to consumers. To give more boost to the EV sector, we propose a more cautious, clear and realistic road map towards the adoption of EVs and hope that more positive steps will be taken by the government to cheer the overall industry and the consumer.”
Dealing with the huge slump in automotive industry, auto dealers are not very happy with the budget announcements. Ashish Harsharaj Kale, President of Federation of Auto dealers Association (FADA), says, “Our budget expectations were high. Looking at the current state of the industry, we were expecting specific measures in the budget to revive growth in the auto industry and, to that extent, we are disappointed. Moreover, with an addition of cess on petrol and diesel leading to a price hike of ₹ 1 might impact auto sales, especially in the price sensitive two-wheeler segment.”
Mudasar Mohamed, Chief Operating Officer and Co-Founder, Ezyhaul, a log-tech startup based in India, Singapore, Malaysia and Thailand, says, “The creation of One Nation-One Transport card is a great initiative to further digitise payments and cashless transactions. A practical use case for the transport industry could be that truck drivers can use this card for paying at Highway Tolls and avoid cash transactions.”
The Finance Minister has also emphasised on constructing roadways infrastructure. Mohamed reacts and says, “It is good to see the continued focus on improving road infra with a commitment to comprehensive restructuring of the National Highways Programme and rural roads.”
Youth and education
“This budget is a positive step in the right direction to focus on the education sector,” expresses Kanak Gupta, Director at Seth M.R. Jaipuria Schools, Lucknow. The Finance Minister has proposed a National Sports Education Board for the development of sports persons under Khelo India initiative to strengthen the sports ecosystem, while a new National Educational Policy for transforming the higher education system. He further says, “I am excited about the proposed setup of the National Research Foundation; this could be the game-changer. Research is sacrosanct. I am also hopeful that the National Education Policy will focus on up-skilling of both teachers and learners to meet global levels, and ensuring we do not send our brains abroad, nor do we spend millions of dollars in tuition and living costs.
“Study in India and Stock Exchange for Social Enterprises will give a boost to the Tier II and III educational institutes as well. Overall, the Hon’ble Minister’s focus on improving education with the target towards the future, sustainable growth is commendable.”
Amol Arora, Managing Director, Shemrock & Shemford Group of Schools, comments, “This budget is guided by the mission to strengthen the education sector, especially the establishment of the National Research Foundation, which will definitely help in creating the right ecosystem for R&D in the country. And it is great to see the government finally taking notice of industry-relevant skills such as Artificial Intelligence (AI), the Internet of Things (IoT), Big Data and other reforms in the higher education sector. A humble, yet notable, announcement was the Study in India programme, which holds the potential to put India on the world map. However, we still need a series of fundamental structural reforms, which, I hope, will be addressed in the near future.” The group has been recognised by the Limca Book of Records for starting the highest number of schools in the shortest time.
Overall, the 2019 union budget has touched upon almost every sector, while not disrupting the overall economic environment. It seems to provide the necessary push in-field of infrastructure, agriculture, banking and finance, technology and biggest of all housing for the common man. Even the industry leaders are of opinion, that the government continues its initiatives towards upgrading India’s road and real infrastructure and it will certainly give a push to other business verticals.