ouseholds should be happy over the Budget, as for the first time, a large number of benefits have been given in an Interim one. The government has so far been quite austere in giving income tax benefits but on the back of a good record of collections, it has decided to reward tax payers with some substantial benefits.
An increase in the exemption limit combined with higher standard deduction and higher limit on TDS on interest from banks, will help in increasing the spending power of individuals. This has wider implications in terms of higher savings and consumption, which will augur well for the economy. The money released into the system will be used for spending on fast moving consumer goods (FMCG), durable goods, auto and textiles. This has positive impetus value for these industries.
The Budget has been cheerful also on the housing front, especially on the rent side for people having two houses as well as the TDS on rent. The first was an anomaly and had to be corrected while the second was quite outdated in these times where TDS had to be applied when rent exceeded Rs 1.8 lakh per annum. Individuals planning to buy a second home can do so without the use of subterfuge as the existing rules were daunting.
The second part of the focus has been on the farm sector and the approach has been different. Instead of going in for loan waivers, the government has pitched for interest rate subvention whereby farmers get to pay 3% less over and above the existing 2% on rescheduled loans provided they service them on time. This is good for banks which have been unsure of such lending, as there was a high chance of building up NPAs in case of an adverse monsoon.
A more novel scheme which has come in relates to the cash transfers for the marginal farmers of Rs 6000 per annum to over 12 crore households. This is in a way is a modified version of the Universal Basic Income where a transfer is invoked into the account of the targeted individuals. As this is an interim budget there have not been any pain points as such as the government has not raised taxes in any area and has concentrated more on giving concessions or invoking expenditures to ensure that the targeted people are better off. This has been done without altering the fiscal math as the fiscal deficit remains at 3.4%. The disinvestment target has been upped to Rs 90,000 cr which is even higher than the Rs 80,000 cr for FY19, which the Budget is confident of achieving. This could be a balancing item once the revenue and expenditure has been worked out which can be achieved by the standard methods used in meeting fiscal targets which involves buybacks, getting LIC to buy shares or PSUs buy into one another. This has become a standard operating procedure which will probably be used again in FY20 to meet the targets.
How has this been achieved? Two things have been assumed here. The first is that the GDP growth will be higher at 11.5% in nominal terms which is reasonable and second, the overall size of the budget has been increased by 13.5%. This will help in increasing tax revenue to maintain high collections which are then used for higher allocations that have been announced. While these numbers can change when the main budget is announced, they are unlikely to be very different.
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