On February 1, 2019, Finance Minister Piyush Goyal released the Interim Budget for the year 2019-20 and made numerous changes in different sectors aimed at benefiting the farmers, the middle class and the unorganized sector. Unorganized sector in India is growing manifold affecting people in the rural areas and rapidly making its way into urban areas. Though the logistics sector falls under the head of organized sector, it needs a lot of development and changes for better functioning. Let’s hear it from the industry stalwarts on their perspectives and analysis on this Interim Budget…
Finance Minister Piyush Goyal’s Interim Budget 2019 can be summed up as a series of SOPs for the middle class, farmers and millions of employees in the unorganized sector. Not only does he promise to put more disposable income in the pockets of Middle-Class India, he is also seeking to improve the quality of life of people at the bottom of the pyramid, particularly the small and marginal farmers, and unorganized sector workers. In short, it is a great Budget that should spur consumption.
The government’s decision to allocate Rs60,000 crore for MNREGA and another Rs19,000 for construction of rural roads under Gram Sadak Yojana, coupled with the increased interest subvention scheme for distressed farmers and the modest farm support scheme offering income support for marginal farmers tick all the right boxes when it comes to fueling the Rural and Agrarian Economy. The minister also announced a social security coverage for workers in the unorganized sector. These are steps in the right direction and would go a long way in improving their quality of life. But the biggest beneficiary this year is Middle-Class India. The government decision to exempt tax on an income of up to Rs5 lakh for individual tax payers and an increase in standard deduction to Rs50,000, the hike in TDS threshold for home rent and higher Capital Gains tax exemptions under Section 54 are big-ticket reliefs for the Aam Aadmi. I am confident this Budget would boost overall consumer confidence and play a catalyst for demand generation for branded consumer staples and consumer products.
What’s also heartening to see is the government’s commitment to long-term reforms while addressing a changing international tax landscape. The decision to process Income-Tax returns within 24 hours and immediate payment of refunds, in addition to anonymizing tax scrutiny within the next two years to beat corruption and increase ease of process are steps that will create the foundation for a new-age India. The Interim Budget, I feel, has successfully laid down the blueprint for creating an enabling framework that would promote growth. However, the upward revision in fiscal deficit target to 3.4% of GDP for 2018-19 and 2019-20 remains an area of concern. Also, there is not much clarity on the government vision and strategy for improving infrastructure and job creation.
The Union Budget for 2019-20 can be summed up as a series of benefits for middle class, farmers & unorganized sector workers. Simultaneously, it also focused on infrastructural development in rural India by allocating Rs19K crore for Gram Sadak Yojana (one of many initiatives), though this will benefit them but seems to be more focused towards upcoming elections. One more initiative announced to reduce the level of corruption is by establishing process framework (within next 2 years) for anonymizing tax scrutiny (hope intent will not get diluted while implementing) in addition to process the income tax refund within 24 hours. However, it is not clear that from where fund will come to allocate money to schemes announced except one which is extending the limit of TDS on bank deposits & small savings, which will attract new depositors to some extent. Again, there is no discussion on how industries will grow and how employment will generate for young India.
The interim budget presented by the Government of India provided a holistic outlook and comprehensive coverage to optimize growth, while addressing inclusive and sustainable development. The measures announced to aid digital inclusion, provide comprehensive healthcare and wellness systems, increase consumer spending, strengthen the agricultural sector and strengthen India’s entrepreneurial spirit and the opportunities, thereof, are commendable. The enhanced focus on digitalization would open up possibilities for consumer sectors to reach larger masses more effectively and economically. Transformational reforms such as the GST and demonetization would not have been possible without the creation of progressive institutions such as FSSAI, Niti Ayog and DIPP and the strong leadership they exhibited in implementing them amidst challenges. The public private partnerships forged by these institutions will serve to be a powerful enabler in maximizing the impact of social, economic and financial inclusion in the country.
While we are pleased to see the focus on boosting entrepreneurial capabilities and measures for women development, Amway strongly believes that direct selling can play a crucial role in fueling the economic growth and in creating job opportunities for women and youth, at large. We hope to see renewed focus on the direct selling industry in the near term, to truly realize this industry’s potential to contribute to the country’s growth and job creation. We were also hoping for a reduction in the corporate tax rate from 30% to 25% for companies exceeding Rs250 crores in turnover. Overall, the budget helped consolidate India’s growth agenda and introduced measures to strengthen the nation’s continued progress, for a large section of the country.
The announcement of the proposed Interim Budget 2019 with an agenda to present “Rise of New India” is clearly a roadmap for development. The introduction of digitization in export/import transactions and leveraging RFID technology will prove to be a headway in fostering digitization on the usage of national and state highways. Setting up of more warehousing facilities in tier II and tier III cities will boost employment opportunities and allow deeper penetration of goods & services for the end customer. Most importantly, we see the Government’s vision to improve all transport infrastructure like roads, airports, ports, etc., for multimodal connectivity will empower the sector. From a logistics standpoint, the Budget made an important announcement with respect to the development of highways in the country. This will enable quicker time to market and increase the visibility & reliability of the supply chain.
The clear focus of the Interim Budget on boosting disposable incomes in the hands of rural Indians and the urban lower middle class is a welcome move for the consumption story of India, while the intent of the Government to avoid any significant deviation from the path of fiscal consolidation was visible. The thrust on improving ease of business and simplifying tax administration by leveraging digital technologies was another step in the right direction. The vision built on the principles of inclusive growth and equitable living in India augurs well for economy and the society in general.
The capital outlay for roads, railways, and metro projects have been budgeted to increase by 12–19% in 2019-20 over the 2018-19 RE. The increased capital outlay is proposed to be supported by higher budgetary allocations in railways and metro projects, while it is to be primarily by way of NHAI’s internal and extra-budgetary resources (IEBR, which is largely through debt raised by NHAI) for roads. This would make the funding availability dependent on NHAI’s ability to increase IEBR significantly. Capital outlay towards some key schemes of the infrastructure sector has also been projected to increase in 2019-20 BE. The capital outlay towards PMGSY is being increased by 22.6% to Rs19,000 crore, that of PMKSY by 15.3% to Rs9,516 crore, AMRUT and Smart Cities Mission (Urban Rejuvenation) by 10.6% to Rs13,900 crore in 2019-20 BE over 2018-19 RE.
On the other hand, budgetary allocation towards NIIF remains modest at Rs 1,000 crore. NIIF, India’s sovereign wealth fund, which was proposed to have a corpus of Rs40,000 crore in FY2015, has gradually started gaining traction. Given the huge capital requirement for the infrastructure sector, NIIF can play a vital role in augmenting available capital for the sector. A higher allocation would have provided more visibility to NIIF for investments in the country’s infrastructure.
Indian logistics sector is currently worth around $160 billion and is assured to grow remarkably over the next two years. Few of the areas of the logistics sector that need to be worked upon for its better functioning and efficiency include Infrastructure Enablement; Enhanced Regulatory Mechanism; and Developing Technologies. Interim Budget 2019-20 had focused on not all but few of the areas that will help the sector to improve in coming years both from the suppliers’ and consumers’ point.
Rationalization of customs duties and the procedures involved to promote the government’s ‘Make in India’ Initiative will uplift the budding entrepreneurs as the Government has abolished duties on 36 capital goods. Further, the procedure involved in importing duty-free capital goods and inputs for manufacture and export have been revised, coupled with introducing a single point of approval under Section 65 of the Customs Act, 1962. In addition, to meet the growing demand of the economy and improve India’s export and import transaction, Indian Customs is introducing full and comprehensive digitalization of export/import transactions and using Radio Frequency Identification technology to its maximum advantage so that it may improve export logistics. Additionally, the Finance minister declared that there would be a jump of 21% budget allocation in the North-Eastern region at Rs58,166 crore, which may unplug the unused logistical productivities of the region. To empower the logistics sector, ministry has laid weightage on inland water development and to accelerate inter-state freight movement, e-way bills will be simplified. One of the biggest initiatives made in the sector is the flagship programme of Sagarmala along the coastal areas of the country, which will develop the ports concerned for faster and easy handling of import and export cargo. For the first time, container freight movement has started on inland waterways from Kolkata to Varanasi. Government will introduce container cargo movement to the North East as well, by improving the navigation capacity of the Brahmaputra river.