As we know that the budget 2019 was on talk way before it was presented by Nirmala Sitharaman, as a first full-time women Union Finance Minister. Also, the public expectations for the Union Budget 2019-2020 were quite more because of the public’s favorite, the new BJP or we can say Modi led government. There were so many key highlights like GDP growth, which has been slowed down, global outlook turning gloomy amid heightened trade tensions and fear of a prolonged slowdown in the eurozone.
However, despite the backdrops, the budget was still appreciating as the Finance Minister presented it focusing on nearly every possible aspect of the economy, especially job creation. Though a large segment of intellectuals would have been comfortable even with 3.5 % in lieu of a growth budget, the most promising part was the fiscal deficit target of 3.3% for FY20. This implies that the government’s focus on international borrowing will restrain crowding in private sector borrowing in the domestic market and will help in establishing a sovereign yield curve.
According to the experts, there is a chance od downfall in interest, as lower borrowing in the domestic market should be positive
A growth focussed budget:
According to the ministry of finance, the government has already built 1.5 crore houses and targets to build 1.95 crore houses over the next two years under the rural head of Pradhan Mantri Awas Yojana(PMAY). Indicating its focus on growth ministry also mentioned the progress in the time taken to complete the construction of houses. It was 314 days in year 2015-2016 and 114 days in the year 2018-2019. Hence, they assured that the target of Housing for All by 2022 is expected to meet.
Now coming to the urban head of Pradhan Mantri Awas Yojana (PMAY), nearly 24 lakh hoses has been handed over to the beneficiaries.
Additionally, the Finance Ministry has also encouraged the common man to buy affordable houses by increasing fiscal incentives on a home loan. The interest component of a home loan borrowed before March 31, 2020, has been increased up to Rs 1,50,000 deduction per annum. However, this is only applicable to property value under the price of Rs 45 lakhs. Along with this Rs 3.5 lakh per annum is the total fiscal incentives on a home loan by way of interest deductions. This also supports the loan eligibility of the borrower.
Now let us talk about the tax benefits, it is offered on repayment of a principal of up to Rs 1.5 lakh. So in case a borrower is buying this kind of property, (s)he also fulfills all the requirements of the Pradhan Mantri Awas Yojana scheme, then the effective overall interest rate on his home loan can be below 4 % per annum even though the nominal home loan interest rate is 8.7% per annum. This step is expected to encourage a huge boost to affordable housing. A recapitalization plan for nearly around Rs 70,000 crore has been a massive clean-up of the NPAs of the banking sector in the past few years. This plan will reasonably bolster the PSU Banks’ capital base and improve credit uptake.
Appreciating the role of NBFCs in the economy, the Finance Minister said that the government will provide one-time six-month partial credit guarantee to PSU banks for the first loss up to 10% for the purchase of high-rated pooled assets of financially-sound NBFCs. Also, Sitharaman has declared to cut the tax rate to 25% for all the corporates. However, this is applicable only on the ones with an annual turnover of up to Rs 400 crore from the earlier Rs 250 crore. Hence it covers 99.30% of all corporates in India.
We believe, it as a good initiative in a context of supporting smaller companies, recognizing and promoting their ability to make available more amount of jobs as compared to large corporates, that too with similar capital. In a nutshell, and in our opinion, the new Fiance Minister has made a great start and one looks forward to bold measures going forward.
