The Highlights and Low lights of the Maiden Budget 2019-20 - Part 2

Our country is pretty much inspired by Bollywood. Our news, for instance, it’s tangy, spicy and served hot just like a good Bollywood masala movie. The Union Budget 2019-20 has been delineated among us via various mediums in different forms. We all have seen the remarks of social media users, print media, T.V broadcasting networks and etc. We’d like to quote an ancient proverb “What’s more important than the things we get to know about? the things that we don’t”

Talking about the budget, there are over a hundred articles written on the topic, still, we don’t get to see the clear picture of how it's going to happen as promised in the recent budget that the aim is to make India a $5 trillion economy. Well, all in all, it sounds big, maybe this is why it’s in the news. It’s something big and new as well.

It’s been said in the budget ceremony that in the next 5 years we will become a $5 trillion dollars economy, maybe we can. But most of the economics experts believe if only we could maintain a GDP percentage of 8% for 9 constant years then it is possible. Right now we have less than 7% (approx), that means if the goal is to achieve a $5 trillion dollars economy we need to hit and maintain a 2X figure for next 5 years.  

Corporate taxes

Indian government collects 55% of its tax from the corporate sector. India features in the list of the countries which have the highest tax in the world. Before we go further let’s see what is the current scenario, and how far we’ve come since 2015. 

In the recent budget, it has been revealed that corporate tax on companies with revenue up to Rs 400 crore s reduced to 25%. 

That means India’s big industries is going to make a smooth shift in terms of growth but that’s also not completely boosted, it’s just some relief in the tax amount. There is no paradigm shift.

Here are the latest tax slabs along with rates and surcharge.

Although, many believe that we should not leave the companies which have less than Rs  250 crore turnover. The government should also give them some help in taxation so that they can focus on growth as well.

Drawbacks of the Union Budget 2019-20

• With an earlier presentation date, there simply isn’t enough data in place for a proper and effective budgeting process.
• E.g. the headline numbers of any Budget - the fiscal deficit for the ongoing year, and the fiscal deficit target for the next financial year.
• Here, the current year’s fiscal deficit depends on the data available on spending and revenue over the months so far and expectations for the remaining months.
• But when presented on February 1, less is known about both the expenditure and the revenue.
• This has led to revenue projections in the Revised Estimates being often the same as the Budget Estimates.
• With the lack of real revised numbers, it becomes harder to budget accurately for the new year, taking away the credibility of the fiscal deficit number.
• Another drawback is the gross domestic product (GDP) numbers in the calculation of fiscal deficit.
• The First Revised Estimates for GDP are only known by the end of January and so, the Advance Estimates of GDP, which have been subject to major revisions recently, are used.
• But not using the Revised Estimates would make notable changes to the Budget’s predictions regarding the fiscal glide path.
• Given these, it would be advisable to return to the original date on which Budgets were presented (February 28 or 29) and also to improve the speed of disbursements of funds. 

Also, there is no proper exhibit of expenditure in the budget speech, making it less about the budget and more about visions, which indeed is a good thing too but the budget needs to have figures.  

It’s the second budget of PM Modi’s government, first after the election. With the recent Union Budget, we all have our hopes held high. If you wish to read our predictions about Modi 2.0 and the economy, please click here. 

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Cedrus Wealth Partners
Pune, Maharashtra.
www.cedruswealth.com