Ministry of Finance

KEY HIGHLIGHTS OF UNION BUDGET 2020-21

Dated: 01 FEB 2020

Presenting the first Union Budget of the third decade of 21^st century, Finance Minister Smt. Nirmala Sitharaman, today unveiled a series of far-reaching reforms, aimed at energizing the Indian economy through a combination of short-term, medium-term, and long-term measures.

The Key Highlights of Union Budget 2020-21 are as follows:

Three prominent themes of the Budget

• Aspirational India - better standards of living with access to health, education and better jobs for all sections of the society
• Economic Development for all - “Sabka Saath , Sabka Vikas , Sabka Vishwas”.
• Caring Society - both humane and compassionate; Antyodaya as an article of faith.
• Three broad themes are held together by:
  • Corruption free, policy-driven Good Governance.
  • Clean and sound financial sector.
• Ease of Living underlined by the three themes of Union Budget 2020-21.

Three components of Aspirational India

• Agriculture, Irrigation, and Rural Development
• Wellness, Water, and Sanitation
• Education and Skills

Sixteen Action Points for Agriculture, Irrigation and Rural Development

• Rs. 2.83 lakh crore to be allocated for the following 16 Action Points:
  • Rs. 1.60 lakh crore for Agriculture, Irrigation & allied activities.
  • Rs. 1.23 lakh crore for Rural development & Panchayati Raj.                          - 
• Agriculture credit:
  • Rs. 15 lakh crore target set for the year 2020-21.
  • PM-KISAN beneficiaries to be covered under the KCC scheme.
  • NABARD Re-finance Scheme to be further expanded.
• Comprehensive measures for 100 water-stressed districts proposed.
• Blue Economy:
  • Rs. 1 lakh crore fisheries’ exports to be achieved by 2024-25.
  • 200 lakh tonnes fish production targeted by 2022-23.
  • 3477 Sagar Mitras and 500 Fish Farmer Producer Organisations to involve youth in fisheries extension.
  • Growing of algae, sea-weed and cage culture to be promoted.
  • Framework for development, management and conservation of marine fishery resources.
• Kisan Rail to be setup by Indian Railways through PPP:
  • To build a seamless national cold supply chain for perishables (milk, meat, fish, etc.
  • Express and Freight trains to have refrigerated coaches.
• Krishi Udaan to be launched by the Ministry of Civil Aviation:
  • Both international and national routes to be covered.
  • North-East and tribal districts to realize Improved value of agri-products.
• One-Product One-District for better marketing and export in the Horticulture sector.
• Balanced use of all kinds of fertilizers - traditional organic and innovative fertilizers.
• Measures for organic, natural, and integrated farming:
  • Jaivik Kheti Portal – online national organic products market to be strengthened.
  • Zero-Budget Natural Farming (mentioned in July 2019 Budget) to be included.

o Integrated Farming Systems in rain-fed areas to be expanded.

o Multi-tier cropping, bee-keeping, solar pumps, solar energy production in non-cropping season to be added.

• PM-KUSUM to be expanded:
  • 20 lakh farmers to be provided for setting up stand-alone solar pumps.
  • Another 15 lakh farmers to be helped to solarise their grid-connected pump sets.
  • Scheme to enable farmers to set up solar power generation capacity on their fallow/barren lands and to sell it to the grid.
• Village Storage Scheme:
  • To be run by the SHGs to provide farmers a good holding capacity and reduce their logistics cost.
  • Women, SHGs to regain their position as Dhaanya Lakshmi.
• NABARD to map and geo-tag agri-warehouses, cold storages, reefer van facilities, etc.
• Warehousing in line with Warehouse Development and Regulatory Authority (WDRA) norms:
  • Viability Gap Funding for setting up such efficient warehouses at the block/taluk level.
  • Food Corporation of India (FCI) and Central Warehousing Corporation (CWC) to undertake such warehouse building.
• Financing on Negotiable Warehousing Receipts (e-NWR) to be integrated with e-NAM.
• State governments who undertake implementation of model laws (issued by the Central government) to be encouraged.
• Livestock:
  • Doubling of milk processing capacity to 108 million MT from 53.5 million MT by 2025.
  • Artificial insemination to be increased to 70% from the present 30%.
  • MNREGS to be dovetailed to develop fodder farms.
  • Foot and Mouth Disease, Brucellosis in cattle and Peste Des Petits ruminants (PPR) in sheep and goat to be eliminated by 2025.
• Deen Dayal Antyodaya Yojana – 0.5 crore households mobilized with 58 lakh SHGs for poverty alleviation.

Wellness, Water and Sanitation

• Rs. 69,000 crore allocated for overall Healthcare sector.
• Rs. 6400 crore (out of Rs. 69,000 crore) for PM Jan Arogya Yojana (PMJAY):
  • More than 20,000 hospitals already empanelled under PM Jan Arogya Yojana (PMJAY).
  • Viability Gap Funding window proposed for setting up hospitals in the PPP mode.
  • Aspirational Districts with no Ayushman empanelled hospitals to be covered in the first phase.
  • Targeting diseases with an appropriately designed preventive regime using Machine Learning and AI.
• Jan Aushadhi Kendra Scheme to offer 2000 medicines and 300 surgicals in all districts by 2024.

• TB Harega Desh Jeetega campaign launched - commitment to end Tuberculosis by 2025.

• Rs. 3.60 lakh crore approved for Jal Jeevan Mission:
  • Rs. 11,500 crore for the year 2020-21.
  • Augmenting local water sources, recharging existing sources, and promoting water harvesting and de-salination.
  • Cities with million-plus population to be encouraged to achieve the objective during the current year itself.
• Rs.12, 300 crore allocation for Swachh Bharat Mission in 2020-21:
  • Committment to ODF-Plus in order to sustain ODF behaviour.
  • Emphasis on liquid and grey water management.

o Focus also on Solid-waste collection, source segregation, and processing.

Education and Skills

• Rs. 99,300 crore for education sector and Rs. 3000 crore for skill development in 2020-21.
• New Education Policy to be announced soon.
• National Police University and National Forensic Science University proposed for policing science, forensic science, and cyber-forensics.
• Degree level full-fledged online education program by Top-100 institutions in the National Institutional Ranking Framework.
• Up to 1-year internship to fresh engineers to be provided by Urban Local Bodies.
• Budget proposes to attach a medical college to an existing district hospital in PPP mode.
• Special bridge courses to be designed by the Ministries of Health, and Skill Development:
  • To fulfill the demand for teachers, nurses, para-medical staff and care-givers abroad.
  • To bring in equivalence in the skill sets of the workforce and employers’ standards.
• 150 higher educational institutions to start apprenticeship embedded degree/diploma courses by March 2021.
• External Commercial Borrowings and FDI to be enabled for education sector.
• Ind-SAT proposed for Asian and African countries as a part of Study in India program.

Economic Development

Industry, Commerce and Investment

• Rs. 27,300 crore allocated for 2020-21 for development and promotion of Industry and Commerce.
• Investment Clearance Cell proposed to be set up:

o To provide “end to end” facilitation and support.

o To work through a portal.

• Five new smart cities proposed to be developed.
• Scheme to encourage manufacture of mobile phones, electronic equipment and semi-conductor packaging proposed.
• National Technical Textiles Mission to be set up:

o With four-year implementation period from 2020-21 to 2023-24.

o At an estimated outlay of Rs 1480 crore.

o To position India as a global leader in Technical Textiles.

• New scheme NIRVIK to be launched to achieve higher export credit disbursement, which provides for:

o Higher insurance coverage

o Reduction in premium for small exporters

o Simplified procedure for claim settlements. 

• Turnover of Government e-Marketplace (GeM) proposed to be taken to Rs 3 lakh crore.
• Scheme for Revision of duties and taxes on exported products to be launched.

o Exporters to be digitally refunded duties and taxes levied at the Central, State and local levels, which are otherwise not exempted or refunded.

• All Ministries to issue quality standard orders as per PM’s vision of “Zero Defect-Zero Effect” manufacturing.

Infrastructure

• Rs.100 lakh crore to be invested on infrastructure over the next 5 years.
• National Infrastructure Pipeline:

o Rs. 103 lakh crore worth projects; launched on 31st December 2019.

o More than 6500 projects across sectors, to be classified as per their size and stage of development. 

• A National Logistics Policy to be released soon: 

o To clarify roles of the Union Government, State Governments and key regulators.

o A single window e-logistics market to be created

o Focus to be on generation of employment, skills and making MSMEs competitive.

• National Skill Development Agency to give special thrust to infrastructure-focused skill development opportunities.
• Project preparation facility for infrastructure projects proposed.

o To actively involve young engineers, management graduates and economists from Universities.

• Infrastructure agencies of the government to involve youth-power in start-ups.
• Rs.1.7 lakh crore proposed for transport infrastructure in 2020-21.

Highways:

• Accelerated development of highways to be undertaken, including:

o 2500 Km access control highways.

o 9000 Km of economic corridors.

o 2000 Km of coastal and land port roads.

o 2000 Km of strategic highways.

• Delhi-Mumbai Expressway and two other packages to be completed by 2023.
• Chennai-Bengaluru Expressway to be started.
• Proposed to monetise at least 12 lots of highway bundles of over 6000 Km before 2024.

Indian Railways:

• Five measures:

o Large solar power capacity to be set up alongside rail tracks, on land owned by railways.

o Four station re-development projects and operation of 150 passenger trains through PPP.

o More Tejas type trains to connect iconic tourist destinations.

o High speed train between Mumbai and Ahmedabad to be actively pursued.

o 148 km long Bengaluru Suburban transport project at a cost of Rs 18600 crore, to have fares on metro model. Central Government to provide 20% of equity and facilitate external assistance up to 60% of the project cost.

• Indian Railways’ achievements: 

o 550 Wi-fi facilities commissioned in as many stations.

o Zero unmanned crossings.

o 27000 Km of tracks to be electrified.

Ports & Water-ways:

• Corporatizing at least one major port and its listing on stock exchanges to be considered.
• Governance framework keeping with global benchmarks needed for more efficient sea-ports.
• Economic activity along river banks to be energised as per Prime Minister’s Arth Ganga concept.

Airports:

• 100 more airports to be developed by 2024 to support Udaan scheme.
• Air fleet number expected to go up from present 600 to 1200 during this time.

Electricity:

• “Smart” metering to be promoted.
• More measures to reform DISCOMs to be taken.

Power:

• Rs.22, 000 crore proposed for power and renewable energy sector in 2020-21.
• Expansion of national gas grid from the present 16200 km to 27000 km proposed.
• Further reforms to facilitate transparent price discovery and ease of transactions.

New Economy

• To take advantage of new technologies:

o Policy to enable private sector to build Data Centre parks throughout the country to be brought out soon.  

o Fibre to the Home (FTTH) connections through Bharatnet to link 100,000 gram panchayats this year.

o Rs.6000 crore proposed for Bharatnet programme in 2020-21.

• Measures proposed to benefit Start-ups:

o A digital platform to be promoted to facilitate seamless application and capture of IPRs.

o Knowledge Translation Clusters to be set up across different technology sectors including new and emerging areas.

o For designing, fabrication and validation of proof of concept, and further scaling up Technology Clusters, harbouring test beds and small scale manufacturing facilities to be established.

o Mapping of India’s genetic landscape- Two new national level Science Schemes to be initiated to create a comprehensive database.

o Early life funding proposed, including a seed fund to support ideation and development of early stage Start-ups.

• Rs.8000 crore proposed over five years for National Mission on Quantum Technologies and Applications.

Caring Society

• Focus on:

o Women & child,

o Social Welfare;

o Culture and Tourism

• Allocation of Rs. 35,600 crore for nutrition-related programmes proposed for the FY2020-21.
• Rs.28, 600 crore proposed for women specific programs.
• Issue about age of a girl entering motherhood - proposed to appoint a task force to present its recommendations in six months’ time.
• Financial support for wider acceptance of technologies, identified by Ministry of Housing and Urban Affairs to ensure no manual cleaning of sewer systems or septic tanks, to be provided.
• Rs. 85, 000 crore proposed for 2020-21 for welfare of Scheduled Castes and Other Backward Classes.
• Rs. 53, 700 crore provided to further development and welfare of Scheduled Tribes.
• Enhanced allocation of Rs. 9,500 crore provided for 2020-21 for senior citizens and Divyang.

Culture & Tourism

• Allocation of Rs. 2500 crore for 2020-21 for tourism promotion.
• Rs.3150 crore proposed for Ministry of Culture for 2020-21.
• An Indian Institute of Heritage and Conservation under Ministry of Culture proposed; with the status of a deemed University.
• 5 archaeological sites to be developed as iconic sites with on-site Museums:

o Rakhigarhi (Haryana)

o Hastinapur (Uttar Pradesh)

o Shivsagar (Assam)

o Dholavira (Gujarat)

o Adichanallur (Tamil Nadu)

• Re-curation of the Indian Museum in Kolkata, announced by Prime Minister in January 2020.
• Museum on Numismatics  and Trade to be located in the historic Old Mint building in Kolkata.
• 4 more museums from across the country to be taken up for renovation and re-curation.
• Support for setting up of a Tribal Museum in Ranchi (Jharkhand).
• Maritime museum to be set up at Lothal- the Harrapan age maritime site near Ahmedabad, by Ministry of Shipping.
• State governments expected to develop a roadmap for certain identified destinations and formulate financial plans during 2021 against which specified grants to be made available to the States in 2020-21.

Environment & Climate Change

• Allocation for this purpose to be Rs.4400 crore for 2020-21.
• Proposed to advise the utilities to close the running old thermal power plants with carbon emission above the pre-set norms.
• States that are formulating and implementing plans for ensuring cleaner air in cities above one million to be encouraged.
• PM launched Coalition for Disaster Resilient Infrastructure (CDRI) with Secretariat in Delhi. Second such international initiative after International Solar Alliance.

Governance

• Clean, corruption-free, policy driven, good in intent and most importantly trusting in faith.
• Taxpayer Charter to be enshrined in the Statute will bring fairness and efficiency in tax administration.
• Companies Act to be amended to build into statues, criminal liability for certain acts that are civil in nature.
  • Other laws with such provisions are to be corrected after examination.
• Major reforms in recruitment to Non-Gazetted posts in Government and Public sector banks:
  • An independent, professional and specialist National Recruitment Agency (NRA) for conducting a computer-based online Common Eligibility Test for recruitment.
  • A test-centre in every district, particularly in the Aspirational Districts.
• A robust mechanism to be evolved for appointment including direct recruitment to various Tribunals and specialised bodies to attract best talents and professional experts.
• Contract Act to be strengthened.
• New National Policy on Official Statistics to:
  • Promote use of latest technologies including AI.
  • Lay down a road-map towards modernised data collection, integrated information portal and timely dissemination of information.
• A sum of Rs. 100 crore allocated to begin the preparations for G20 presidency to be hosted in India in the year 2022.
• Development of North East region:
  • Improved flow of funds using online portal by the Government.
  • Greater access to financial assistance of Multilateral and Bilateral funding agencies.
• Development of Union Territories of J&K and Ladakh:
  • An amount of Rs. 30,757 crore provided for the financial year 2020-21.

o The Union Territory of Ladakh has been provided with Rs. 5,958.

Financial Sector

• Reforms accomplished in PSBs :
  • 10 banks consolidated into 4.
  • Rs. 3,50,000 crore capital infused.
• Governance reforms to be carried out to bring in transparency and greater professionalism in PSBs.
• Few PSBs to be encouraged to approach the capital market to raise additional capital
• Deposit Insurance and Credit Guarantee Corporation (DICGC) permitted to increase Deposit Insurance Coverage to Rs. 5 lakh from Rs.1 lakh per depositor.
• Scheduled Commercial Bank’s health under monitoring through a robust mechanism, keeping depositors’ money safe.
• Cooperative Banks to be strengthen by amending Banking Regulation Act for:
  • Increasing professionalism.
  • Enabling access to capital.
  • Improving governance and oversight for sound banking through the RBI.
• NBFCs eligibility limit for debt recovery reduced from:
  • Rs. 500 crore to Rs 100 crore asset size.
  • Rs 1 crore to Rs 50 lakh loan size.
• Private capital in Banking system:
  • Government to sell its balance holding in IDBI Bank to private, retail and institutional investors through the stock exchange.
• Easier mobility in jobs:
  • Auto-enrolment in Universal Pension coverage.
  • Inter-operability mechanism to safeguard the accumulated corpus.
• Pension Fund Regulatory Development Authority of India Act to be amended to:
  • Strengthen regulating role of PFRDAI.
  • Facilitate separation of NPS trust for government employees from PFRDAI.
  • Enable establishment of a Pension Trust by the employees other than Government.
• Factor Regulation Act 2011 to be amended to:
  • Enable NBFCs to extend invoice financing to the MSMEs through TReDS
• New scheme to provide subordinate debt for entrepreneurs of MSMEs by the banks
  • Would be counted as quasi-equity.
  • Would be fully guaranteed through the Credit Guarantee Trust for Medium and Small Entrepreneurs (CGTMSE).
  • The corpus of the CGTMSE would accordingly be augmented by the government.
• Window for MSME’s debt restructuring by RBI to be extended by one year till March 31, 2021.
  • More than five lakh MSMEs have already been benefitted.
• An app-based invoice financing loans product for MSMEs to be launched.
  • To prevent the problem of delayed payments and consequential cash flows mismatches.
• Export promotion of MSMEs:
  • For selected sector such as pharmaceuticals, auto components and others.
  • An Rs 1000 crore scheme anchored by EXIM Bank together with SIDBI.

o Hand holding support for technology upgradations, R&D, business strategy etc.

Financial Market

• Deepening Bond Market.
  • Certain specified categories of Government securities to be opened fully for non -resident investors also.
  • FPI limit in corporate bonds increased to 15% from 9% of its outstanding stock.
• New legislation to be formulated for laying down a mechanism for netting of financial contracts.  
  • Scope of credit default swaps to expand.
• Debt Based Exchange Traded Fund expanded by a new Debt-ETF consisting primarily of Government Securities.
  • To give attractive access to retail investors, pension funds and long-term investors.
• A Partial Credit Guarantee scheme for the NBFCs formulated post the Union budget 2019-20 to address their liquidity constraints. 
  • New mechanism to be devised to further this.

o Government support to securities so floated.

Infrastructure Financing

• Rs.103 lakh crore National Infrastructure Pipeline projects earlier announced.
• Rs 22,000 crore to cater to the equity support to Infrastructure Finance Companies such as IIFCL and a subsidiary of NIIF.
• IFSC, GIFT city: full of potential to become a centre of international finance as well as a centre for high end data processing:

o An International Bullion exchange(s) to be set up as an additional option for trade by global market participants with the approval of regulator.

Disinvestment

• Government to sell a part of its holding in LIC by way of Initial Public Offer (IPO).

Fiscal Management

• XV Finance Commission (FC):

o XV Finance Commission has given its first report for FY2020-21

o Recommendations accepted in substantial measure

o Its final report for five years beginning 2021-22 to be submitted during the latter part of the year.

• GST Compensation Fund:

o Balances due out of collection of the years 2016-17 and 2017-18 to be transferred to the Fund, in two instalments.

o Hereinafter, transfers to the fund to be limited only to collection by way of GST compensation cess.

• Overhaul of Centrally Sponsored Schemes and Central Sector Schemes necessary:

o To align them with emerging social and economic needs of tomorrow

o To ensure that scarce public resources are spent optimally

• On the recent debate over transparency and credibility of projected fiscal numbers, it is assured that procedure adopted is compliant with the FRBM Act.
• For the FY 2019-20:

o Revised Estimates of Expenditure: at Rs.26.99 lakh crore

o Revised Estimates of Receipts: estimated at Rs.19.32 lakh crore.

• For year 2020-21:

o Nominal growth of GDP estimated at 10%.

o Receipts: estimated at Rs.22.46 lakh cr

o Expenditure: at Rs.30.42 lakh cr.

• Significant tax reforms for boosting investments recently undertaken. However, expected tax buoyancy expected to take time.
• Fiscal deficit of 3.8% estimated in RE 2019-20 and 3.5% for BE 2020-21.  It comprises two ingredients;

o 3.3% for year 2019-20 and 3% for the 2020-21 budget estimate.

o Deviation of 0.5%, consistent with Section 4(3) of FRBM Act, both for RE 2019-20 and BE 2020-21. (Section 4 (2) of the FRBM Act provides for a trigger mechanism for a deviation from the estimated fiscal deficit on account of structural reforms in the economy with unanticipated fiscal implications.)

o Return path, committing to fiscal consolidation without compromising needs of investment out of public funds, is laid in Medium Term Fiscal Policy cum Strategy Statement.

o Market borrowings: Net market borrowings: Rs.4.99 lakh crore for 2019-20 and Rs.5.36 lakh crore for 2020-21.

• A good part of the borrowings for the financial year 2020-21 to go towards Capital expenditure that has been scaled up by  more than 21%.

Direct Tax

Direct Tax Proposals - To stimulate growth, simplify tax structure, bring ease of compliance, and reduce litigations.

• Personal Income Tax:
  • Significant relief to middle class taxpayers.
  • New and simplified personal income tax regime proposed:

Taxable Income Slab (Rs.)	Existing tax rates	New tax rates
0-2.5 Lakh	Exempt	Exempt
2.5-5 Lakh	5%	5%
5-7.5 Lakh	20%	10%
7.5-10 Lakh	20%	15%
10-12.5 Lakh	30%	20%
12.5-15 Lakh	30%	25%
Above 15 Lakh	30%	30%

• • 
    Around 70 of the existing exemptions and deductions (more than 100) to be removed in the new simplified regime.
  • Remaining exemptions and deductions to be reviewed and rationalised in coming years.
  • New tax regime to be optional - an individual may continue to pay tax as per the old regime and avail deductions and exemptions.
  • Measures to pre-fill the income tax return initiated so that an individual who opts for the new regime gets pre-filled income tax returns and would need no assistance from an expert to pay income tax.
  • New regime to entail estimated revenue forgone of Rs. 40,000 crore per year.
• Corporate Tax:
  • Tax rate of 15% extended to new electricity generation companies.
  • Indian corporate tax rates now amongst the lowest in the world.
• Dividend Distribution Tax (DDT):
  • DDT removed making India a more attractive investment destination.
  • Deduction to be allowed for dividend received by holding company from its subsidiary.
  • Rs. 25,000 crore estimated annual revenue forgone.
• Start-ups:
  • Start-ups with turnover up to Rs. 100 crore to enjoy 100% deduction for 3 consecutive assessment years out of 10 years.
  • Tax payment on ESOPs deferred.

• MSMEs to boost less-cash economy:
  • Turnover threshold for audit increased to Rs. 5 crore from Rs. 1 crore for businesses carrying out less than 5% business transactions in cash.

• Cooperatives:
  • Parity brought between cooperatives and corporate sector.
  • Option to cooperative societies to be taxed at 22% + 10% surcharge and 4% cess with no exemption/deductions.
  • Cooperative societies exempted from Alternate Minimum Tax (AMT) just like Companies are exempted from the Minimum Alternate Tax (MAT).
• Tax concession for foreign investments:
  • 100% tax exemption to the interest, dividend and capital gains income on investment made in infrastructure and priority sectors before 31^st March, 2024 with a minimum lock-in period of 3 years by the Sovereign Wealth Fund of foreign governments.
• Affordable housing:
  • Additional deduction up to Rs. 1.5 lakhs for interest paid on loans taken for an affordable house extended till 31st March, 2021.
  • Date of approval of affordable housing projects for availing tax holiday on profits earned by developers extended till 31st March, 2021.

Tax Facilitation Measures

• Instant PAN to be allotted online through Aadhaar.

• ‘Vivad Se Vishwas’ scheme, with a deadline of 30^th June, 2020, to reduce litigations in direct taxes:
  • Waiver of interest and penalty - only disputed taxes to be paid for payments till 31^st March, 2020.
  • Additional amount to be paid if availed after 31^st March, 2020.
  • Benefits to taxpayers in whose cases appeals are pending at any level.
• Faceless appeals to be enabled by amending the Income Tax Act.
• For charity institutions:
  • Pre-filling in return through information of donations furnished by the done.
  • Process of registration to be made completely electronic.
  • Unique registration number (URN) to be issued to all new and existing charity institutions.
  • Provisional registration to be allowed for new charity institutions for three years. 
  • CBDT to adopt a Taxpayers’ Charter.

• Losses of merged banks:
  • Amendments proposed to the Income-tax Act to ensure that entities benefit from unabsorbed losses and depreciation of the amalgamating entities.
  •  

Indirect Tax

• GST:
  • Cash reward system envisaged to incentivise customers to seek invoice.
  • Simplified return with features like SMS based filing for nil return and improved input tax credit flow to be implemented from 1st April, 2020 as a pilot run.
  • Dynamic QR-code capturing GST parameters proposed for consumer invoices.
  • Electronic invoice to capture critical information in a centralized system to be implemented in a phased manner.
  • Aadhaar based verification of taxpayers being introduced to weed out dummy or non-existent units.  
  • GST rate structure being deliberated to address inverted duty structure.
• Customs Duties:
  • Customs duty raised on footwear to 35% from 25% and on furniture goods to 25% from 20%. 
  • Basic customs duty on imports of news print and light-weight coated paper reduced from 10% to 5%.
  • Customs duty rates revised on electric vehicles and parts of mobiles.
  • 5% health cess to be imposed on the imports of medical devices, except those exempt from BCD.
  • Lower customs duty on certain inputs and raw materials like fuse, chemicals, and plastics.
  • Higher customs duty on certain goods like auto-parts, chemicals, etc. which are also being made domestically. 
• Trade Policy Measures
  • Customs Act being amended to enable proper checks of imports under FTAs.
  • Rules of Origin requirements to be reviewed for certain sensitive items.
  • Provisions relating to safeguard duties to be strengthened to enable regulating such surge in imports in a systematic way. 
  • Provisions for checking dumping of goods and imports of subsidized goods being strengthened.
  • Suggestions for reviews of exemptions from customs duty to be crowd-sourced.

• Excise duty proposed to be raised on Cigarettes and other tobacco products, no change made in the duty rates of bidis.
• Anti-dumping duty on PTA abolished to benefit the textile sector.

Unprecedented Milestones and Achievements of Indian Economy

• India now the fifth largest economy of the world.
• 7.4% average growth clocked during 2014-19 with inflation averaging around 4.5%.
• 271 million people raised out of poverty during 2006-16.
• India’s Foreign Direct Investment elevated to US$ 284 billion during 2014-19 from US$ 190 billion during 2009-14.
• Central Government debt reduced to 48.7% of GDP (March 2019) from 52.2% (March 2014
• Two cross-cutting developments:
  • Proliferation of technologies (Analytics, Machine Learning, robotics, Bio-informatics and Artificial Intelligence).
  • Highest ever number of people in the productive age group (15-65 years) in India.
• GST removed many bottlenecks in the system.

Future Aim for sustaining India’s unique global leadership, driven by Digital Revolution

• Seamless delivery of services through Digital Governance.
• Improvement in physical quality of life through National Infrastructure Pipeline.
• Risk mitigation through Disaster Resilience.
• Social security through Pension and Insurance penetration.

 

 

******

RM/SC/AS/KA/PJ/SG​​​​​​​
(Release ID: 1601474) Visitor Counter : 173

 

1) Simplified and New Income Tax Regime as an option to the old regime the old regime.

Income Bracket (lakh)	Below 5	5 - 7.5	7.5-10	10-12.5	12.5-15	Above 15
Tax Rate (per cent)	Exempt	10	15	20	25	30

 

2) Dividend Distribution Tax removed and classical system of dividend taxation adopted.

3) Concessional corporate tax rate of 15 per cent to new domestic companies in manufacturing and power sector.

4) Tax concession for sovereign wealth fund of foreign governments and other foreign investments.

5) Tax benefits to Start-ups by way of deduction of 100 per cent of their profits are enhanced by increasing turnover limit and period of eligibility.

6) Concessional tax rate for cooperatives proposed.

7) Turnover threshold for audit of MSMEs increased.

8) Extension of time limits pertaining to the tax benefits for affordable housing.

9) Issuance of Unique Registration Number to all charity institutions for easy tax compliance.

10) Health cess to be imposed on imports of medical equipment given these are made significantly in India.

 

Ministry of Finance

Key Highlights of Economic Survey 2019-20

Dated: 31 JAN 2020 

The Union Minister for Finance & Corporate Affairs, Smt. Nirmala Sitharaman presented the Economic Survey 2019-20 in the Parliament today. The Key Highlights of the Economic Survey 2019-20 are as follows:

Wealth Creation: The Invisible Hand Supported by the Hand of Trust

• India’s dominance as global economic power for three-fourths of economic history manifests by design.
• Kautilya’s Arthashastra postulates the role of prices in an economy (Spengler, 1971).
• Historically, Indian economy relied on the invisible hand of the market with the support of the hand of trust:
• o Invisible hand of the market reflected in openness in economic transactions.
• o Hand of trust appealed to ethical and philosophical dimensions.
• Post-liberalisation, Indian economy supports both pillars of the economic model advocated in our traditional thinking.
• Survey illustrates enormous benefits accruing from enabling the invisible hand of the market.
• Exponential rise in India’s GDP and GDP per capita post-liberalisation coincides with wealth generation.
• Survey shows that the liberalized sectors grew significantly faster than the closed ones.
• Need for the hand of trust to complement the invisible hand, illustrated by financial sector performance during 2011-13.
• Survey posits that India’s aspiration to become a $5 trillion economy depends critically on:
• o Strengthening the invisible hand of the market.
• o Supporting it with the hand of trust.
• Strengthening the invisible hand by promoting pro-business policies to:
•  Provide equal opportunities for new entrants.
•  Enable fair competition and ease doing business.
•  Eliminate policies unnecessarily undermining markets through government intervention.
•  Enable trade for job creation.
•  Efficiently scale up the banking sector.
• Introducing the idea of trust as a public good, which gets enhanced with greater use.
• Survey suggests that policies must empower transparency and effective enforcement using data and technology.

Entrepreneurship and Wealth Creation at the Grassroots

• Entrepreneurship as a strategy to fuel productivity growth and wealth creation.
• India ranks third in number of new firms created, as per the World Bank.
• New firm creation in India increased dramatically since 2014:

o 12.2 % cumulative annual growth rate of new firms in the formal sector during 2014-18, compared to 3.8 % during 2006-2014.

o About 1.24 lakh new firms created in 2018, an increase of about 80 % from about 70,000 in 2014.

• Survey examines the content and drivers of entrepreneurial activity at the bottom of the administrative pyramid – over 500 districts in India.
• New firm creation in services is significantly higher than that in manufacturing, infrastructure or agriculture.
• Survey notes that grassroots entrepreneurship is not just driven by necessity.
• A 10 percent increase in registration of new firms in a district yields a 1.8 % increase in Gross Domestic District Product (GDDP).
• Entrepreneurship at district level has a significant impact on wealth creation at the grassroots.
• Birth of new firms in India is heterogeneous and dispersed across districts and sectors.
• Literacy and education in a district foster local entrepreneurship significantly:

o Impact is most pronounced when literacy is above 70 per cent.

o New firm formation is the lowest in eastern India with lowest literacy rate (59.6 % as per 2011 Census).

• Physical infrastructure quality in the district influences new firm creation significantly.
• Ease of Doing Business and flexible labour regulation enable new firm creation, especially in the manufacturing sector.
• Survey suggests enhancing ease of doing business and implementing flexible labour laws can create maximum jobs in districts and thereby in the states.

Pro-business versus Pro-markets

• Survey says that India’s aspiration of becoming a $5 trillion economy depends critically on:

o Promoting ‘pro-business’ policy that unleashes the power of competitive markets to generate wealth.

o Weaning away from ‘pro-crony’ policy that may favour specific private interests, especially powerful incumbents.

• Viewed from the lens of the Stock market, creative destruction increased significantly post-liberalisation:

o Before liberalisation, a Sensex firm expected to stay in it for 60 years, which decreased to only 12 years after liberalisation.

o Every five years, one-third of Sensex firms are churned out, reflecting the continuous influx of new firms, products and technologies into the economy.

• Despite impressive progress in enabling competitive markets, pro-crony policies destroyed value in the economy:

o An equity index of connected firms significantly outperformed market by 7 % a year from 2007 to 2010, reflecting abnormal profits extracted at common citizens’ expense.

o In contrast, the index underperforms market by 7.5 % from 2011, reflecting inefficiency and value destruction inherent in such firms.

• Pro-crony policies such as discretionary allocation of natural resources till 2011 led to rent-seeking by beneficiaries while competitive allocation of the same post 2014 ended such rent extraction.
• Similarly crony lending that led to wilful default, wherein promoters collectively siphoned off wealth from banks, led to losses that dwarf subsidies for rural development.

Undermining Markets: When Government Intervention Hurts More Than It Helps

• Government intervention, though well intended, often ends up undermining the ability of the markets to support wealth creation and leads to outcomes opposite to those intended.
• Four examples of anachronistic government interventions:

1. Essential Commodities Act (ECA), 1955:

o Frequent and unpredictable imposition of blanket stock limits on commodities under ECA distorts:

• The incentives for the creation of storage infrastructure by the private sector.

• Movement up the agricultural value chain.

• Development of national market for agricultural commodities.

o Imposition of stock limits on dal in 2006-Q3, sugar in 2009-Q1 and onions in September, 2019 spiked up the volatility of the retail and wholesale prices of onions.

o The Ministry of Consumer Affairs must examine whether the ECA is relevant in today’s India.

o With raids having abysmally low conviction rate and no impact on prices, the ECA only seems to enable rent-seeking and harassment.

o Survey suggests there is clear evidence for jettisoning this anachronistic legislation.

1. Drug Price Control under ECA:

o The regulation of prices of drugs, through the DPCO 2013, led to increase in the price of the regulated pharmaceutical drug vis-à-vis that of an unregulated but similar drug.

o The increase in prices is greater for more expensive formulations than for cheaper ones and for those sold in hospitals rather than retail shops.

o These findings reinforce that the outcome is opposite to what DPCO aims to do - making drugs affordable.

o Government, being a huge buyer of drugs, can intervene more effectively to provide affordable drugs by combining all its purchases and exercising its bargaining power.

o Ministry of Health and Family Welfare must evolve non-distortionary mechanisms that utilise Government’s bargaining power in a transparent manner.

1. Government intervention in Grain markets:

o Policies in the food-grain markets led to:

• Emergence of Government as the largest procurer and hoarder of rice and wheat.

• Crowding out of private trade.

• Burgeoning food subsidy burden

• Inefficiencies in the markets, affecting the long run growth of agricultural sector.

o The food-grains policy needs to be dynamic and allow switching from physical handling and distribution of food-grains to cash transfers/food coupons/smart cards.

1. Debt waivers:

o Analysis of debt waivers given by States/Centre:

• Full waiver beneficiaries consume less, save less, invest less and are less productive after the waiver, compared to the partial beneficiaries.

• Debt waivers disrupt the credit culture.

• They reduce formal credit flow to the very same farmers, thereby defeating the purpose.

• Survey suggests that:

o Government must systematically examine areas of needless intervention and undermining of markets; but it does not argue that there should be no Government intervention.

o Instead it suggests that the interventions that were apt in a different economic setting may have lost their relevance in a transformed economy.

o Eliminating such instances will enable competitive markets spurring investments and economic growth.

Creating Jobs and Growth by Specializing in Network Products

• Survey says India has unprecedented opportunity to chart a China-like, labour-intensive, export trajectory.
• By integrating “Assemble in India for the world” into Make in India, India can:

o Raise its export market share to about 3.5 % by 2025 and 6 % by 2030.

o Create 4 crore well-paid jobs by 2025 and 8 crore by 2030.

• Exports of network products can provide one-quarter of the increase in value added required for making India a $5 trillion economy by 2025.
• Survey suggests a strategy similar to one used by China to grab this opportunity:

o Specialization at large scale in labour-intensive sectors, especially network products.

o Laser-like focus on enabling assembling operations at mammoth scale in network products.

o Export primarily to markets in rich countries.

o Trade policy must be an enabler.

• Survey analyses the impact of India’s trade agreements on overall trade balance:

o India’s exports increased by 13.4 % for manufactured products and 10.9 % for total merchandise

o Imports increased by 12.7 % for manufactured products and 8.6 per cent for total merchandise.

o India gained 0.7 % increase in trade surplus per year for manufactured products and 2.3 % per year for total merchandise.

Targeting Ease of Doing Business in India

• A jump of 79 positions to 63 in 2019 from 142 in 2014 in World Bank’s Doing Business rankings.
• India still trails in parameters such as Ease of Starting Business, Registering Property, Paying Taxes and Enforcing Contracts.
• Survey has numerous case studies:

o For merchandise exports, the logistics process flow for imports is more efficient than that for exports.

o Electronics exports and imports through Bengaluru airport illustrate how Indian logistical processes can be world class.

• The turnaround time of ships in India has almost halved to 2.48 days in 2018-19 from 4.67 days in 2010-11.
• Suggestions for further Ease of Doing Business:

o Close coordination between the Logistics division of the Ministry of Commerce and Industry, the Central Board of Indirect Taxes and Customs, Ministry of Shipping and the different port authorities.

o Individual sectors such as tourism or manufacturing require a more targeted approach that maps out the regulatory and process bottlenecks for each segment.

Golden jubilee of bank nationalisation: Taking stock

• Survey observes 2019 as the golden jubilee year of bank nationalization
• Accomplishments of lakhs of Public Sector Banks (PSBs) employees cherished and an objective assessment of PSBs suggested by the Survey.
•  Since 1969, India’s Banking sector has not developed proportionately to the growth in the size of the economy.
• India has only one bank in the global top 100 – same as countries that are a fraction of its size: Finland (about 1/11th), Denmark (1/8th), etc.
•  A large economy needs an efficient banking sector to support its growth.
•  The onus of supporting the economy falls on the PSBs accounting for 70 % of the market share in Indian banking:

o PSBs are inefficient compared to their peer groups on every performance parameter.

o In 2019, investment for every rupee in PSBs, on average, led to the loss of 23 paise, while in NPBs it led to the gain of 9.6 paise.

o Credit growth in PSBs has been much lower than NPBs for the last several years.

· Solutions to make PSBs more efficient:

o Employee Stock Ownership Plan (ESOP) for PSBs’ employees

o Representation on boards proportionate to the blocks held by employees to incentivize employees and align their interests with that of all shareholders of banks.

o Creation of a GSTN type entity that will aggregate data from all PSBs and use technologies like big data, artificial intelligence and machine learning in credit decisions for ensuring better screening and monitoring of borrowers, especially the large ones.

Financial Fragility in the NBFC Sector

•  Survey investigates the key drivers of Rollover Risk of the shadow banking system in India in light of the current liquidity crunch in the sector.
•  Key drivers of Rollover Risk:

o Asset Liability Management (ALM) Risk.

o Interconnectedness Risk.

o Financial and Operating Resilience of an NBFC.

o Over-dependence on short-term wholesale funding.

• Survey computes a diagnostic (Health Score) by quantifying the Rollover risk for a sample of HFCs and Retail-NBFCs (which are representative of their respective sectors).
•  The analysis of the Health Score has the following findings:

o  The HFC sector exhibited a declining trend post 2014 and overall health of the sector worsened considerably by the end of FY2019.

o The Score of the Retail-NBFC sector was consistently below par for the period 2014 -19.

o Larger Retail-NBFCs had higher Health Scores but among medium and small Retail- NBFCs, the medium size ones had a lower score for the entire period of 2014-19.

•  Survey suggests that the Health Score provides an early warning signal of impending liquidity problems.
•  Equity markets react favourably to increase in Health Score of individual HFCs and Retail-NBFCs.
•  The Survey prescribes this analysis to efficiently allocate liquidity enhancements across firms (with different Health Scores) in the NBFC sector, thereby arresting financial fragility in a capital-efficient manner.

Privatization and Wealth Creation

•  Survey examines the realized efficiency gains from privatization in the Indian context and bolsters the case for aggressive disinvestment of CPSEs.
•  Strategic disinvestment of Government’s shareholding of 53.29 per cent in HPCL led to an increase of around Rs. 33,000 crore in national wealth.
•  Survey presents an analysis of the before-after performance of 11 CPSEs which underwent strategic disinvestment from 1999-2000 to 2003-04:

o Financial indicators such as net worth, net profit, return on assets (ROA), return on equity (ROE) etc of the privatized CPSEs, on an average, have improved significantly.

o Privatized CPSEs have been able to generate more wealth from the same resources.

•  Survey suggests aggressive disinvestment of CPSEs to:

o Bring in higher profitability.

o Promote efficiency.

o Increase competitiveness.

o Promote professionalism.

Is India’s GDP Growth Overstated? No!

• GDP growth is a critical variable for decision-making by investors and policymakers. Therefore, the recent debate about accuracy of India’s GDP estimation following the revised estimation methodology in 2011 is extremely significant.
• As countries differ in several observed and unobserved ways, cross-country comparisons have to be undertaken by separating the effect of other confounding factors and isolating effect of methodology revision alone on GDP growth estimates.
• Models that incorrectly over-estimate GDP growth by 2.7 % for India post-2011 also misestimate GDP growth over the same period for 51 out of 95 countries in the sample.
• Several advanced economies such as UK, Germany and Singapore have their GDPs misestimated with incompletely specified econometric model.
• Correctly specified models that account for all unobserved differences and differential trends in GDP growth across countries fail to find any misestimating of growth in India or other countries.
• Concerns of a misestimated Indian GDP are unsubstantiated by the data and are thus unfounded.

Thalinomics: The Economics of a Plate of Food in India

• An attempt to quantify what a common person pays for a Thali across India.
• A shift in the dynamics of Thali prices since 2015-16.
• Absolute prices of a vegetarian Thali have decreased significantly since 2015-16 across India and the four regions; though the price has increased during 2019-20.
• Post 2015-16:
• Average household gained close to Rs. 11, 000 on average per year from the moderation in prices in the case of vegetarian Thali.
• Average household that consumes two non-vegetarian Thalis gained close to Rs. 12, 000 on average per year during the same period.
• From 2006-07 to 2019-20:
• Affordability of vegetarian Thalis improved 29 %.
•  Affordability of non-vegetarian Thalis improved by 18 %.

India’s Economic Performance in 2019-20

• India’s GDP growth moderated to 4.8 % in H1 of 2019-20, amidst a weak environment for global manufacturing, trade and demand.
• Real consumption growth has recovered in Q2 of 2019-20, cushioned by a significant growth in government final consumption.
• Growth for ‘Agriculture and allied activities’ and ‘Public administration, defense, and other services’ in H1 of 2019-20 was higher than in H2 of 2018-19.
• India’s external sector gained further stability in H1 of 2019-20:
•  Current Account Deficit (CAD) narrowed to 1.5 % of GDP in H1 of 2019-20 from 2.1 % in 2018-19.
•  Impressive Foreign Direct Investment (FDI).
•  Rebounding of portfolio flows.
•  Accretion of foreign exchange reserves.
•  Sharper contraction of imports as compared to that of exports in H1 of 2019-20, with easing of crude prices.
• Headline inflation expected to decline by year end:
• Increased from 3.3 % in H1 of 2019-20 to 7.35 % in December 2019-20 due to temporary increase in food inflation.
• Rise in CPI-core and WPI in December 2019-20 suggests building of demand pressure.
• Deceleration in GDP growth can be understood within the framework of a slowing cycle of growth:
• Financial sector acted as a drag on the real sector (investment-growth-consumption).
• Reforms undertaken during 2019-20 to boost investment, consumption and exports:
• Speeding up the insolvency resolution process under Insolvency and Bankruptcy Code (IBC).
•  Easing of credit, particularly for the stressed real estate and NBFC sectors.
•  Announcing the National Infrastructure Pipeline 2019-2025.
• Survey expects an uptick in the GDP growth in H2 of 2019-20:
• 5 % GDP growth for 2019-20 based on CSO’s first Advance Estimates.
•  Expeditious delivery on reforms for enabling the economy to strongly rebound in 2020-21.

Fiscal Developments

• Revenue Receipts registered a higher growth during the first eight months of 2019-20, compared to the same period last year, led by considerable growth in Non-Tax revenue.
• Gross GST monthly collections have crossed the mark of Rs. 1 lakh crore for a total of five times during 2019-20 (up to December 2019).
• Structural reforms undertaken in taxation during the current financial year:
• Change in corporate tax rate.
• Measures to ease the implementation of GST.
• Fiscal deficit of states within the targets set out by the FRBM Act.
• Survey notes that the General Government (Centre plus States) has been on the path of fiscal consolidation.

External Sector

• Balance of Payments (BoP):
• India’s BoP position improved from US$ 412.9 bn of forex reserves in end March, 2019 to US$ 433.7 bn in end September, 2019.
• Current account deficit (CAD) narrowed from 2.1% in 2018-19 to 1.5% of GDP in H1 of 2019-20.
• Foreign reserves stood at US$ 461.2 bn as on 10^th January, 2020.
• Global trade:
• In sync with an estimated 2.9% growth in global output in 2019, global trade is estimated to grow at 1.0% after having peaked in 2017 at 5.7%.
• However, it is projected to recover to 2.9% in 2020 with recovery in global economic activity.
• India’s merchandise trade balance improved from 2009-14 to 2014-19, although most of the improvement in the latter period was due to more than 50% decline in crude prices in 2016-17.
• India’s top five trading partners continue to be USA, China, UAE, Saudi Arabia and Hong Kong.
• Exports:
•  Top export items: Petroleum products, precious stones, drug formulations & biologicals, gold and other precious metals.
• Largest export destinations in 2019-20 (April-November): United States of America (USA), followed by United Arab Emirates (UAE), China and Hong Kong.
• The merchandise exports to GDP ratio declined, entailing a negative impact on BoP position.
• Slowdown of world output had an impact on reducing the export to GDP ratio, particularly from 2018-19 to H1 of 2019-20.
• Growth in Non-POL exports dropped significantly from 2009-14 to 2014-19.
• Imports:
•  Top import items: Crude petroleum, gold, petroleum products, coal, coke & briquittes.
•  India’s imports continue to be largest from China, followed by USA, UAE and Saudi Arabia.
•  Merchandise imports to GDP ratio declined for India, entailing a net positive impact on BoP.
• Large Crude oil imports in the import basket correlates India’s total imports with crude prices. As crude price raises so does the share of crude in total imports, increasing imports to GDP ratio.
• Significant Gold imports also correlate India’s total imports with gold prices. However, share of gold imports in total imports remained the same during 2018-19 and the first half of 2019-20, despite an increase in prices, possibly due to increase in import duty that reduced the import of gold.
• Non-POL-non-gold imports are positively correlated with GDP growth.
• Non-POL-non-oil imports fell as a proportion to GDP from 2009-14 to 2014-19 when GDP growth accelerated.
• This may be because of consumption driven growth while investment rate declined, lowering non-POL-non-gold imports.
• Continuous decline in investment rate decelerated GDP growth, weakened consumption, dampened the investment outlook, which further reduced GDP growth and along with it non-POL-non-gold imports as a proportion of GDP from 2018-19 to H1 of 2019-20.
• Under trade facilitation, India improved its ranking from 143 in 2016 to 68 in 2019 under the indicator, “Trading across Borders”, monitored by World Bank in its Ease of Doing Business Report.
• Logistics industry of India:
•  Currently estimated to be around US$ 160 billion.
•  Expected to touch US$ 215 billion by 2020.
•  According to World Bank's Logistics Performance Index, India ranks 44th in 2018 globally, up from 54th rank in 2014.
• Net FDI inflows continued to be buoyant in 2019-20 attracting US$ 24.4 bn in the first eight months, higher than the corresponding period of 2018-19.
• Net FPI in the first eight months of 2019-20 stood at US$ 12.6 bn.
• Net remittances from Indians employed overseas continued to increase, receiving US$ 38.4 billion in H1 of 2019-20 which is more than 50% of the previous year level.
• External debt:
• Remains low at 20.1% of GDP as at end September, 2019.
• After significant decline since 2014-15, India’s external liabilities (debt and equity) to GDP increased at the end of June, 2019 primarily by increase in FDI, portfolio flows and external commercial borrowings (ECBs).

Monetary Management and Financial Intermediation

• Monetary policy:
• Remained accommodative in 2019-20.
• Repo rate was cut by 110 basis points in four consecutive MPC meetings in the financial year due to slower growth and lower inflation.
• However, it was kept unchanged in the fifth meeting held in December 2019.
• In 2019-20, liquidity conditions were tight for initial two months; but subsequently it remained comfortable.
• The Gross Non Performing Advances ratio:
• Remained unchanged for Scheduled Commercial banks at 9.3% between March and September 2019
• Increased slightly for the Non-Banking Financial Corporations (NBFCs) from 6.1% in March 2019 to 6.3% in September 2019.
• Credit growth:
• The financial flows to the economy remained constrained as credit growth declined for both banks and NBFCs.
• Bank Credit growth (YoY) moderated from 12.9% in April 2019 to 7.1% as on December 20, 2019.
• Capital to Risk-weighted Asset Ratio of SCBs increased from 14.3% to 15.1% between March 2019 and September 2019.

Prices and Inflation

• Inflation Trends:
  • Inflation witnessing moderation since 2014
  • Consumer Price Index (CPI) inflation increased from 3.7 per cent in 2018-19 (April to December, 2018) to 4.1 per cent in 2019-20 (April to December, 2019).
  • WPI inflation fell from 4.7 per cent in 2018-19 (April to December, 2018) to 1.5 per cent during 2019-20 (April to December, 2019).
• Drivers of CPI - Combined (C) inflation:
• During 2018-19, the major driver was the miscellaneous group
• During 2019-20 (April-December), food and beverages was the main contributor.
• Among food and beverages, inflation in vegetables and pulses was particularly high due to low base effect and production side disruptions like untimely rain.
• Cob-web Phenomenon for Pulses:
  • Farmers base their sowing decisions on prices witnessed in the previous marketing period.
  • Measures to safeguard farmers like procurement under Price Stabilisation Fund (PSF), Minimum Support Price (MSP) need to be made more effective.
• Divergence Between Retail and Wholesale price:
• Observed for essential agricultural commodities in four metropolitan cities of the country from 2014 to 2019.
• Divergence particularly high for vegetables like onion and tomato. This may be due to the presence of intermediaries and high transaction costs.
• Volatility of Prices:

o Volatility of prices for most of the essential food commodities with the exception of some of the pulses has actually come down in the period 2014-19 as compared to the period 2009-14.

o Lower volatility might indicate the presence of better marketing channels, storage facilities and effective MSP system.

• Regional variations:

o CPI-C inflation has been highly variable across States ranging between (-)0.04 per cent to 8.1 per cent across States/UTs in financial year (FY) 2019-20 (April-December).

o In most states, CPI-C inflation in rural areas is lower than the CPI-C inflation in urban areas

o Rural inflation has been more variable across states than urban inflation.

• Inflation dynamics:

o Convergence of headline inflation towards core inflation as per the CPI-C data from 2012 onwards.

Sustainable Development and Climate Change

• India moving forward on the path of SDG implementation through well-designed initiatives
• SDG India Index:

o Himachal Pradesh, Kerala, Tamil Nadu, Chandigarh are front runners.

o Assam, Bihar and Uttar Pradesh come under the category of Aspirants.

• India hosted COP-14 to UNCCD which adopted the Delhi Declaration: Investing in Land and Unlocking Opportunities.
• COP-25 of UNFCCC at Mandrid:

o India reiterated its commitment to implement Paris Agreement.

o COP-25 decisions include efforts for climate change mitigation, adaptation and means of implementation from developed country parties to developing country parties.

• Forest and tree cover:

o Increasing and has reached 80.73 million hectare.

o 24.56 % of the geographical area of the country.

• Burning of agricultural residues, leading to rise in pollutant levels and deterioration of air quality, is still a major concern though the total number of burning events recorded reduced due to various efforts taken.
• International Solar Alliance (ISA)

o ‘Enabler’ by institutionalizing 30 Fellowships from the Member countries.

o ‘Facilitator’ by getting the lines of credit worth US$ 2 Billion from EXIM Bank of India and 1.5 Billion from AfD, France.

o ‘Incubator’ by nurturing initiatives like the Solar Risk Mitigation Initiative.

o ‘Accelerator’ by developing tools to aggregate demand for 1000 MW solar and 2.7 lakh solar water pumps.

Agriculture and Food Management

• Largest Proportion of Indian population depends directly or indirectly on agriculture for employment opportunities as compared to any other sector.
• The share of agriculture and allied sectors in the total Gross Value Added (GVA) of the country has been continuously declining on account of relatively higher growth performance of non-agricultural sectors, a natural outcome of development process.
• GVA at Basic Prices for 2019-20 from ‘Agriculture, Forestry and Fishing’ sector is estimated to grow by 2.8 %.

· Agricultural productivity is also constrained by lower level of mechanization in agriculture which is about 40 % in India, much lower than China (59.5 %) and Brazil (75 %).

· Skewed pattern of regional distribution of agricultural credit in India:

o Low credit in Hilly, Eastern and North Eastern states (less than 1 % of total agricultural credit disbursement).

· Livestock income has become an important secondary source of income for millions of rural families:

o An important role in achieving the goal of doubling farmers’ income.

o Livestock sector has been growing at a CAGR of 7.9 % during last five years.

· During the last 6 years ending 2017-18, Food Processing Industries sector has been growing:

o Average Annual Growth Rate (AAGR) of around 5.06 %

o Constitutes as much as 8.83 % and 10.66 % of GVA in Manufacturing and Agriculture sector respectively in 2017-18 at 2011-12 prices.

· While interests of the vulnerable sections of the population need to be safeguarded, Survey emphasizes on sustainability of food security operations by:

o Addressing the burgeoning food subsidy bill.

o Revisiting the rates and coverage under NFSA.

Industry and Infrastructure

• The industrial sector as per Index of Industrial Production (IIP) registered a growth of 0.6 per cent in 2019-20 (April-November) as compared to 5.0 % during 2018-19 (April-November).
• Fertilizer sector achieved a growth of 4.0 % during 2019-20 (April-November) as compared to (-) 1.3 per cent during 2018-19 (April-November).
• Steel sector achieved a growth of 5.2 % during 2019-20 (April-November) as compared to 3.6 % during 2018-19 (April-November).
• Total telephone connections in India touched 119.43 crore as on September 30, 2019.
• The installed capacity of power generation has increased to 3, 64,960 MW as on October 31, 2019 from 3, 56,100 MW as on March 31, 2019.
• Report of the Task Force on National Infrastructure Pipeline released on 31.12.2019 has projected total infrastructure investment of Rs. 102 lakh crore during the period FY 2020 to 2025 in India.

Services Sector

· Increasing significance of services sector in the Indian economy:

• About 55 % of the total size of the economy and GVA growth.
•  Two-thirds of total FDI inflows into India.
• About 38 per cent of total exports.
• More than 50 % of GVA in 15 out of the 33 states and UTs.

· Gross Value Added growth of the services sector moderated in 2019-20 as suggested by various high-frequency indicators and sectoral data such as air passenger traffic, port and shipping freight traffic, bank credit etc.

· On the bright side, FDI into services sector has witnessed a recovery in early 2019-20.

Social Infrastructure, Employment and Human Development

• The expenditure on social services (health, education and others) by the Centre and States as a proportion of GDP increased from 6.2 % in 2014-15 to 7.7 % in 2019-20 (BE).
• India’s ranking in Human Development Index improved to 129 in 2018 from 130 in 2017:
• o With 1.34 % average annual HDI growth, India is among the fastest improving countries
• Gross Enrolment Ratio at secondary, higher secondary and higher education level needs to be improved.
• The share of regular wage/salaried employees has increased by 5 percentage points from 18 % in 2011-12 to 23 % in 2017-18.
•  A significant jump of around 2.62 crore new jobs with 1.21 crore in rural areas and 1.39 crore in urban areas in this category.
• Total formal employment in the economy increased from 8 % in 2011-12 to 9.98 % in 2017-18.
• Gender disparity in India’s labour market widened due to decline in female labour force participation especially in rural areas:
• o Around 60 % of productive age (15-59) group engaged in full time domestic duties.
• Access to health services inter-alia through Ayushman Bharat and Mission Indradhanush across the country has improved.
• Mission Indradhanush has vaccinated 3.39 crore children and 87.18 lakh pregnant women of 680 districts across the country.
• About 76.7 % of the households in the rural and about 96 % in the urban areas had houses of pucca structure.
• A 10 Year Rural Sanitation Strategy (2019-2029) launched to focus on sustaining the sanitation behavior change and increasing access to solid and liquid waste management.

*****

RM/SC/AS/KA/PJ/SG

(Release ID: 1601273) 

 

A functionality has been enabled in the e-filing login of the taxpayers whose business turnover exceeds Rs.50 crores to provide the prescribed mode of electronic acceptance of payment made available to the customers;

Click here to read CBDT Notification

Click here to read CBDT Circular

 

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

New Delhi, 24th January, 2020

PRESS RELEASE

Income Tax searches lead to detection of undisclosed foreign assets of more than Rs. 1000 crore

Taking forward the mission of the Government against black money, particularly undisclosed foreign assets, the Income Tax Department conducted searches on 19th January, 2020, on a group which has been on their radar for having substantial undisclosed foreign assets. The operation covered 13 premises in NCR.

The group is a leading member of the hospitality industry, running a hotel abroad and a chain of luxury hotels under a prominent brand name, situated at various locations in India.

The search operation has so far resulted in seizure of unaccounted assets valued at Rs. 24.93 crore(cash of Rs. 71.5 lakh, jewellery worth Rs.23 crore and expensive watches valued at Rs.1.2 crore).

Evidence seized during the search reveals that a large amount of black money was stashed abroad by the group, through the mechanism of Trusts, formed in early 1990s in tax havens.

Such foreign holdings of the main persons have remained hidden for decades beneath complex multi layered structures, located in different countries, ensuring secrecy. Search action further revealed that one of the close relatives of the promoter family was intentionally introduced as a front to ostensibly escape the provisions of domestic tax laws.

The investigation has successfully lifted the veil, leading to detection of  undisclosed foreign assets of more than Rs. 1000 crore, apart from domestic tax evasion of more than Rs. 35 crore which may, inter alia, lead to consequences under the Black Money Act, 2015, as also, action under the Income-tax Act, 1961 respectively. Foreign assets include investment in a Hotel in UK, immovable properties in UK and UAE and deposits with foreign banks. Further investigations are in progress.

(Surabhi Ahluwalia)

Commissioner of Income Tax

(Media & Technical Policy)

Official Spokesperson, CBDT.